FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996 Commission File No. 0-15423
__________________
SOUTH ALABAMA BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
Alabama 63-0909434
(State of Incorporation) (IRS Employer Identification No.)
100 Saint Joseph Street
P. O. Box 3067
Mobile, Alabama 36652 334-431-7800
(Address of principal executive office) (Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $.01 PAR
(Title of Class)
____________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [ ]
Aggregate market value of the Common Stock ($.01 Par) held by nonaffiliates of
the registrant as of March 21, 1997 (assuming that all officers, directors and
5% shareholders are affiliates): $41,951,482
Shares of Common Stock ($.01 Par) outstanding at March 21, 1997: 4,227,136
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1996 are incorporated by reference into Parts I and II and portions of the
Proxy Statement for the 1997 annual meeting are incorporated by reference into
Part III.
_____________________________________________________________________
Part I
Item 1. Business
General
South Alabama Bancorporation, Inc. ("South Alabama") is the parent company
and owner of 100% of the stock of The Bank of Mobile (the "Mobile Bank")
headquartered in Mobile, Alabama, First National Bank, Brewton (the " Brewton
Bank"), headquartered in Brewton, Alabama, and Monroe County Bank (the
"Monroeville Bank"), headquartered in Monroeville, Alabama. South Alabama is
a registered bank holding company originally incorporated under Delaware law
in 1985 under the name Mobile National Corporation. In 1993, the former
parent company of the Brewton Bank was merged with and into Mobile National
Corporation, at which time its name was changed to South Alabama Bancorporation,
Inc. Effective December 31, 1996, South Alabama changed its state of domicile
from Delaware to Alabama through a merger with a wholly owned Alabama
subsidiary corporation formed for that purpose.
All of the stock of the Mobile Bank was acquired in 1986. By merger with
the respective holding companies, the stock of the Brewton Bank and the
Monroeville Bank was acquired in 1993 and 1996, respectively. The Mobile Bank,
the Brewton Bank and the Monroeville Bank are sometimes referred to as the
"Banks."
South Alabama's corporate headquarters are located at 100 Saint Joseph
Street, Mobile, Alabama 36602. The following table reflects certain basic
information concerning South Alabama and its subsidiary banks as of
December 31, 1996.
<TABLE>
<CAPTION>
Monroe Co. Brewton Bank Mobile Bank South Alabama
Consolidated(1)
<S> <C> <C> <C> <C>
Banking Offices 2 3 7 12
Employees 35 68 92 197
Percent of
Ownership 100% 100% 100% -
Loans (Net) $ 23,523,000 $ 57,306,000 $105,601,000 $186,430,000
Investments $ 55,066,000 $ 37,268,000 $ 25,439,000 $117,773,000
Total Assets $ 97,815,000 $107,359,000 $145,307,000 $350,077,000
Deposits $ 80,315,000 $ 90,444,000 $124,559,000 $295,287,000
Equity Capital $ 16,777,000 $ 15,234,000 $ 14,185,000 $ 47,088,000
</TABLE>
(1) Amounts include the accounts of South Alabama and subsidiaries. All
material balances have been eliminated in consolidation.
South Alabama reviews policy for the banks and coordinates certain of
their common internal functions, such as loan review, marketing and business
development, accounting, auditing, compliance and computer operations. South
Alabama utilizes the services and capabilities of the staffs of the Banks in
conducting its business. South Alabama has under consideration the acquisition
of additional banks and/or the organization of additional subsidiaries to
engage in bank related activities, and to that end officers of South Alabama
are engaged in general discussions with the principals of other banking
organizations from time to time.
Information Incorporated by Reference
Additional information concerning the business of South Alabama is set
forth in the Annual Report to Shareholders for the year ended December 31, 1996
at pages 8-22 and is incorporated herein by reference.
Operations of Subsidiary Banks
Deposits of the Banks are insured to the maximum limits allowed by the
Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"). The
Banks offer similar banking services including business and personal checking
accounts, money market accounts, savings accounts, certificates of deposit,
overdraft protection, the extension of business and personal loans, mortgages
on commercial and residential real estate, corporate and personal trust
services, access to automated teller machines through the Alert System of
Alabama Network, Inc., retail repurchase agreements, safe deposit box
facilities, credit card privileges, travelers' checks, money orders, letters of
credit, foreign transfers and remittances and wire transfers. Mutual funds,
annuities and certain insurance products are offered through South Alabama
Financial Services, Inc., a subsidiary of the Mobile Bank. Securities, mutual
funds and annuities are offered through First National Securities, Inc., a
subsidiary of the Brewton Bank. The Banks also offer general banking advice
and consultation to the public as well as other customer convenience and
community oriented services. Additionally, the Banks have relationships with
correspondent banks to offer additional services which may be requested by
their customers. None of the Banks currently offer international banking
services.
The Brewton Bank currently operates three offices located in and around
Brewton. The Mobile Bank has seven banking offices, three of which are
located inside supermarkets within the corporate limits of the City of Mobile.
The Monroeville Bank currently operates 2 offices in Monroeville. The Mobile
Bank has purchased two parcels of land in Baldwin County for future branch
expansion.
Market Served
The Brewton Bank
The primary service area of the Brewton Bank is a 15 mile radius of
Brewton. Manufacturing employs the greatest number of workers in the county.
Government and the wholesale and retail trade also employ a significant number
of workers. The largest employer in the trade area is Container Corporation
of America, employing approximately 600 workers. T.R. Miller Mill Co., a
lumber manufacturer is the second largest employer with approximately 400
workers. The area has a 160 acre industrial park which includes all necessary
utilities. Brewton Municipal Airport serves commuter air travel and commercial
air service is available in nearby Pensacola, Florida. CSX Transportation
provides railroad carrier services and the City of Brewton is served by two
bus lines. During 1996 announced capital investment in new and expanded
industry in Escambia County totaled approximately $7,933,396.00, resulting in
an announced 364 new jobs according to the Escambia County Industrial
Development Authority.
The Mobile Bank
The Mobile Bank's principal office is located in downtown Mobile, Alabama,
which is situated on the western shore of Mobile Bay, bordering the Gulf of
Mexico. The Bank's primary geographic market is comprised of Mobile County and
Baldwin County. The population of the Mobile County/Baldwin County market is
approximately 517,875 persons according to the Mobile and Baldwin County
Chambers of Commerce.
The economy of Mobile County is primarily industrial in nature.
The largest employers are engaged in manufacture of paper products, providing
health care services, production of chemicals, production of nylon and rayon,
processing retail catalogue orders and manufacture of piston aircraft engines.
Southwest Alabama, including Mobile County, has been the major oil and gas
producing region in Alabama for many years. The seafood industry and ship
building and repair industry also make significant contributions to the
economy of the area. The Port of Mobile, Alabama's only port, is one of the
nation's busiest in tons of cargo handled, and through it the City is served
by more than 135 steamship lines. During 1996 announced capital investment
in new and expanded industry in Mobile County totaled approximately
$746,255,000, resulting in an announced 1730 additional jobs, according to the
Mobile Chamber of Commerce.
The economy of Baldwin County (including the communities of Spanish Fort,
Daphne, Montrose, Fairhope and Point Clear) is based mostly on growth as a
residential area, although it is also supported by light manufacturing and
tourism.
The Monroeville Bank
The Monroeville Bank's main office and one branch are located in
Monroeville, with its primary service area extending in a ten mile radius of
Monroeville. Monroe County's population is approximately 25,000, of whom
7,500 reside in Monroeville.
The county economy is a blend of textile and timber-related business.
Vanity Fair Mills, employing about 1,300, is the largest single employer.
Timber-related industry including Alabama River Pulp and other Parsons and
Whittemore affiliates, Temple-Inland, Georgia Pacific, Scotch Plywood and
Harrigan Lumber Company, directly employs 2000.
The city is developing a 92 acre industrial park. Two trucking companies,
access to the Alabama River and railroads, and a 6,000 foot runway airport
accommodating corporate jets contribute to the marketability of the area. The
area offers parks, lakes, campgrounds, athletic fields, playground and an 18
hole golf course. The community college and local public and private schools
are accredited. Major 1996 capital investment added nursing home and assisted
living/retirement residence facilities and supply services and upgraded the
Temple-Inland plant.
Competition
Competition in the banking industry is primarily based on products and
services offered, delivery of services, product pricing and interest rate
levels. South Alabama competes with statewide bank holding companies, each of
which has substantially greater total resources than South Alabama and
numerous branch offices located throughout the state. Also providing
competition are local and regional banks, credit unions, finance companies,
insurance companies, mortgage companies, securities brokerage firms, money
market mutual funds, loan production offices operated by out-of-state banks,
and other providers of financial services in the areas served by South
Alabama's subsidiary banks.
The Brewton Bank
There are three banks based in the Brewton Bank's market area. A total
of eight financial institutions are located in Escambia County. The Brewton
Bank is the largest bank in terms of deposits in Escambia County with a market
share of deposits of approximately 22.29 percent. The second and third largest
banks in the county have market shares of approximately 19.56 percent and
18.85 percent.
The Mobile Bank
The Mobile Bank faces intense competition in its market area. It has a
market share of deposits of approximately 3.35 percent. There are currently
16 commercial banks and two savings banks doing business in the Mobile/Baldwin
County market. The primary competitors are the six commercial banks affiliated
with statewide bank holding companies, each of which has a substantial market
share. These competitors have numerous branch offices located throughout the
market area.
The Monroeville Bank
The Monroeville Bank is the oldest and largest bank in Monroe County. It
has a market share of deposits of approximately 36.97 percent. Currently
there are 6 commercial banks, including one bank owned by a statewide holding
company, in Monroe County.
Supervision and Regulation
South Alabama is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Act"), and is registered as such
with the Board of Governors of the Federal Reserve System (the "Board of
Governors"). The Act prohibits, subject to certain exceptions, a bank holding
company from engaging in or acquiring direct or indirect control of more than
5% of the voting stock of any company engaged in non-banking activities.
Activities expressly found by the Board of Governors, by order or regulation,
to be so closely related to banking or managing or controlling banks as to be
a proper incident thereto, such as acting as fiduciary or investment or
financial advisor, selling or underwriting insurance coverage directly related
to extensions of credit, and the leasing of real and personal property, are
excepted from this prohibition.
The Act requires every bank holding company to obtain the prior approval
of the Board of Governors before it may acquire substantially all of the assets
of any bank or control of any voting shares of any bank, if, after such
acquisition, it would own or control, directly or indirectly, more than 5% of
the voting shares of such bank. In no case, however, may the Board approve an
acquisition by South Alabama of the voting shares of, or substantially all the
assets of, any bank located outside Alabama unless such acquisition is
specifically authorized by the laws of the state in which the bank to be
acquired is located. Effective June 1, 1997 banks may merge with banks in
other states as long as neither state has opted out of interstate branching by
May 31, 1997. The State of Alabama has opted in with respect to interstate
branching effective on or before June 1, 1997.
As a registered bank holding company, South Alabama is required to file
with the Board of Governors an annual report and such additional information
as the Board of Governors may require pursuant to the Act. The Board may also
conduct examinations of South Alabama and each of its subsidiaries.
Subsidiary banks of a bank holding company are subject to certain
restrictions on extensions of credit to the bank holding company or any of its
subsidiaries, on investments in the stock or other securities thereof and on
the acceptance of such stocks or securities as collateral for loans to any
borrower. Also, such subsidiaries are generally prohibited from conditioning
the extension of credit or other services, or conditioning the lease or sale
of property, on the customer's agreement to obtain or furnish some additional
credit, property or service from or to such subsidiary or an affiliate.
As subsidiary banks, the Banks are subject to supervision and regulation
by the Board of Governors of the Federal Reserve System. As a national banking
institution, the Brewton Bank is subject to federal banking laws and is subject
to supervision and regular examination by the Office of the Comptroller of the
Currency. The Mobile Bank and the Monroeville Bank are state banks, subject to
state banking laws and regulation, supervision and regular examination by the
Alabama State Department of Banking, the FDIC, and the Federal Reserve.
Areas subject to regulation include dividend payments, reserves,
investments, loans, mergers, issuance of securities, establishment of branches
and other aspects of operation, including compliance with truth-in-lending and
usury laws.
Because South Alabama is subject to the provisions of the Bank Holding
Company Act of 1956, South Alabama and its subsidiaries are affected by the
credit policies of the Board of Governors of the Federal Reserve System. A
function of the Federal Reserve System is to regulate the national supply of
bank credit in order to combat recessions and curb inflationary pressures.
Among the instruments of monetary policy used to implement these objectives are
open-market operations in United States Government securities, changes in the
discount rate on member bank borrowings, changes in reserve requirements against
member bank deposits, and limitations on the payment of interest for certain
deposit accounts. The effect of such policies upon the future business and
earnings of South Alabama and its subsidiaries cannot be predicted with
certainty.
Item 2. Properties
South Alabama and the Mobile Bank occupy leased premises located in
downtown Mobile, Alabama consisting of a building complex of approximately
30,000 square feet. The primary term of the lease of the building complex
expires December 31, 2005. The Bank has an option to extend the term of this
lease for three additional terms of five years each.
In addition to the downtown office, the Mobile Bank operates six full
service branch offices at various locations in Mobile County. The banking
premises of one branch and the land adjacent to the branch are owned in fee,
while five branches, three of which are located inside supermarkets, are leased
for varying periods through 1999.
The Brewton Bank's main office, containing approximately 6,832 square feet,
is located in downtown Brewton, Alabama. This main office is owned in fee.
In addition, the Brewton Bank operates two branches, one in the City of Brewton
and one in the City of East Brewton. Both of these branches are owned in fee.
The Monroeville Bank's main office, containing approximately 20,402 square
feet, is located in Monroeville, Alabama. In addition, the Monroeville Bank
operates one other branch in the city of Monroeville. Both the main office and
the branch are owned in fee by the Monroeville Bank.
Item 3. Legal Proceedings
As of the date of this report there were no material pending legal
proceedings to which South Alabama or any of the Banks was a party.
Item 4. Submission of Matters to a Vote of Security Holders
On December 20, 1996, at a special meeting of stockholders, the
stockholders of South Alabama approved a proposal for the change of South
Alabama's state of incorporation from Delaware to Alabama through a merger of
South Alabama into SAB Newco, Inc., an Alabama corporation and a wholly owned
subsidiary of South Alabama. The proposal passed with the affirmative vote of
3,331,614 shares, representing 78.8% of the shares outstanding. There were no
votes against the proposal, 9,712 abstentions and 207,857 broker non-votes.
Optional Item. Executive Officers of the Registrant
The following table reflects certain information concerning the executive
officers of South Alabama. Each such officer holds his office(s) until the
first meeting of the Board of Directors following the annual meeting of
stockholders each year, or until a successor is chosen, subject to removal at
any time by the Board of Directors. Except as otherwise indicated, no family
relationships exist among the executive officers and directors of South Alabama,
and no such officer holds his office(s) by virtue of any arrangement or
understanding between him and any other person except the Board of Directors.
Name, Age and Office(s) with Other Positions with
South Alabama South Alabama
J. Stephen Nelson--age 59(1) Director (since 1993)
Chairman (since 1993)
W. Bibb Lamar, Jr.--age 53(2) Director (since 1989)
President and CEO (since 1989)
John B. Barnett, III--age 44(3)
Executive Vice President (since 1996) Director (since 1996)
W. Gaillard Bixler--age 51(4) None
Executive Vice President & Chief Operating
Officer (since 1993)
F. Michael Johnson--age 51(5) None
Chief Financial Officer & Secretary (since 1993)
Haniel F. Croft--age 56(6)
President (since 1979) and CEO (since 1988) Director (since 1996)
Monroe County Bank
(1) Chairman, since 1993, Chief Executive Officer, since 1984, and
Director, since 1979, the Brewton Bank. From 1986 until its merger with
South Alabama, Mr. Nelson was also President and a director of the Brewton
Bank's holding company.
(2) President and Chief Executive Officer, since 1989, the Mobile Bank.
(3) Chairman, since 1994, and Director, since 1983, the Monroeville Bank.
Previously: Vice Chairman (1989-1994) the Monroeville Bank. From 1983 until
the merger with South Alabama in 1996, Mr. Barnett was Vice President and a
director of the Monroeville Bank's holding company.
(4) President and Chief Operating Officer, since 1993, and Director,
since 1991, the Brewton Bank. Previously: Senior Vice President and Senior
Loan Officer (1989-Feb. 1993), the Brewton Bank. From 1991 until its merger
with South Alabama, Mr. Bixler was also a director of the Brewton Bank's
holding company.
(5) Executive Vice President and Cashier, since 1986, the Mobile Bank.
Previously: Executive Vice President (1984-1993) Mobile National Corporation.
(6) Director, since 1972, The Monroeville Bank. From 1982 until the
merger with South Alabama in 1996, Mr. Croft served as Vice President and a
director of the Monroeville Bank's holding company.
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information called for by Item 5 is set forth in South Alabama's
Annual Report to Shareholders for the year ended December 31, 1996 at page 25
under the heading "Market Prices and Cash Dividends Per Share" and is
incorporated herein by reference.
Item 6. Selected Financial Data
The information called for by Item 6 is set forth in South Alabama's
Annual Report to Shareholders for the year ended December 31, 1996 at page 24
under the heading "Selected Financial Data" and is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation
The information called for by Item 7 is set forth in South Alabama's
Annual Report to Shareholders for the year ended December 31, 1996 at pages
8-22 under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The information called for by Item 8, is set forth in South Alabama's
Annual Report to Shareholders for the year ended December 31, 1996 at page 23
and at pages 26-45 and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The disclosure required by this Item has been previously reported in a
current report on Form 8-K, dated September 27, 1995, and in the Company's
Proxy Statement for the 1996 annual meeting.
Part III
Item 10. Directors and Executive Officers of the Registrant
A portion of the information called for by Item 10 is set forth above in
an Optional Item in Part I. The balance of the information called for by Item
10 is set forth in South Alabama's Proxy Statement for the 1997 annual meeting
under the captions "VOTING SECURITIES-- Section 16(a) Beneficial Ownership
Reporting Compliance" and "ELECTION OF DIRECTORS" and is incorporated herein
by reference.
Item 11. Executive Compensation
The information called for by Item 11 is set forth in South Alabama's
Proxy Statement for the 1997 annual meeting under the caption "EXECUTIVE
COMPENSATION" and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 is set forth in South Alabama's
Proxy Statement for the 1997 annual meeting under the caption "VOTING
SECURITIES--Security Ownership of Directors, Nominees, 5% Stockholders and
Officers" and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information called for by Item 13 is set forth in South Alabama's
Proxy Statement for the 1997 annual meeting under the caption "CERTAIN
TRANSACTIONS AND MATTERS" and is incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements:
The following consolidated financial statements of the registrant and its
subsidiaries, and Report of Independent Auditors, included in the
registrant's Annual Report to Shareholders for the year ended December 31,
1996, a copy of which is included as an exhibit to this report, are
incorporated herein by reference:
Report of Independent Auditors' Report.
Consolidated Statements of Condition as of December 31, 1996 and 1995.
Consolidated Statements of Income for the years ended December 31,
1996, 1995 and 1994.
Consolidated Statements of Changes in Shareholders' Equity for the
years ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Independent Auditors' Report
(a) 2. Financial Statement Schedules
None.
(a) 3. Exhibits:
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.
.1 Agreement and Plan of Merger, dated as of May 31, 1996, as
amended and restated as of August 21, 1996, filed as Exhibit
(2).1 to the registrant's Registration Statement on Form S-4
filed on September 3, 1996 (No. 333-11305), is incorporated
herein by reference.
(3) Articles of Incorporation and By-Laws.
.1 Articles of Incorporation of SAB Newco, Inc., dated November 8,
1996, filed as Exhibit B to the registrant's Definitive Proxy
Statement filed on Schedule 14A on November 15, 1996, is
incorporated herein by reference.
.2 Certificate of Ownership and Merger, dated December 20, 1996,
executed by South Alabama Bancorporation, Inc.
.3 Bylaws of SAB Newco, Inc.
(4) Instruments defining the rights of security holders, including
indentures.
.1 Articles of Incorporation of SAB Newco, Inc., dated November 8,
1996, filed as Exhibit B to the Registrant's Definitive Proxy
Statement filed on Schedule 14A on November 15, 1996, is
incorporated herein by reference.
.2 Certificate of Ownership and Merger, dated December 20, 1996,
executed by South Alabama Bancorporation, Inc., is filed as
Exhibit (3).2 hereto.
.3 Bylaws of SAB Newco, Inc. is filed as Exhibit (3).3 hereto.
.4 Specimen of Common Stock Certificate of South Alabama
Bancorporation, Inc.
(10) Material Contracts.
.1 Lease, entered into March 11, 1986 between Dauphin 65 Partners,
Ltd. and The Bank of Mobile, N.A, filed as Exhibit (10).3 to the
registrant's annual report on Form 10-K for the year 1986
(No. 0-15423), is incorporated herein by reference.
.2 Lease Renewal and Extension Agreement, dated March 18, 1992,
between Dauphin 65 Partners, Ltd. and The Bank of Mobile, filed
as Exhibit (10).2 to the registrant's annual report on Form 10-K
for the year 1991 (No. 0-15423), is incorporated herein by
reference.
.3 Lease, entered into June 21, 1994 between Staples-Pake Realty,
Inc. and The Bank of Mobile, filed as Exhibit (10).3 to the
registrant's annual report on Form 10-K for the year 1994
(No. 0-15423), is incorporated herein by reference.
.4 Sublicense Agreement dated July 18, 1990, between National
Commerce Bancorporation and The Bank of Mobile, N.A, filed as
Exhibit (10).5 to the registrant's annual report on Form 10-K
for the year 1991 (No. 0-15423), is incorporated herein by
reference.
.5 Member Institution Agreement entered into July 25, 1986 between
The Bank of Mobile, N.A and Alabama Network, Inc., filed as
Exhibit (10).4 to the registrant's annual report on Form 10-K
for the year 1986 (No. 0-15423), is incorporated herein by
reference.
.6 *Stock Option Plan of Mobile National Corporation, filed as
Exhibit (10).3 to the registrant's annual report on Form 10-K
for the year 1985 (No. 0-15423), is incorporated herein by
reference.
.7 *The Bank of Mobile Retirement Plan (Restated), dated September
12, 1990, filed as Exhibit (10).8 to the registrant's annual
report on Form 10-K for the year 1991 (No. 0-15423), is
incorporated herein by reference.
.8 *Contracts pursuant to Supplemental Retirement Plan of The Bank
of Mobile, N.A, effective January 1, 1988, filed as Exhibit
(10).7 to the registrant's annual report on Form 10-K for the
year 1990 (No. 0-15423), are incorporated herein by reference.
.9 *Restated Contracts pursuant to Supplement Retirement Plan of
The Bank of Mobile, dated April 1, 1992, filed as Exhibit (10).10
to registrant's Form 10-K for the year 1992 (No. 0-15423), is
incorporated herein by reference.
.10 *First National Bank Employees' Profit Sharing Plan, as amended
and restated effective January 1, 1989, filed as Exhibit (10).12
to registrant's annual report on Form 10-K for the year 1993
(No. 0-15423), is incorporated by reference.
.11 *First National Bank Employees' Pension Plan, as amended and
restated effective January 1, 1989, filed as Exhibit (10).13 to
registrant's Form 10-K for the year 1993 (No. 0-15423), is
incorporated herein by reference.
.12 Member Institution Agreement entered into February 16, 1988
between First National Bank and Alabama Network, Inc., filed as
Exhibit (10).14 to registrant's annual report on Form 10-K for
the year 1993 (No. 0-15423), is incorporated herein by reference.
.13 *Split Dollar Insurance Agreements of First National Bank, filed
as Exhibit (10).15 to registrant's annual report on Form 10-K
for the year 1993 (No. 0-15423), is incorporated herein by
reference.
.14 *Deferred Compensation Agreements of First National Bank, filed
as Exhibit (10).16 to registrant's annual report on Form 10-K
for the year 1993 (No. 0-15423), is incorporated herein by
reference.
.15 *South Alabama Bancorporation 1993 Incentive Compensation Plan
dated October 19, 1993 as adopted by shareholders May 3, 1994
filed as Exhibit (10).18. to registrant's form 10-K for the
year 1994 (No. 0-15423), is incorporated herein by reference.
.16 Lease, entered into April 17, 1995 between Augustine Meaher,
Jr., Robert H. Meaher individually and Executor of the Estate of
R. Lloyd Hill, Joseph L. Meaher and Augustine Meaher, III, and
The Bank of Mobile, filed as Exhibit (10).1 to registrant's
Form 10-Q for the Quarter ended June 30, 1995 (No. 0-15423),
is incorporated herein by reference.
.17 Lease, entered into April 17, 1995 between Augustine Meaher, Jr.
and Margaret L. Meaher, and The Bank of Mobile, filed as Exhibit
(10).2 to registrant's Form 10-Q for the Quarter ended June 30,
1995 (No. 0-15423), is incorporated herein by reference.
.18 Lease, entered into April 17, 1995 between Hermione McMahon
Sellers (f/k/a Hermione McMahon Dempsey) a widow, William
Michael Sellers, married, and Mary S. Burnett, married, and
The Bank of Mobile, filed as Exhibit (10).3 to registrant's
Form 10-Q for the Quarter ended June 30, 1995 (No. 0-15423),
is incorporated herein by reference.
.19 Lease, entered into May 1, 1995 between Augustine Meaher, Jr.,
Robert H. Meaher individually and Executor of the Estate of R.
Lloyd Hill, Joseph L. Meaher and Augustine Meaher, III, and
The Bank of Mobile, filed as Exhibit (10).4 to registrant's
Form 10-Q for the Quarter ended June 30, 1995 (No. 0-15423),
is incorporated herein by reference.
.20 *Change in Control Compensation Agreement, dated as of November
14, 1995, between The Bank of Mobile and W. Bibb Lamar, Jr.,
filed as Exhibit (10).24 to the registrant's annual report on
Form 10-K for the year 1995 (No. 0-15423) is incorporated
herein by reference.
.21 *Change in control Compensation Agreement, dated as of November
20, 1995, between First National Bank, Brewton and J. Stephen
Nelson, filed as Exhibit (10).25 to the registrant's annual
report on Form 10K for the year 1995 (No. 0-15423), is
incorporated herein by reference.
.22 *Change in Control Compensation Agreements, between The Bank of
Mobile or First National Bank, Brewton and certain officers
filed as Exhibit (10).25 to the registrant's annual report on
Form 10-K for the year 1995 (No. 0-15423) is incorporated
herein by reference.
.23 *Monroe County Bank Profit Sharing Plan, Amended and Restated
January 1, 1989.
.24 *Monroe County Bank Pension Plan as Amended and Restated
January 1, 1989.
(13) Annual report to security holders.
.1 1996 Annual Report of South Alabama Bancorporation, Inc. (Such
annual report, except for those portions expressly incorporated
by reference, is furnished solely for the information of the
Commission and is not deemed to be "filed" as part of this
report.)
(21) Subsidiaries of the registrant.
.1 Subsidiaries of South Alabama Bancorporation, Inc.
(b) Reports on Form 8-K
Report on Form 8-K filed on November 8, 1996 reporting South Alabama's
merger with the Monroeville Bank's holding company, as amended by Report on
Form 8-K/A filed on January 17, 1997.
* Indicates compensatory plan identified pursuant to Item 14(a)(3) of Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SOUTH ALABAMA BANCORPORATION, INC.
By:/s/ F. Michael Johnson
F. Michael Johnson
Chief Financial Officer
and Secretary
Dated: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
\s\W. Bibb Lamar, Jr. Director, President and 03/25/97
W . Bibb Lamar, Jr. CEO (Principal executive
officer)
\s\F. Michael Johnson Chief Financial Officer 03/25/97
F. Michael Johnson and Secretary (Principal
financial and accounting
officer)
\s\John B. Barnett, III Director, Executive Vice 03/25/97
John B. Barnett, III President
\s\John B. Barnett, Jr. Director 03/25/97
John B. Barnett, Jr.
\s\Stephen G. Crawford Director 03/25/97
Stephen G. Crawford
\s\Haniel F. Croft Director 03/25/97
Haniel F. Croft
\s\David C. De Laney Director 03/25/97
David C. De Laney
\s\Lowell J. Friedman Director 03/25/97
Lowell J. Friedman
\s\Broox G. Garrett, Jr. Director 03/25/97
Broox G. Garrett, Jr.
James P. Hayes, Jr. Director
Clifton C. Inge Director
\s\Thomas E. McMillan, Jr. Director 03/25/97
Thomas E. McMillan, Jr.
J. Richard Miller, III Director
\s\J. Stephen Nelson Director and Chairman 03/25/97
J. Stephen Nelson
\s\Earl H. Weaver Director 03/25/97
Earl H. Weaver
Exhibit (3).2
CERTIFICATE OF OWNERSHIP AND MERGER
This Certificate of Ownership and Merger (the "Certificate") is made and
entered into by South Alabama Bancorporation, Inc., a Delaware corporation,
pursuant to Section 253 of the Delaware General Corporation Law.
W I T N E S S E T H :
WHEREAS, SAB Newco, Inc., an Alabama corporation ("Newco"), is a wholly
owned subsidiary of South Alabama Bancorporation, Inc., a Delaware corporation
("SAB"), and said corporations desire to merge SAB with and into Newco, with
Newco as the surviving corporation; and
WHEREAS, the respective Boards of Directors and voting shareholders of
Newco and SAB have duly approved said merger, and SAB desires to execute and
file this Certificate to effect said merger under the provisions of the
Delaware General Corporation Law;
NOW, THEREFORE, in order to effect said merger, SAB does hereby declare
and certify as follows:
ARTICLE ONE
The Board of Directors of SAB approved this merger by adopting the
following resolutions on August 20, 1996, viz:
BE IT RESOLVED, that, for the purpose of changing its state of domicile
to Alabama, the corporation form a wholly owned Alabama subsidiary
corporation with Articles of Incorporation and Bylaws substantially the
same as those of the corporation, which subsidiary shall be named SAB
Newco, Inc.
BE IT RESOLVED, that (i) the corporation merge itself with and into SAB
Newco, Inc., an Alabama corporation and wholly owned subsidiary of the
corporation ( Newco ), with Newco as the surviving corporation (but with
Newco s name to be changed to South Alabama Bancorporation, Inc.), such
merger to be effective upon approval and adoption of said merger by the
parties thereto and the filing of such articles and certificates of merger
as are required by applicable law, (ii) upon adoption of this resolution
by the Board of Directors the merger be presented to the shareholders
after due notice and disclosure has been given said shareholders pursuant
to all applicable law, (iii) upon completion of said merger, there be a
one for one conversion of stock of this corporation into stock of the
Newco without necessity of surrender of certificates therefor, and (iv)
the president and secretary of SAB be, and hereby are, authorized and
directed to execute any and all documents and do any and all things
necessary to effect said merger, including without limitation calling a
shareholders meeting for consideration of said merger and setting a
record date for voting shares at such meeting.
ARTICLE TWO
This merger has been approved by a majority of the outstanding stock of
SAB entitled to vote thereon at a meeting of the shareholders duly called and
held after 20 days notice of the purpose of said meeting mailed to each
shareholder at his or her address as it appears on the records of SAB.
ARTICLE THREE
This merger shall be effective at midnight on December 31, 1996.
ARTICLE FOUR
Pursuant to Section 253(a) and Section 252(d) of the Delaware General
Corporation Law, the Plan of Merger duly adopted and approved by SAB and
Newco contained the following provision:
Newco shall be subject to service of process in Delaware in any
proceeding for enforcement of any obligation of SAB, as well as for any
obligation of Newco, arising from the merger, and Newco irrevocably
appoints the Secretary of State of the State of Delaware as its agent to
accept service of process in any such suit or other proceeding related
thereto, with any process so served to be sent to Newco at:
South Alabama Bancorporation, Inc.
Attention: F. Michael Johnson
100 St. Joseph Street
Mobile, AL 36602
IN WITNESS WHEREOF, SAB has caused this instrument to be executed by its
duly authorized officers under seal this 20th day of December, 1996.
SOUTH ALABAMA BANCORPORATION, INC.,
a Delaware corporation
By: \s\W. Bibb Lamar, Jr.
W. BIBB LAMAR, JR., President
and Chief Executive Officer
ATTEST:
\s\F. Michael Johnson
F. MICHAEL JOHNSON, Secretary
and Chief Financial Officer
[SEAL]
This instrument was prepared by:
Brooks P. Milling, Esq.
Hand Arendall, L.L.C.
3000 First National Bank Building
Mobile, Alabama 36602
Exhibit (3).3
BYLAWS
OF
SAB NEWCO, INC.
TABLE OF CONTENTS
BYLAWS
OF
SAB NEWCO, INC.
ARTICLE I
OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II
MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . .1
ARTICLE III
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
MEETINGS OF THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . .4
COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . .5
COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . .5
DIRECTOR EMERITUS . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE IV
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE V
OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . .7
VICE CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . . .7
CHIEF EXECUTIVE OFFICER . . . . . . . . . . . . . . . . . . . . .7
PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
EXECUTIVE VICE-PRESIDENT AND VICE-PRESIDENT . . . . . . . . . . .8
THE SECRETARY AND ASSISTANT SECRETARIES . . . . . . . . . . . . .8
THE TREASURER AND ASSISTANT TREASURERS. . . . . . . . . . . . . .9
ARTICLE VI
CERTIFICATES OF STOCK . . . . . . . . . . . . . . . . . . . . . 10
LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . 10
TRANSFERS OF STOCK. . . . . . . . . . . . . . . . . . . . . . . 10
FIXING RECORD DATE. . . . . . . . . . . . . . . . . . . . . . . 11
REGISTERED STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII
GENERAL PROVISIONS DIVIDENDS . . . 11
ANNUAL STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . 12
CHECKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE
VIII
AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
BYLAWS
OF
SAB NEWCO, INC.
ARTICLE I
OFFICES
SECTION 1. The registered office shall be established and maintained
in the City of Mobile, County of Mobile, State of Alabama.
SECTION 2. The principal office shall be in the City of Mobile,
County of Mobile, State of Alabama. The corporation may also have offices at
such other places both within and without the State of Alabama as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1.
All regular annual meetings of the stockholders shall be held in the City of
Mobile, State of Alabama, at such place as may be fixed by the board of
directors or at such place either within or without the State of Alabama as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may
be held at such time and place, within or without the State of Alabama, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
SECTION 2. Annual meetings of stockholders, commencing with the year
1997, shall be held on the second Thursday of May if not a legal holiday, and
if a legal holiday, then on the next business day following, at 10:00 a.m., or
at such other date and time as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at which the
stockholders shall elect by a plurality vote by written ballot a board of
directors, and transact such other business as may properly be brought before
the meeting.
SECTION 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the
date of the meeting.
SECTION 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
SECTION 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the board of directors or by a majority of the
board of directors or by a committee of the board of directors which has been
duly designated by the board of directors and whose powers and authority, as
provided in a resolution of the board of directors or in the bylaws of the
corporation, include the power to call such meetings, but such special meetings
may not be called by any other person or persons.
SECTION 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
SECTION 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided herein, by statute or by
the articles of incorporation. If, however, such quorum shall not be present
or represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision herein, of the
statutes or of the articles of incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
SECTION 10. Unless otherwise provided in the articles of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on or after eleven
months from its date, unless the proxy provides for a longer period.
SECTION 11. All stockholder actions must be taken at either a duly
called special or annual meeting and may not be taken without such meeting.
ARTICLE III
DIRECTORS
SECTION 1. The number of directors which shall constitute the whole
board shall not be less than three nor more than twenty-five. The board at the
time these bylaws become effective shall consist of three directors.
Thereafter, within the limits above specified, the number of directors shall be
determined by resolution of the board of directors. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until his
successor is elected and qualified, unless sooner displaced. Directors need not
be stockholders. No person shall be eligible for election as a director if he
will be over 70 years of age during the calendar year of election, except that
the board may, by majority vote, permit the nomination and election of one or
more directors without regard to such age limitation in connection with any
merger, acquisition or other similar transaction in which such otherwise
ineligible director is a director of the company acquired by or merged into the
corporation.
SECTION 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), a court of competent jurisdiction
may, upon application of any stockholder or stockholders holding at least ten
percent of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
SECTION 3. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the articles of
incorporation or by these bylaws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Alabama.
SECTION 5. The first meeting of each newly elected board of directors
shall be held within one month following the annual meeting of the stockholders
at which the board was elected, unless a different time and place for such
board meeting shall be fixed by the vote of the stockholders at the annual
meeting. In the event such meeting is not so held, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
SECTION 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
SECTION 7. Special meetings of the board may be called by the chief
executive officer on three days' notice to each director, either personally,
by telephone, by mail or by telegram; special meetings shall be called by the
chief executive officer or secretary in like manner and on like notice on the
written request of at least 25% of the directors.
SECTION 8. At all meetings of the board a majority of the directors
then in office shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided herein, by statute or by the articles of incorporation.
If a quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 9. Unless otherwise restricted by the articles of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
SECTION 10. Unless otherwise restricted by the articles of
incorporation or these bylaws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
SECTION 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution of the board of
directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it; but no such committee shall have the power or
authority in reference to authorizing distributions, approving or proposing to
shareholders action that requires shareholder approval, filling vacancies on
the board of directors or on any of its committees, amending the articles of
incorporation, adopting, amending or repealing bylaws, approving a plan of
merger not requiring shareholder approval, authorizing or approving
reacquisition of shares, except according to a formula or method prescribed by
the board of directors, or authorizing or approving the issuance or sale or
contract for sale of shares, or determining the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
board of directors may authorize a committee (or a senior executive officer of
the corporation) to do so within limits specifically prescribed by the board of
directors. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the board of directors.
SECTION 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
SECTION 13. The board of directors shall have the authority to fix
the compensation of directors. The directors may be paid their expenses, if
any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed compensation for
attending committee meetings.
DIRECTOR EMERITUS
SECTION 14. The stockholders or the board of directors may from time
to time elect one or more persons as Director Emeritus of the corporation. Such
title shall be honorary and shall not entitle its holder to a vote on any matter
presented to the board of directors.
ARTICLE IV
NOTICES
SECTION 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director
or stockholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at
the time when the same shall be deposited in the United States mail. Notice
to directors may also be given by telegram or telephone.
SECTION 2. Whenever any notice is required to be given under the
provisions of the statutes or of the articles of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. The officers of the corporation who shall be chosen by
the board of directors at its first meeting after each annual meeting of
stockholders may be a chairman of the board, a vice-chairman of the board, a
chief executive officer, a president, an executive vice-president, a
vice-president, a secretary and a treasurer. The board of directors may also
choose from time to time one or more executive vice-presidents, vice-presidents,
assistant secretaries and assistant treasurers, each of whom shall also be an
officer of the corporation. Any number of offices may be held by the same
person unless the articles of incorporation otherwise provide.
SECTION 2. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
SECTION 3. The salaries of all officers and agents of the corporation
whose annual salaries exceed $50,000.00 shall be fixed by the board.
SECTION 4. The officers of the corporation shall hold office until
their successors are chosen and qualify, except that any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board. Any vacancy occurring in any
office of the corporation may be filled by the board of directors.
CHAIRMAN OF THE BOARD
SECTION 5. The chairman of the board shall preside at all meetings
of the board. He shall have such further powers and duties as may, from time
to time be prescribed for him by the board.
VICE-CHAIRMAN OF THE BOARD
SECTION 6. In the absence or disability of the chairman of the board,
his powers and duties shall temporarily devolve upon the vice-chairman of the
board who shall exercise all powers and duties of the chairman during such
absence or disability or until the office of chairman shall be filled. He
shall have such further powers and duties as may from time to time be
prescribed for him by the board or chief executive officer.
CHIEF EXECUTIVE OFFICER
SECTION 7. The chief executive officer shall preside at all meetings
of the stockholders and shall have general and active management of the business
of the corporation and shall supervise the carrying out of policies adopted or
approved by the board of directors. Except as otherwise required by law or the
board of directors or the bylaws of the corporation, he shall exercise
supervision over and prescribe the powers and duties of all other officers,
except chairman of the board, and employees of the corporation, either directly
or through such officer or officers as he may designate, and shall fix the
compensation of each officer and employee whose annual salary is not in excess
of $50,000.00.
SECTION 8. In the absence or the disability of the chief executive
officer, his powers and duties shall temporarily devolve upon the next officer
in the line of succession who is available and not disabled, such line of
succession being chairman of the board, vice-chairman of the board, president,
executive vice-presidents (in the order of their election to such office)
and vice-presidents (in the order of their election to such office). The
appropriate officer in said line of succession shall exercise all powers and
duties of the chief executive officer during his absence or disability or until
the office of chief executive officer shall be filled.
PRESIDENT
SECTION 9. The President shall have such powers and duties as may
from time to time be prescribed for him by the board or the chief executive
officer.
SECTION 10. In addition to the chief executive officer, he shall also
have authority to execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law
to be otherwise signed or executed and except where the signing and the
execution thereof shall be expressly delegated by the board of directors or
the chief executive officer to some other officer or agent of the corporation.
EXECUTIVE VICE-PRESIDENT
AND VICE-PRESIDENT
SECTION 11. An executive vice-president or a vice-president shall
have such powers and duties as may from time to time be prescribed for him by
the board or the chief executive officer.
THE SECRETARY AND ASSISTANT SECRETARIES
SECTION 12. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the board of directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board or the chief
executive officer. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
SECTION 13. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board or
the chief executive officer may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
SECTION 14. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board or
the chief executive officer.
SECTION 15. He shall disburse the funds of the corporation as may
be ordered by the board of directors or the chief executive officer, taking
proper vouchers for such disbursements, and shall render to the chief executive
officer and the board of directors, at its regular meetings, or when the chief
executive officer or the board so requires, an account of all his
transactions as treasurer and of the financial condition of the corporation.
SECTION 16. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
SECTION 17. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board or
the chief executive officer may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. Every holder of stock in the corporation shall be entitled
to have a certificate signed by or in the name of the corporation by the
chairman of the board of directors or the vice-chairman of the board of
directors or the president and the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
SECTION 2. Where a certificate is countersigned (1) by a transfer
agent other than the corporation or its employee, or, (2) by a registrar other
than the corporation or its employee, any other signature on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
SECTION 3. The board of directors may direct a new certificate or
certificates be issued in place of any certificate or certificates theretofore
issued by the corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the board of directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF
STOCK
SECTION 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
FIXING RECORD DATE
SECTION 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the board of directors may fix, in advance,
a record date, which shall not be more than seventy nor less than ten days
before the date of such meeting, nor more than seventy days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
REGISTERED STOCKHOLDERS
SECTION 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Alabama.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
SECTION 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the articles of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the articles of incorporation.
SECTION 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper
as a reserve or reserves to meet contingencies, or for equalizing dividends,
or for repairing or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
SECTION 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by
vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
CHECKS
SECTION 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person
or persons as the board of directors may from time to time designate.
FISCAL YEAR
SECTION 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
SECTION 6. The corporate seal shall have inscribed thereon the name
of the corporation and the words "Corporate Seal" and "Alabama." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
SECTION 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the board of directors at any
regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors if notice of
such alteration, amendment, repeal or adoption of new bylaws be contained in
the notice of such special meeting.
Exhibit (4).4
SOUTH ALABAMA
NUMBER BANCORPORATION, SHARES
_________ INC. ______
INCORPORATED UNDER THE LAWS OF THE STATE OF ALABAMA
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS
CERTIFIES
THAT
IS THE
OWNER OF
CUSIP 836234 10 4
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE
OF ONE CENT ($.01) PER SHARE, OF SOUTH ALABAMA BANCORPORATION, INC.
transferable only on the books of the Corporation by the holder hereof in
person, or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
DATED:
_______________________________ _________________________
SECRETARY CHAIRMAN OF THE BOARD
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - . . . . Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act . . . . . . . . . . .
in common. (State)
Additional abbreviations may also be used though not in the
above list.
For value received, . . . . . . . . . . hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
-------------------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Please print or typewrite name and address, including postal zip code,
of assignee
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated, . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
(NOTICE: the signature to this assignment must correspond with the name
as written upon the face of the Certificate in every particular, without
alteration or enlargement or any change whatever.)
THE CORPORATION IS AUTHORIZED TO ISSUE SHARES OF TWO CLASSES, COMMON
STOCK AND PREFERRED STOCK. THE CORPORATION WILL FURNISH WITHOUT CHARGE
TO EACH STOCKHOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
Exhibit (10).23
THE MONROE COUNTY BANK
PROFIT SHARING PLAN .
Amended and Restated
January 1, 1989
TABLE OF CONTENTS
PAGE
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.01 Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.02 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.03 Anniversary Date . . .. . . . . . . . . . . . . . . . . . . . . 2
1.04 Annual Additions . . . . . . . . . . . . . . . . . . . . .. . . 2
1.05 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . .. . . 2
1.06 Board . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 4
1.07 Committee . . . . . . . . . . . . . . . . . . . . . . . . .. . . 4
1.08 Compensation . . . . . . . . . . . . . . . . . . . . . . .. . . 4
1.09 Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.11 Current Balance . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.12 Defined Benefit Plan . . . . . . . . . . . . . . . . . . . . . . 5
1.13 Defined Contribution Plan . . . . . . . . . . . . . . . . . . . . 5
1.14 Delayed Retirement Date . . . . . . . . . . . . . . . . . . . . . 5
1.15 Disability Retirement Date. . . . . . . . . . . . . . . . . . . . 5
1.16 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.17 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.18 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 ERISA or Act . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.20 Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.21 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . ... 6
1.22 Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.23 Highly Compensated Employee. . . . . . . . . . . . . . . . . . . 6
1.24 Hours of Service . . . . . . . . . . . . . . . . . . . . . . .. .9
1.25 IRC . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 11
1.26 Limitation Year . . . . . .. . . . . . . . . . . . . . . . . . . 11
1.27 Maximum Compensation . . .. . . . . . . . . . . . . . . . . . . 11
1.28 Net Profits . . . . . . . .. . . . . . . . . . . . . . . . . . . 12
1.29 Non-Highly Compensated Employee. . . . . . . . . . . . . . . . . 12
1.30 Normal Retirement Age . . .. . . . . . . . . . . . . . . . . . . 12
1.31 Normal Retirement Date . . . . . . . . . . . . . . . . . . . .. 12
1.32 One Year Break in Service . . . . . . . . . . . . . . . . . . .. 12
1.33 Participant . . . . . . . . . . . . . . . . . . . . . . . . . .. 14
1 34 Participation Date . . . . . . . . . . . . . . . . . . . . . .. 14
1.35 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14
1.36 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
1.37 Profit Sharing Account . . . . . . . . . . . . . . . . . . . . .14
1.38 Profit Sharing Contributions . . . . . . . . . . . . . . . . . .14
1.39 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
1.40 Total and Permanent Disability or Totally and Permanently
Disabled . . . . . . .. . . . . . . . . . . . . . . . . . . . . 16
1.41 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 17
1.42 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.43 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . 18
2.01 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.02 Participation . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CONTRIBUTIONS AND ALLOCATIONS TO PROFIT SHARING ACCOUNTS . . . . . . . 19
3.01 Profit Sharing Contributions . . . . . . . . . . . . . . . . . . 19
3.02 Allocation of Adjustment . . . . . . . . . . . . . . . . . . . . 20
3.03 Avocation of Forfeitures . . . . . . . . . . . . . . . . . . . . 20
3.04 Equitable Avocations . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
LIMITATIONS ON CONTRIBUTIONS AND REQUIRED
DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . 22
4.01 Maximum Additions . . . . . . . . . . . . . . . . . . . . . . 22
4.02 Multiple Plan Participation . . . . . . . . . . . . . . . . . . 23
4.03 Required Distributions . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.01 Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . 27
5.02 Delayed Retirement . . . . . . . . . . . . . . . . . . . . . . 27
5.03 Disability Retirement . . . . . . . . . . . . . . . . . . . . . 27
5.04 Death Before Retirement or Termination of Employment . . . . . 28
5.05 Death After Retirement or Termination of Employment . . . . . . 28
5.06 Termination of Employment . . . . . . . . . . . . . . . . . . . 28
5.07 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . 31
5.08 Maximum Option Payable . . . . . . . . . . . . . . . . . . . . 34
5.09 Benefits to Minors and Incompetents . . . . . . . . . . . . . . 34
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.01 Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.02 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
FIDUCIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.01 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.02 Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.03 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.04 Administrative Committee . . . . . . . . . . . . . . . . . . . 39
7.05 Claims for Benefits . . . . . . . . . . . . . . . . . . . . . . 40
7.06 Claims Procedures . . . . . . . . . . . . . . . . . . . . . . 41
7.07 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.08 Missing Persons . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . . . . . . 44
8.01 Amendment of the Plan . . . . . . . . . . . . . . . . . . . . . 44
8.02 Termination of the Plan . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
PROVISIONS RELATIVE TO EMPLOYERS INCLUDED IN PLAN . . . . . . . . . . .46
9.01 Method of Participation . . . . . . . . . . . . . . . . . . . . .46
9.02 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
TOP HEAVY PLAN PROVISIONS . . . . . . . . . . . . . . . . . . . . . .48
10.01 General . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
10.02 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .48
10.03 Minimum Top Heavy Contribution . . . . . . . . . . . . . . . . .51
10.04 Defined Benefit Plan Minimum Accrued Benefit . . . . . . . . . .52
10.05 Multiple Plan Participation . . . . . . . . . . . . . . . . . .52
10.06 Minimum Vesting . . . . . . . . . . . . . . . . . . . . . . . .52
10.07 Top Heavy Contribution . . . . . . . . . . . . . . . . . . . . .53
10.08 Top Heavy Assumptions . . . . . . . . . . . . . . . . . . . . .53
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . .54
11.01 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .54
11.02 Construction . . . . . . . . . . . . . . . . . . . . . . . . .54
11.03 Administrative Expenses . . . . . . . . . . . . . . . . . . . .54
11.04 No Employment Contracts . . . . . . . . . . . . . . . . . . . .54
11.05 Spendthrift Clause . . . . . . . . . . . . . . . . . . . . . .54
11.06 Merger, Consolidation or Transfer . . . . . . . . . . . . . . .55
11.07 Return of Contributions. . . . . . . . . . . . . . . . . . . . .56
11.08 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .56
11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .56
11.10 Maximum Deductible Contribution. . . . . . . . . . . . . . . . .56
11.11 Payment of Employer Contributions to Trustee . . . . . . . . . .56
11.12 Notification of Individual Account Balance . . . . . . . . . .57
11.13 Exclusive Benefit. . . . . . . . . . . . . . . . . . . . . . . .57
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .57
11.15 Misstatement . . . . . . . . . . . . . . . . . . . . . . . . . .57
11.16 Receipt Prior to Payment . . . . . . . . . . . . . . . . . . . .57
11.17 Payments to Minors and Incompetents. . . . . . . . . . . . . . .57
ARTICLE XII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
ADOPTION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . .59
INTRODUCTION
The Monroe County Bank Profit Sharing Plan, became effective
January 1, 1967, and was subsequently amended effective January 1, 1976
as The Monroe County Bank Revised Profit Sharing Plan (~Profit Sharing
Plan") and subsequently amended and restated effective January 1, 1985.
Effective January 1, 1987, the First National Bank of
Monroeville Revised Profit Sharing Plan was merged into The Monroe County
Bank Revised Profit Sharing Plan.
The amended and restated Profit Sharing Plan herein
contained constitutes an amendment, effective January 1, 1989, to the
earlier plan provisions, rather than a replacement of such plan. The name of
the Plan, however, is changed back to the Monroe County Bank Profit Sharing
Plan effective January 1, 1994. The plan provisions as in effect
immediately prior to this January 1, 1989 amendment, shall remain in effect
for those Participants who are not actively employed by the participating
Employers at any time after such date. The assets held under the 1976 trust
will continue to be held pursuant to the Plan as herein amended.
The Employer intends that this Plan be qualified as a
profit-sharing plan under applicable governmental rules. The purpose of the
Plan is to provide additional incentives and retirement security for eligible
Employees of participating Employers by permitting them to share in the
profits of the Employer. Therefore, Employer Contributions to the
Plan, if any, shall be conditioned on and only made to the extent there
are current or accumulated Net Profits of the Employer.
It is intended that this amended and restated Plan, together
with the Trust Agreement, meet all the requirements of the Internal
Revenue Code of 1986, as amended, and the Plan shall be interpreted, wherever
possible, to comply with the terms of the Code and all formal regulations and
rulings issued under the Code and amendments thereto.
Except as otherwise provided herein the Plan as amended and
restated has the terms and provisions hereinafter set forth, effective
January 1, 1989.
1
ARTICLE I
DEFINITIONS
As used herein and in the concomitant Trust Agreement, unless otherwise
required by the context, the following words and phrases shall have the
meanings indicated:
Section 1.01 Adjustment means the net increases and
decreases in the market value of the Fund during a Plan Year or other period
exclusive of any Contribution during such year or other period. Such increases
and decreases shall include such items as realized or unrealized investment
gains and losses, investment income, and may include the reasonable expenses
of administering the Fund and the Plan.
Section 1.02 Affiliate means an organization which is a member of
the same controlled group of organizations as the Employer as determined
pursuant to IRC Sections 414(b), (c), (m), and (o) but which is not an
Employer.
Section 1.03 Anniversary Date means the first day of the Plan Year.
Section 1.04 Annual Additions means for any Employee in any Limitation Year,
the sum of Contributions made by the Employer, Forfeitures and Contributions
made by the Employee other than Rollover Contributions.
Section 1.05 Beneficiary means any person or persons (or trust)
designated by a Participant or otherwise entitled to receive such benefits
as may become payable under the provisions of the Plan after the death of
such Participant.
Except as otherwise provided in Section 5.07, a Participant's
designation of a Beneficiary is subject to the following:
Section 1.05(a) - Upon commencing participation, each Participant
shall designate a Beneficiary on forms provided by the Committee, and
such forms shall be maintained in files held by the Committee.
2
Section 1.05(b) - A Participant may, from time to time, change
the Beneficiary designation by written notice to the Committee and, upon such
change, the rights of all previously designated Beneficiaries to receive any
benefits under the Plan shall cease.
Section 1.05(c) - If, at the date of death of the Participant,
there is no valid and current designation of Beneficiary on file with the
Committee or if all designated Beneficiaries pre-decease the Participant, then
any death benefits which would have been payable to the designated
Beneficiary shall be payable to the Participant's Spouse who survives him,
if any; if none, to the Participant's children who survive him, equally; or
if none survive, then to the Participant's estate.
Section 1.05(d) - If payments are continued to a Beneficiary and the
Beneficiary dies prior to receiving the entire Death Benefit, the remaining
portion of such Death Benefit shall be paid in a single sum to the estate of
such deceased Beneficiary.
Section 1.05(e) - The interpretation of the Committee with respect to any
Beneficiary designation, subject to the applicable law, shall be binding and
conclusive upon all parties and no person who claims to be a Beneficiary, or
any other person, shall have the right to question any action of the
Committee, which in the judgment of the Committee fulfills the intent of the
Participant who filed such designation.
Section 1.05(f) - A Participant may elect to have his estate receive such
benefits as may become payable under the provisions of the Plan after the
death of such Participant. In such event, any benefits payable under the Plan
after the death of the Participant must be distributed: (i) within five (5)
years after the death of the Participant; and (ii) in accordance with IRC
Section 401(a)(9) and the regulations issued thereunder.
If a Beneficiary designated by a Participant is not the
Participant's Spouse, then the Spouse's written consent shall be required
with respect to such alternate Benefic _ 3 designation to become effective
and must be limited to a benefit for a specific alternate Beneficiary. The
Spouse's consent must acknowledge the effect of the consent, shall be
irrevocable once given and shall be witnessed by a representative of the
Committee or a notary public. Any change in the designation of an alternate
Beneficiary shall also require the consent
3
of the Spouse for such change to become effective. The Committee
may accept an election other than that provided hereunder without the
consent of the Spouse if there is no Spouse, the Spouse cannot be
located, or such other circumstances as may be prescribed by regulations. Any
spousal consent shall only be applicable to the Spouse granting such
consent.
Section 1.06 Board means the board of directors of the Corporation.
Section 1.07 Committee means the administrative committee provided for in
Article VII.
Section 1.08 Compensation means, for any Employee, total earnings,
prior to withholding, paid to him by the Employer during a calendar year
excluding bonuses, overtime and commissions, plus salary reductions in
effect under the IRC Section 125 plan of the Employer during such calendar
year. Compensation shall exclude extraordinary compensation such as the
imputed value of group life insurance and any Contributions by the
Employer to this or any other employee benefit programs. Reference herein
to Compensation with respect to any period of time shall mean the total
Compensation as defined in the preceding sentence. Notwithstanding the
preceding, effective for Plan Years commencing on or after January 1,
1989, in no event shall Compensation exceed the amount as may be determined
by the Secretary of the Treasury pursuant to IRC Section 401(a)(17). In
determining the Compensation of an Employee for purposes of
this limit, the family member aggregation rules required under
Section 1.23(b) shall apply, except that in applying such rules, the term
"family member" shall include only the spouse of the Employee and any
lineal descendants of the Employee who have not attained age nineteen
(19) before the dose of the Plan Year. If, as a result of the application of
such rules, the Compensation limitation is exceeded, then the limitation shall
be prorated among the affected individuals in proportion to each such
individual's Compensation as determined under this Section prior to the
application of the Compensation limitation under IRC Section 401(a)(17).
Section 1.09 Contributions means payments as provided herein
by the Employer to the Trustee for the purpose of providing the benefits
under this Plan.
4
Section 1.10 Corporation means The Monroe County Bank, an
Alabama corporation, any successor thereto or any Corporation which may
be merged or consolidated or to which all or substantially all of its
assets may be transferred. For purposes of ERISA as it relates to the
employees of each Employer, the Corporation is the sponsor, the named
Fiduciary and the Plan Administrator of the Plan.
Section 1.11 Current Balance as used in regard to a Participant's
Profit Sharing Account or stipulated portion thereof, means, as of any
date, the account balance as of the Valuation Date which coincides with or
immediately precedes such date plus any Contributions made to the Fund
since such Valuation Date on behalf of such Participant reduced by any
distributions made since such Valuation Date.
Section 1.12 Defined Benefit Plan means a plan established
and qualified under IRC Section 401 or 403, except to the extent it
is, or is treated as, a Defined Contribution Plan.
Section 1.13 Defined Contribution Plan means a plan which is
established and qualified under IRC Section 401 or 403, which provides for
an individual account for each participant therein and for benefits based
solely on the amount contributed to each participant's account and any
income and expenses or gains or losses (both realized and unrealized)
which may be allocated to such accounts.
Section 1.14 Delayed Retirement Date means the later of: (a)
the last day of the month in which the Participant actually retires after
his Normal Retirement Date, and (b) the first Valuation Date
following his commencement of participation in the Plan.
Section 1.15 Disability Retirement Date means the later of:
(a) the last day of the month in which the Participant is determined to
be Totally and Permanently Disabled, and (b) the first Valuation Date
following his commencement of participation in the-Plan =
Section 1.16 Effective Date means January 1, 1967, or such
later date as of which an Employer shall have adopted the Plan for its
Employees.
5
Section 1.17 Employee means each current or future employee
of the Employer (but excluding any person considered a leased employee
within the meaning of Internal Revenue Code Section 414(n)) who has either
(a) had at least one thousand (1,000) Hours of Service in his first twelve
(12) months of employment commencing on the date he completed his first Hour
of Service or (b) had at least one thousand (1,000) Hours of Service in any
Plan Year.
Section 1.18 Employer means, collectively or individually as the
context may indicate, the Corporation and any other corporation which (a) is
a member of the same controlled group of corporations as the Corporation [as
determined pursuant to IRC Section 414(b), (c), (m), and (a)], (b) the Board
shall have authorized to adopt the Plan and (c) by action of its own board
of directors shall have adopted the Plan or any successor to one or more of
such entities.
Section 1.19 ERISA or Act means the Employee Retirement Income
Security Act of 1974 as amended.
Section 1.20 Fiduciary means any person considered a fiduciary with
respect to the Plan within the meaning of ERISA Section 3(21)(A).
Section 1.21 Forfeiture means the non-vested portion of the
Current Balance of a Former Participant's Profit Sharing Account which is
reallocated to remaining Participants pursuant to Section 3.03.
Section 1.22 Fund means the trust fund created in accordance with Article VI.
Section 1.23 Highly Compensated Employee means:
Section 1.23(a) - Any employee who during the Plan Year or preceding Plan
Year meets one of the following criteria -
(i) was at any time a Five Percent (5%) Owner of the Employer or
Affiliate;
6
(ii) received Maximum Compensation from the Employer or Affiliate
in excess of seventy-five thousand dollars ($75,000) (or such larger amount
as may be determined by the Secretary of Treasury);
(iii) received Maximum Compensation from the Employer or Affiliate in excess
of fifty thousand dollars ($50,000) (or such larger amount as may be
determined by the Secretary of Treasury) and was in the top-paid group
consisting of the top twenty percent (20%) of the employees (considering
all Employees of the Employer or Affiliate) when ranked on the basis of
Maximum Compensation during such Plan Year; or
(iv) was at any time an officer and received Maximum Compensation
greater than fifty percent (50%) of the amount in effect under IRC
Section 415(b)(1)(A) for such Plan Year. No more than fifty (50)
employees - or if lesser, the greater of three (3) employees or ten percent
(10%) of the employees, shall be treated as officers. If, for the Plan Year,
no officer of the Employer or Affiliate receives the above described amount
of Maximum Compensation, the highest paid officer of the Employer or Affiliate
for such Plan Year shall be treated as a Highly Compensated Employee hereunder.
An employee shall be considered a Highly Compensated
Employee for purposes of (a)(i) of this Section if he was a Five Percent (5%)
Owner of the Employer or Affiliate in the Plan Year of determination or the
preceding Plan Year. An employee shall not be considered a Highly
Compensated Employee for purposes of (a)(ii), (a)(iii) and (a)(iv) of this
Section if he was a Highly Compensated Employee in the current Plan Year
but was not a Highly Compensated Employee in the preceding Plan Year
unless such employee is a member of the group consisting of the one
hundred (100) employees paid the greatest Maximum Compensation during the
Plan Year for which such determination made.
7
Section 1.23(b) - The following employees shall be excluded for
purposes of determining the number of officers under subparagraph
(iv) above and the size of (but not the identity of) the top-paid
group under paragraph (a)(iii) of this section:
(i) employees who have not completed six (6) months of service;
(ii) employees who normally work less than seventeen and one-half
(171/2) hours per week;
(iii) employees who normally work not more than six (6) months
during any year;
(iv) employees who have not attained age twenty-one (21);
(v) except to the extent provided in regulations, employees who
are included in a collective bargaining agreement between employee
representatives and an Employer or Affiliate; and
(vi) employees who are nonresident aliens and who receive no
earned income (within the meaning of IRC Section 911(d)(2) from an
Employer or Affiliate which constitutes income from sources within the
United States (within the meaning of IRC Section 861(a)(3)).
Except as otherwise provided in Article IV, if an employee
is a Family Member of another employee who is during the Plan Year or
immediately preceding Plan Year (i) a Five Percent (5%) Owner of
the Employer or Affiliate, or (ii) one (1) of the ten (10) Highly
Compensated Employees of the Employer or Affiliate paid the
greatest amount of Maximum Compensation, the Maximum Compensation paid to
and contributions made on behalf of such Family Member shall be
treated as having been paid to or made on behalf of such Five Percent (5%)
Owner or Highly Compensated Employee.
8
Any former employee shall be treated as a Highly Compensated
Employee if such employee was a Highly Compensated Employee (i) in the
Plan Year that he terminated employment, or (ii) in any year ending after
his fifty-fifth (55th) birthday. In addition, an employee who works only a
de minimis amount of service may be considered a Highly Compensated
Employee.
Section 1.23(c) - For purposes of this Section, the following definitions
shall apply:
(i) The term "Family Member" as used in this Section 1.23 shall
mean with respect to any Employee, such employee's spouse and lineal
ascendants or descendants and the spouses of such lineal ascendants or
descendants.
(ii) The term "Five Percent (5%) Owner" shall have the same
meaning as is specified in IRC Section 416(i).
(iii) The determination of "Maximum Compensation" for purposes of
this Section shall be made without regard to IRC Sections 125,
402(a)(8) and 402(h)(1)(B) and in the case of contributions by the Employer
made pursuant to a salary reduction agreement, without regard to IRC
Section 403(b).
Section 1.23(d! - For the purpose of determining who is a Highly
Compensated Employee, the Committee may make the calendar year
election for any Plan Year, as defined in Treas. Reg. 1.414(q)-1T,
Q&A-14(b), with respect to this Plan; provided, however, such election must
apply with respect to all plans of the Employer and Affiliates for such
year.
Section 1.24 Hours of Service means the sum of:
Section 1.24(a) - Each hour for which an employee is paid, or
entitled to payment for the performance of duties for the Employer during the
applicable computation period.
9
Section 1.24(b) - Each hour for which an employee is paid, or
entitled to payment by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty or leave of absence. However, the
determination of hours under this paragraph (b) shall be subject to the
following restrictions:
(i) No more than five hundred one (501) hours shall be credited
to an employee during any single continuous period during which the
employee performs no duties (whether or not such period occurs in a single
computation period).
(ii) No such hours shall be credited to an employee if payment is
made or due under a plan maintained solely for the purpose of complying with
applicable workers' compensation or unemployment or disability insurance
laws.
(iii) Hours shall not be credited for a payment which solely reimburses an
employee for medical or medically related expenses incurred by the employee.
Section 1.24(c) - Each hour during which an employee is paid, or entitled
to payment, by the Employer on account of a period of time during which no
duties are performed due to military duty and any other periods in which an
employee was not paid or entitled to payment and would presumably have
performed services for the Employer but for the fact that such individual
was on a military leave of absence for service in the armed forces of the
United States of America, provided the individual entered such service
directly from the employ of the Employer, was discharged from such service
and was re-employed by the Employer within the period during which his
employment rights as a veteran are protected by law.
Section 1.24(d) - Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer provided,
however, that the same hours shall not be credited both under paragraphs
(a), (b) or (c) of this Section, as the case may be, and under this
paragraph (d).
10
Hours of Service shall not include any period during which
the employee was employed by a predecessor of the Employer, unless
the predecessor's organization maintained the Plan or a predecessor
plan or credit for such period of employment is otherwise granted under
the Plan.
Hours of Service under paragraphs (a), (c) and (d) of this
Section shall be determined from the Employer records. Hours of Service
under paragraph (b) of this Section shall be determined in accordance
with Department of Labor Regulations Section 2530.200b-2. Hours of
Service hereunder shall be credited to the appropriate computation period
in accordance with Department of Labor Regulations Section 2530.200b-2(c).
Notwithstanding anything herein to the contrary, nothing in this
Section shall be construed to alter, amend, modify, invalidate, impair or
supersede any law of the United States or any rule or regulation issued
under any such law.
Section 1.25 IRC means the Internal Revenue Code of 1986, as amended.
Section 1.26 Limitation Year means the twelve (12) month period
commencing January 1 and ending December 31.
Section 1.27 Maximum Compensation means a Participant's wages, as
defined in Code Section 3401(a), and all other payments of compensation to
a Participant by his Employer or Affiliate (in the course of the Employer's
or Affiliate's trade or business) for which the Employer or
Affiliate is required to furnish the Participant a written statement under
Code Sections 6401(d), 6051(a)(3) and 6052 (Form W-2 or substitute).
Compensation must be determined without regard to any rules under Code
Section 3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such as
the exception for agricultural labor in Code Section 3401(a)(2)).
Maximum Compensation for any Limitation Year is the compensation actually
paid or includable in gross income during such year. For
Limitation Years commencing on and after January 1, 1989, Maximum Compensation
shall be limited to the amount as may be determined by the Secretary of the
Treasury pursuant to IRC Section 401(a)(17).
11
This definition shall be interpreted consistent with IRC
Section 415 and rules and regulations issued thereunder. Further, such
law and regulations shall be controlling in all determinations under this
definition, inclusive of any provisions and requirements stated
thereunder but hereinabove absent.
Section 1.28 Net Profits means for any Plan Year the
Employer's net operating profits for such year determined by the Employer
upon the basis of its books of account in accordance with generally
accepted accounting practices excluding any extraordinary gains or losses
from non-operational areas.
Section 1.29 Non-Highly Compensated Employee means any Employee who
is not a Highly Compensated Employee.
Section 1.30 Normal Retirement Age means age sixty-five (65).
Section 1.31 Normal Retirement Date means the later of: (a) the
last day of the month in which the Employee attains his sixty-fifth
(65th) birthday, and (b) the first Valuation Date following his
commencement of participation under the Plan.
Section 1.32 One Year Break in Service means a Plan Year
during which an Employee has completed five hundred (500) or fewer Hours
of Service.
For periods commencing on or after January 1, 1985, and to
the extent not already credited, Hours of Service shall be credited
solely for purposes of determining whether a One Year Break in Service
has occurred with respect to an Employee who is absent from work
regardless of whether the employee is paid for such absence:
Section 1.32(a) - By reason of the pregnancy of the Employee,
Section 1.32(b) - By reason of the birth of a child of the Employee,
12
Section 1.32(c) - By reason of the placement of a child with the
Employee in connection with the adoption of such child by such Employee, or
Section 1.32(d) - For purposes of caring for such child for a period
beginning immediately following such birth or placement.
Hours of Service to be credited for such purpose shall be:
(i) the Hours of Service which otherwise would normally have been
credited to such Employee but for such absence, or
(ii) in any case in which the Committee is unable to determine
the hours in (i) above, eight (8) Hours of Service per normal workday
of absence,
except that the total number of hours treated as Hours of Service
by reason of any such pregnancy or placement shall not exceed five
hundred one (501) hours. The hours in items (i) and (ii) above
shall be treated as Hours of Service hereunder:
(iii) only in the Plan Year in which the absence from work
begins, if an Employee would be prevented from incurring a One Year Break in
Service in such Plan Year solely because the period of absence is treated as
Hours of Service as provided in paragraphs (a), (b), (c) or (d) above; or
(iv) in any other case, in the immediately following Plan Year.
Further, the Committee may request that the Employee furnish
any information the Committee may require to establish that the
absence is for the reasons hereinbefore provided and the number
of days for which there was such an absence. In the event such
information is not submitted in a timely manner, no Hours of
Service shard pursuant to this paragraph.
13
Section 1.33 Participant means any Employee who becomes a
Participant as provided in Article II.
Section 1.34 Participation Date means January 1 and July 1.
Section 1.35 Plan means The Monroe County Bank Profit
Sharing Plan, as contained herein or as duly amended.
Section 1.36 Plan Year means each twelve (12) month period
beginning on January 1 and ending on December 31.
Section 1.37 Profit Sharing Account means the account
established on behalf of a Participant which as of January 1, 1976, shall
consist of his "Profit Sharing Account" as defined in The Monroe County Bank
Profit Sharing Plan as constituted and valued as of December 31, 1975,
in accordance with said Plan. On and after January 1, 1976, there
shall be credited to the Participant's Profit Sharing Account (a) the amount
of the Employer's Contribution allocated to the Participant pursuant to
Article III; (b) the Participant's proportionate share in any Forfeiture; and
(c) the Participant's proportionate share of the Adjustment, attributable to
this Account.
Section 1.38 Profit Sharing Contributions mean the
contribution made by the Employer pursuant to Article III hereof.
Section 1.39 Service means, as of any date the sum of past
Service, if any, under Section 1.39(a) and future Service under Section 1.39(b),
subject to Section 1.39(c), Section 1.39(d) and Section 1.39(e), if applicable:
Section 1.39(a) If the Employee was employed by the Employer on December 31,
1975, he shall receive credit for past Service. Past Service shall mean the
number of years of continuous employment by the Employer of an Employee from
his most recent hiring date prior to January 1, 1976, until January 1, 1976,
rounded up to the next full year.
14
Past Service shall not be broken and shall be credited for
absences due to:
(i) Vacation, temporary sickness, or injury;
(ii) Leaves of absence duly granted by the Employer continuing
for a period of not more than one (1) year, with all Employees under similar
circumstances being treated alike;
(iii) Disabilities arising in or out of the course of his employment by the
Employer and compensable under any Workmen's Compensation Act or
Occupational Disease Act applicable to him;
(iv) Service in the armed forces of the United States or any of
its allies during any war or state of emergency in which the United States
shall be engaged, or in the armed forces of the United States while any
form of law requiring compulsory military service shall be in effect and when
such law shall be applicable to the Employee, provided that in either case
the Employee shall have directly entered into such armed forces and
shall not have reenlisted after the date of first entering and shall have
made application for employment within the period and subject to the
conditions for re-employment rights as provided by such law.
Section 1.39(b) - Future Service shall be the total number of
Plan Years during which the Employee has at least one thousand (1,000) Hours
of Service for the Employer during the period of time commencing on
the later of (i) January 1, 1976; and (ii) if Section 1.39(c) is
applicable, the Anniversary Date coincident with or immediately preceding the
applicable re-employment date.
Section 1.39(c) - Notwithstanding the above, if a terminated
Participant is subsequently re-employed and again becomes a Participant, his
Service shall not includes employment prior to re-employment if the
Participant's vested interest in Employer Contributions under the Plan was
zero at date of termination and the Participant's number of consecutive One Year
Breaks in Service equal or exceed the greater of (i) five consecutive One
Year Breaks in Service, or (ii) the number of Years of the Participant's
Service as of his termination date. However, the provisions of Section
1.39(c)(i) shall only apply to Employees actively participating in the Plan for
periods on and after the first day of the Plan Year following December 31, 1984.
Section 1.39(d) - Notwithstanding the above, if (i) an Employee's
first twelve (12) months of employment begin after January 1, 1976, but before
January 1, 1979, and overlaps two (2) Plan Years, (ii) the Employee is credited
with at least one thousand (1,000) Hours of Service during
such twelve (12) month period, and (iii) the Employee is credited
with fewer than one thousand (1,000) Hours of Service during each of those two
(2) Plan Years, then the Employee shall be credited with one (1)
year of Service effective as of entry into the Plan.
Section 1.39(e) - For purposes of this Section 1.39, employment
and Hours of Service with The First National Bank of Monroeville shall be
considered to be Service with the Employer.
Section 1.40 Total and Permanent Disability or Totally and Permanently
Disabled means a physical or mental condition arising after the original date of
employment of the Participant which totally and permanently prevents the
Participant from engaging in any occupation or employment for remuneration or
profit, except for the purpose of rehabilitation not incompatible with a
finding of total and permanent disability. The determination as to whether a
Participant is totally and permanently disabled shall be made (i) on medical
evidence by a licensed physician designated by the Committee, (ii) on
evidence that the Participant is eligible for disability benefits under any
long-term disability plan sponsored by the Employer but administered by an
independent third party, or (iii) on evidence that the Participant is eligible
for disability benefits under the Social Security Act in effect at
the date of disability. Total and Permanent Disability shall exclude
disabilities arising from:
_ ~
Section 1.40(a) - Chronic or excessive use of intoxicants, drugs,
or narcotics; or
Section 1.40(b) - Intentionally self-inflicted injury or intentionally
self-induced sickness; or
16
Section 1.40(c) - A proven unlawful act or enterprise on the part
of the Participant; or
Section 1.40(d) - Military service where the Participant is
eligible to receive a government-sponsored military disability pension.
Section 1.41 Trust Agreement means the agreement entered
into between the Employer and the Trustee pursuant to Article VI.
Section 1.42 Trustee means such individual, individuals or
financial institution, or a combination of them as shall be designated in
the Trust Agreement to hold in trust any assets of the Plan for the purpose
of providing benefits under the Plan, and shall include any
successor trustee to the trustee initially designated thereunder.
Section 1.43 Valuation Date means the last day of each Plan
Year subsequent to the Effective Date, as of which date the Fund shall
be valued at fair market value. The Committee may from time to time
value the Fund as of any other date as it deems desirable.
17
ARTICLE II
ELIGIBILITY AND PARTICIPATION
Section 2.01 Eligibility - Each person who was a Participant
on December 31, 1988, subject to the provisions hereinafter contained, shall
continue as acParticipant after such date.
On any Participation Date, beginning with January 1, 1989,
an Employee whocis not yet a Participant but whose original date of employment
(including cemployment with The First National Bank of Monroeville) is at
least one (1) year prior to said Participation Date shall become a Participant
on that Participation Date.
Section 2.02 Participation - Each person who becomes a Participant shall
remain a Participant so long as he remains an Employee. In the event an
Employee ceases to be a Participant due to his termination of employment
and is later reemployed, he shall once again become a Participant upon his
re-employment date.
18
ARTICLE III
CONTRIBUTIONS AND ALLOCATIONS TO PROFIT SHARING ACCOUNTS
Section 3.01 Profit Sharing Contributions -
Section 3.01(a) Contributions - For each Plan Year subsequent to
the Effective Date each Employer may contribute to the Fund a
discretionary amount, out of its current or accumulated Net Profits
to be allocated on behalf of each Participant eligible to recede an
allocation hereunder. Such discretionary amount shall be determined
by the Employer's Board of Directors.
Section 3.01(b) Allocation of Profit Sharing Contributions to
Profit Sharing Accounts -In the event an Employer makes a Profit Sharing
Contribution to the Fund, such Profit Sharing Contribution shall
be credited as of the December 31 Valuation Date to the Profit Sharing
Account of each Participant who has not retired from or terminated
his employment with the Employer or died or become Totally and
Permanently Disabled prior to or as of such Valuation Date.
Each such Participant's share in the Profit Sharing Contribution shall
be determined in the following manner.
Section 3.01(b)(i) - One (1) unit shall be granted for each year of
Service with the Employer.
Section 3.01(b)(ii) - One (1) unit shall be granted for each one
hundred dollars ($100) of Compensation. One (1) unit shall be
given for fractions of Compensation of fifty dollars ($50) or more with
fractions of less than fifty dollars ($50) disregarded.
Section 3.01(b)(iii) - The total number of units for all Participants, as
calculated in Section 3.01(b)(i) and Section 3.01(b)(ii) above, shall be
determined by the Committee and divided into the Employer's Profit Sharing
Contribution in order to determine the value of one (1) unit.
19
Section 3.01(b)(iv) - The value of one (1) unit, as determined in
Section 3.01(b)(iii) above shall then be multiplied by the number of
units credited to each Participant to determine his share of the Employer's
Profit Sharing Contribution.
Section 3.02 Allocation of Adjustment - The Committee shall
determine the Adjustment of the Fund for the period elapsed since the last
preceding Valuation Date by adding together all income received, realized
and unrealized profits, and deducting therefrom all taxes, charges or
expenses (unless paid for by the Corporation) and any realized or
unrealized losses which may have been sustained. Such Adjustment shall be
allocated as of the Valuation Date in the following manner to the accounts of
all then Participants or former Participants who maintain a credit balance
in their Profit Sharing Account. The Adjustment shall be prorated and
credited or debited, as the case may be, to the accounts of all such
Participants and Former Participants on the Valuation Date, prior to the
allocation of contributions as provided in Section 3.01 and Forfeitures as
provided in Section 3.03, on the basis of the ratio of (a) the Participant's
or Former Participant's credit balance in his Profit Sharing Account to (b)
the total of all such Participants' or Former Participants' credit balances
for the same period. In determining whether a credit balance is present,
the Committee shall first determine the value of a Participant's
Profit Sharing Account as of the prior Valuation Date; from this amount any
distributions and Forfeitures resulting from such Participant's termination of
employment shall be subtracted. Distributions made pursuant to Article V
shall not share in any Adjustment determined in accordance with this
Section.
The Committee shall maintain the necessary accounting to
ensure that each Participant's allocation is properly credited or debited to
his Profit Sharing Account.
Section 3.03 Allocation of Forfeitures - The Committee shall
determine the amount of Forfeitures for each Employer as of each
Valuation Date by adding together all amounts forfeited pursuant to Section
5.06 since the last preceding December 31 Valuation Date. Forfeitures
shall be reallocated among the remaining Participants actually employed by
the Employer from whom such Forfeiture was derived. Forfeitures shall
be allocated as of the December 31 Valuation Date among the Profit
Sharing Accounts of each Participant (who has not retired from or
terminated his employment with the Employer or died or become Totally and
20
Permanently Disabled prior to or as of such Valuation Date) in
the same proportion as the Employer's Profit Sharing Contribution as set
forth in Section 3.01.
Section 3.04 Equitable Allocations - The Committee shall
establish accounting procedures for the purpose of making the allocations,
valuations and adjustments to Participants' accounts. Should the
Committee determine that the strict application of its accounting
procedures will not result in an equitable and non-discriminatory-allocation
among the accounts of Participants, it may modify its procedures for the
purpose of achieving an equitable and nondiscriminatory allocation in
accordance with the general concepts of the Plan and the provisions of this
Article.
Further, notwithstanding anything contained in this Article III
herein to the contrary, the Committee, in order to administer the Plan in
an equitable and nondiscriminatory manner with respect to all
Participants, may choose an alternate date to value Participants'
accounts for all purposes including distributions from the Plan and any
other transaction needing a specific Valuation Date.
21
ARTICLE IV
LIMITATIONS ON CONTRIBUTIONS AND REQUIRED DISTRIBUTION OF
BENEFITS
Section 4.01 Maximum Additions - Anything in the Plan to the
contrary notwithstanding, the total Annual Additions made to the Profit
Sharing Account of a Participant for any Limitation Year commencing on
and after January 1, 1983, when combined with any similar Annual Additions
credited to the Participant for the same period-from all other qualified
Defined Contribution Plans maintained by the Employer, shall not exceed
the lesser of paragraphs (a) and (b) following:
Section 4.01(a) - Thirty thousand dollars ($30,000) or if
greater, twenty- five percent (25%) of the dollar limitation in effect under
IRC Section 415(b)(1)(A); and
Section 4.01(b) - Twenty-five percent (25%) of the Participant's
total non-deferred Maximum Compensation received from the Employer for such
Limitation Year.
In the event a Participant is covered by more than one Defined
Contribution Plan maintained by the Employer, the maximum Annual Additions
under this Plan as noted above shall be decreased as determined necessary
by the Employer, prior to the reduction of such other Defined Contribution
Plans, to ensure that all such plans will remain qualified under the IRC.
In the event that as of any Valuation Date corrective adjustments in
the Annual Addition to any Profit Sharing Account is required pursuant to
this Section, the Profit Sharing Account shall be reduced by the lesser
of: (i) the amount required to ensure compliance with this Section, and
(ii) Employer Contributions on behalf of the Participant during the
applicable Plan Year. If a further corrective adjustment in a Participant's
Profit Sharing Account is necessary, the Profit Sharing Account of such
Participant shall be reduced by the portion of Forfeitures
to be allocated to such Participant's Account for such Plan Year
which is necessary to ensure compliance with this Section.
22
If, as a result of the allocation of Forfeitures, a
reasonable error is made in estimating a Participant's annual Maximum
Compensation, or under other facts and circumstances which the Internal Revenue
Service finds justify the availability of these rules, any amount
withheld or taken from a Participant's Profit Sharing Account pursuant to the
above, shall be segregated in the Fund in a separate account and applied
toward the Contribution of the Employer for the next Limitation Year.
Section 4.02 Multiple Plan Participation - If a Participant is a
participant of a Defined Benefit Plan maintained by the Employer, the sum
of his defined benefit plan fraction and his defined contribution plan
fraction for any Limitation Year may not exceed 1.0.
For purposes of maximum Annual Additions to Defined
Contribution Plans and maximum annual benefits payable from Defined Benefit
Plans, all Defined Contribution Plans and all Defined Benefit Plans, whether
or not terminated, shall be combined and treated as one (1) such plan.
For purposes of this Section, the term "defined contribution
plan fraction" shall mean a fraction the numerator of which is the sum
of all of the Annual Additions to the Participant's Individual Account
under this Plan as of the close of the Limitation Year and the denominator
of which is the sum of the lesser of the following amounts determined for
such Limitation Year and for each prior Limitation Year of employment
with the Employer:
Section 4.02(a) the product of 1.25 multiplied by the dollar
limitation in effect in Section 4.01(a) for such year determined without
regard to IRC Section 415(c)(6); or
Section 4.02(b) the product of 1.4 multiplied by an amount determined
pursuant to Section 4.01(b) with respect to each individual under the Plan
for such Limitation Year.
For purposes of this Section, the term, "defined benefit plan
fraction" shall mean a fraction the numerator of which is the
Participant's projected annual benefit (as defined in the said
defined benefit plan) determined as of the close of the Limitation Year
and the denominator of which is the lesser of:
23
<PAGE>
Section 4.02(c) the product of 1.25 multiplied by the dollar
limitation in effect pursuant to IRC Section 415(b)(1)(A) for such Limitation
Year; or
Section 4.02(d) the product of 1.4 multiplied by the amount which
may be taken into account pursuant to IRC Section 415(b)(1)(B) with
respect to each individual under the Plan for such Limitation Year.
The limitation on aggregate benefits from a Defined Benefit
Plan and a Defined Contribution Plan which is contained in IRC Section
415(e) shall be complied with by a reduction (if necessary) in the Participant's
benefits under the Defined Benefit Plan(s) [in accordance with the
provisions of the said plan(s)] before a reduction of any such Defined
Contribution Plan.
Section 4.03 Required Distributions - In the event that
there shall be a portion of a Participant's Profit Sharing Account which shall
be due and payable pursuant to this Article IV, and the Participant has not
elected otherwise in accordance with the provisions of the Plan, any
payment of benefits or commencement thereof to the Participant shall begin
not later than sixty (60) days after the close of the Plan Year in which
occurs the latest of the dates described in Section 4.03(a), (b) or (c)
where:
Section 4.03(a) is the date on which the Participant's attains his Normal
Retirement Age; and
Section 4.03(b) is the date the Participant terminates his service with the
Employer; and
Section 4.03(c) is the tenth (10th) anniversary of the date the Employee
becomes a Participant.
Notwithstanding anything contained herein to the contrary, the Plan
shall begin to distribute the entire interest of each Participant not later
than a date prescribed in paragraph (d) below with such payment(s) being
made at least as rapidly as that described in paragraph (e) below.
24
Section 4.03(d) - In all events, benefits shall commence by the April 1
following the calendar year in which the Participant attains age
seventy and one-half (70 1/2). Notwithstanding the foregoing,
Participants who have never been five percent (5%) owners as defined in
IRC Section 401(a)(9), and reached age seventy and one-half (70 1/2)
before January 1, 1988 may elect to defer benefit commencement under
the Plan until the April 1 which follows the calendar year in which
such Participants retire from the employ of the Employer.
Section 4.03(e) - The payment of benefits hereunder shall be made in
accordance with IRC Section 401(a)(9) and the regulations issued
thereunder, inclusive of the minimum distribution incidental benefit
requirements of Section 1.401(a)(9)-2 of the Treasury Regulations:
(i) over the life of such Participant or over the lives of such
Participant and his Beneficiary, or
(ii) over a period not extending beyond the life expectancy of
such Participant or the life expectancies of such Participant and his
Beneficiary.
Further, except as provided in paragraph (f) following, if a
Participant dies before the distribution of the Participant's interest
begins pursuant to paragraph (e) above, the entire interest of the
Participant shall be distributed within five (S) years after the death
of such Participant.
Section 4.03(f) - The immediately preceding sentence shall not be
applicable provided:
(i) any portion of the Participant's interest is payable to (or for the
benefit of) a designated Beneficiary;
(ii) such portion will be distributed (in accordance with
regulations) over the life of such designated Beneficiary (or over a period
not extending beyond the life expectancy of such Beneficiary);
25
(iii) such distributions begin not later than one (1) year after
the date of the Participant's death or such later date as the
Secretary of the Treasury may by regulation prescribe; or
(iv) the designated Beneficiary is the surviving spouse of the
Participant and distributions commence on or before the date on
which the Participant would have attained age seventy and one-half
(70 1/2).
If the surviving spouse dies before the distribution to such
spouse, this paragraph (f) shall be applied as if the surviving
spouse were the Participant.
Section 4.03(g) - If distributions have begun and if the Participant
dies before his entire interest has been paid to him, then the
remainder of the interest will be distributed to his Beneficiary at
least as rapidly as it would have been distributed to the Participant,
under the method of distribution in effect as of the date of the
Participant's death.
Section 4.03(h) - For purposes of this Section, the life
expectancy of a Participant and the Participant's spouse (other than in the
case of a life annuity) will not be redetermined unless the Participant
or the Participant's spouse (as the case may be) elects no later than
the date benefit commencement is required under IRC Section 401(a)(9)
to have his (or her) life expectancy redetermined (but not more
frequently than annually).
Section 4.03(i) - Under regulations prescribed by the Secretary of the
Treasury for purposes of this Section, any amount paid to a child of a
Participant shall be treated as if it had been paid to the surviving
spouse if such amount will become payable to the surviving spouse upon
such child reaching majority (or other designated event permitted by
regulation).
26
ARTICLE V
DISTRIBUTIONS
Section 5.01 Normal Retirement - Upon the retirement of a
Participant on his Normal Retirement Date, the Participant shall be
eligible to receive the Current Balance of his Profit Sharing Account as
of the date of distribution and the Committee shall thereupon direct the
Trustee to distribute to such Participant such amount in accordance with
Section 5.07.
Section 5.02 Delayed Retirement - In the event a Participant remains
in the employ of the Employer beyond his Normal Retirement Date, he shall
thereafter retire on his Delayed Retirement Date.
Upon the retirement of a Participant in accordance with the provisions
of this Section, the Participant shall be eligible to receive
the Current Balance of his Profit Sharing Account as of the date
of distribution and the Committee shall direct the Trustee to
distribute to such Participant such amount in accordance with Section 5.07.
Section 5.03 Disability Retirement - Upon the retirement of a
Participant on his Disability Retirement Date, the Current Balance of his
Profit Sharing Account as of the date of distribution shall become payable
and the Committee shall thereupon direct the Trustee to distribute to such
Participant such amount in accordance with Section 5.07.
Notwithstanding anything in this Section 5.03 to the contrary, a
Participant who retires in accordance with this Section shall (a) have the
right, at any time, prior to his commencement of benefits to defer
commencement of his disability retirement benefit until the April 1
following the calendar year in which he attained age seventy and one half
(70 1/2) and (b) if deferred benefit commencement is elected under (a),
have the right, at any time subsequent to his Disability Retirement Date
but prior to April 1 following the calendar year in which he attained age
seventy and one-half (70 1/2) to elect an earlier benefit commencement
date. All assets held on behalf of a Participant pursuant to this
paragraph shall continue to be debited or credited, as the case may be,
with an allocation of the Adjustment pursuant to Section 3.02.
27
Section 5.04 Death Before Retirement or Termination of Employment -
Upon the death of a Participant before retirement or termination of
employment the Current Balance of such Participant's Profit Sharing
Account as of the date of distribution shall become payable and the
Committee shall direct the Trustee to distribute to such Participant's
Beneficiary such amount in accordance with Section 5.07.
Section 5.05 Death After Retirement or Termination of Employment -
Upon the death of a Participant who is not receiving benefit payments in
accordance with Section 5.07(c)(i), (ii) or (iii) or if a retired or
terminated Participant who has elected to receive his benefit payments
pursuant to Section 5.07(b) should die prior to receiving such benefit
payments, the Committee shall direct the Trustee to distribute to such
Participant's Beneficiary the vested portion of the Current Balance of the
Participant's Profit Sharing Account or other separate account in
accordance with Section 5.07. Upon the death of a Participant who is
receiving benefit payments in accordance with Section 5.07(c)(i), (ii) or
(iii) or if a retired or terminated Participant who has elected to receive
benefit payments pursuant to Section 5.07(c)(i), (ii) or (iii) should die
prior to the commencement of such benefit payments, the provisions of
Section 5.07(c)(i), (ii) or (iii) shall control concerning any payments
upon the death of such Participant.
Section 5.06 Termination of Employment - Upon termination of
employment for any reason, other than retirement, death or Total and
Permanent Disability, a Participant's benefit shall equal the vested
portion of the Current Balance of his Profit Sharing Account.
28
If a Participant's date of termination occurs prior to
January 1, 1989 and prior to his age sixty (60), he shall be vested in
his Profit Sharing Account in accordance with the following table:
<TABLE>
<CAPTION>
Vested
Service Percentage
<S> <C>
Less than 2 years 0%
2 years but less than 3 years 10%
3 years but less than 4 years 20%
4 years but less than 5 years 30%
5 years but less than 6 years 40%
6 years but less than 7 years 50%
7 years but less than 8 years 60%
8 years but less than 9 years 70%
9 years but less than 10 years 80%
10 years but less than 11 years 90%
11 years or more 100%
</TABLE>
If a Participant's date of termination occurs on or after
January 1,1989 and prior to his age sixty (60), he shall be vested
in his Profit Sharing Account in accordance with the following
table:
<TABLE>
<CAPTION>
Vested
Service Percentage
<S> <C>
Less than 2 years 0%
2 years but less than 3 years 10%
3 years but less than 4 years 20%
4 years but less than 5 years 40%
5 years but less than 6 years 60%
6 years but less than 7 years 80%
7 years or more 100%
</TABLE>
Notwithstanding the foregoing, a Participant shall be one
hundred percent (100%) vested in his Profit Sharing Account upon
the occurrence of his death, Total and Permanent Disability or
the attainment of his age sixty (60) while in the employ of the
Employer.
If the vested portion of the Current Balance of the
Participant's Profit Sharing Account is not greater than three
thousand five hundred dollars ($3,500) (or such other amount as
may be prescribed by regulations of the Secretary of the Treasury),
the Committee shall direct the Trustee to distribute to the
Participant the vested portion of said Current Balance as soon as
29
reasonably possible following the December 31 Valuation Date next
following his termination of employment in accordance with Section 5.07. If
the vested portion of the Current Balance of the Participant's Profit
Sharing Account determined at the time of any distribution is in excess
of three thousand five hundred dollars ($3,500) (or such other amount as
may be prescribed by regulations of the Secretary of the Treasury), the
Participant's consent shall be required for such distribution to be made.
If the Current Balance at the time of any distribution exceeds thirty-five
hundred dollars ($3,500) (or such other amount as may be prescribed by
regulations of the Secretary of the Treasury) then the Current Balance as
of any subsequent distribution date shall be deemed to be in excess of
thirty-five hundred dollars ($3,500). In the event the Participant does not
consent to such distribution being made upon his termination of employment,
the vested portion of the Current Balance of the Participant's Profit
Sharing Account shall continue to be held in his Profit Sharing Account
until the April 1 following the calendar year in which the Participant
attains age seventy and one-half (70 1/2), or if earlier, the Valuation
Date next following the date the Participant requests an earlier distribution.
Except as otherwise provided in Section 5.07(c),
while such amount is being held in his Profit Sharing Account, it shall
continue to share in the Adjustment of the Fund pursuant to Section 3.02.
Upon termination of employment, the non-vested portion of
the Current Balance of the Participant's Profit Sharing Account shall be held
in the Participant's Profit Sharing Account until the December 31
Valuation Date coinciding with or next following the earlier of: (i) the
distribution to a Participant of the vested portion of his Profit Sharing
Account before the close of the second Plan Year following the Plan Year in
which his
termination of employment occurred, or (ii) the occurrence of five (5)
consecutive One Year Breaks in Service, at which time it shall become a
Forfeiture, subject to the reinstatement provisions hereinafter provided,
and reallocated to remaining Participants in accordance with Section 3.03.
While such nonvested amount is being held in the Participant's Profit
Sharing Account, it shall share in the Adjustment of the Fund as set forth
in Section 3.02.
In the event a partially vested Participant, who received a
distribution before the close of the second Plan Year following
the Plan Year in which occurred his termination of employment in
accordance with the preceding provisions of this Section, is re-employed prior
to incurring five (5) consecutive One Year Breaks in Service beginning after
the date of distribution, and such
30
Participant repays the amount of the distribution previously paid to him
upon his termination of employment prior to the end of the five (5) Year
period beginning with the Employee's date of re-employment, the Employer
shall reinstate the amount which was previously forfeited by such
Participant and reallocated to remaining Participants in accordance with
Section 3.03. Such amount shall be reinstated as of the Valuation Date
following the date the Participant repays the amount previously distributed
to him by reason of his termination of employment from the income or gains
of the Fund, from current Forfeitures or from Employer Contributions, at
the Employer's discretion.
In the event a Participant who terminates employment has received a
distribution after the close of the second Plan Year following the Plan
Year in which such termination occurs, is re-employed prior to incurring
five (5) consecutive One Year Breaks in Service, he shall not have a
repayment right. Upon any subsequent termination of such a re-employed
Participant at a time when he is not fully vested in his Profit Sharing
Account, the vested value of such Participant's Profit Sharing Account
("X") shall be determined by the formula X = P [AB + D] - D; where P equals
the vested percentage under this Section 5.06 at such later date, AB equals
the balance in such account at such later date, and D equals the amount
distributed to the Participant attributable to the Profit Sharing Account.
In the event a Participant who has terminated his employment with an
Employer is reemployed as an Employee prior to receiving a distribution of
the vested portion of his Profit Sharing Account, he shall not be entitled
to a distribution as provided in this Section due to such termination, but
shall be entitled to a distribution as determined herein upon any subsequent
termination of employment for any reason.
A non-vested Participant shall be deemed to be paid his entire
interest in the Plan upon his termination of employment and shall forfeit
the non-vested portion of his Individual Account as of such date. However,
if such Participant is re-employed and again becomes a Participant
hereunder prior to incurring five (5) consecutive one year Breaks in
Service, such forfeited portion of his Individual Account shall be
reinstated.
Section 5.07 Method of Payment -
31
<PAGE>
Section 5.07(a) Application for Benefits - In order to receive a
benefit under the Plan, a Participant, his Beneficiary, or next of
kin must make written application therefor on a form or forms
provided by the Committee at least thirty (30) days before
distribution is to be made. The Committee may require that there be
furnished to it in connection with such application all information
pertinent to any question of eligibility and the amount of any benefit.
Each Participant whose vested Current Balance in his Profit
Sharing Account exceeds three thousand five hundred dollars ($3,500)
(or such other amount as may be prescribed by regulations of the
Secretary of the Treasury) or such Participant's Beneficiary shall
have the right to elect to have his benefit paid under an option
hereinafter set forth in paragraph (c) in lieu of the benefit
otherwise provided for in paragraph (b).
If the vested portion of the Current Balance of a Participant's
Profit Sharing Account is not greater than three thousand five
hundred dollars ($3,500) (or such other amount as may be prescribed
by regulations of the Secretary of the Treasury), the Committee shall
direct the Trustee to distribute to the Participant or his
Beneficiary the vested portion of said Current Balance as soon as
reasonably possible following the Participant's retirement,
termination or date of death in the form of a lump sum.
A Participant who desires to have his benefits paid under an
optional form provided in paragraph (c) shall make such an election
by written notification to the Committee on forms provided by the
Committee at least thirty (30) days before distribution is to be
made. An election by a Participant to receive his benefit under
paragraph (c) below, may be revoked by such Participant in writing to
the Committee at any time prior to the commencement of benefits.
32
Section 5.07(b) Normal Form - In the absence of the election of an
optional method of payment as provided in paragraph (c) below,
benefits shall be payable in one lump sum payment in cash.
Section 5.07(e) Optional Forms - In lieu of receiving payment in
accordance with paragraph (b) above, a Participant or Beneficiary may
elect in writing to receive his distribution in accordance with
one of the following options:
(i) In monthly installments from a segregated account over a
period not to exceed the lesser of (i) five (5) years or (ii) the life
expectancy of the Participant or the life expectancy of the
Participant and his Beneficiary.
(ii) A Participant or Beneficiary (other than the estate of a deceased
Participant as provided in Section 1.05(f)) may elect in writing that
his benefits be paid in monthly or annual installments from a
segregated account over a period not to exceed the lesser of (i) ten
(10) years or (ii) the life expectancy of the Participant or the life
expectancy of the Participant and his Beneficiary.
(iii) A Participant or Beneficiary may elect that his benefits be paid
partially in a lump sum with the remainder paid in accordance with
either paragraph (c)(i) or (ii) above.
As soon as practical after the amount that is distributable to a
Participant is determined, if his distribution will be paid in
installments or delayed more than six (6) months if payable in a lump
sum, his Profit Sharing Account shall be segregated from other Fund
assets and invested in a separate account. The investment of such
segregated account shall be in such federally insured savings account
as is determined by the Trustee, with all interest earned on such
investments credited to such accounts and all disbursements charged
thereto. Such account may be held in cash but only (a) for a limited
period between investments, or (b) as a reserve to meet installments
distributions due shortly. In the event of the death of either a
Participant or Beneficiary to whom periodic installments are being
paid, or are due to be paid, prior to receipt of the full
33
interest in such account, the remaining balance of such segregated account
shall be paid in cash or in kind as soon as practical to the Beneficiary of
such Participant.
Section 5.08 Maximum Option Payable - In the event a Participant
elects to have his benefit paid under Section 5.07(b), (c)(ii) or (c)(iii)
and the designated Beneficiary is not the spouse of the Participant, the
option elected shall be made in accordance with IRC Section 401(a)(9) and
the regulations issued thereunder, inclusive of the minimum distribution
incidental benefit requirements of Section 1.401(a)(9)-2 of the Treasury
Regulations and restricted so that the present value of the payments
expected to be made to the Participant is more than fifty percent (50%) of
the present value of the total payment expected to be made to the Participant
and his Beneficiary.
Section 5.09 Benefits to Minors and Incompetents - In case any person
entitled to receive payment under the Plan shall be a minor, the Committee,
in its discretion, may dispose of such amount in any one or more of the
following ways:
Section 5.09(a) - By payment thereof directly to such minor;
Section 5.09(b) - By application thereof for the benefit of such minor;
Section 5.09(c) - By payment thereof to either parent of such minor or to
any adult person with whom such minor may at the time be living or to any
person who shall be legally qualified and shall be acting as guardian of
the person or the property of such minor; provided only that the parent or
adult person to whom any amount shall be paid shall have advised the
Committee in writing that he will hold or use such amount for the benefit
of such minor.
In the event that it shall be found that a person entitled to receive
payment under the Plan is physically or mentally incapable of personally
receiving and giving a valid receipt for any payment due (unless prior
claim therefor shall have been made by a duly qualified committee or
34
other legal representative), such payment may be made to the spouse, son,
daughter, parent, brother, sister or other person deemed by the Committee
to have incurred expense for such person otherwise entitled to payment.
Section 5.10 Direct Rollover Option - This Section 5.10 applies to
distributions made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
distributee's election under this Plan, a distributee who is not subject to
any of the four (4) limitations set forth in Section 5.10(a) may elect, at
the time and in the manner prescribed by the Committee, to have any portion
of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct
rollover.
Section 5.10(a) - The four (4) limitations on a distributee's direct
rollover rights are as follows: (1) a distributee may not elect the direct
rollover option if the distributee's eligible rollover distributions during
a Plan Year are reasonably expected to total less than two hundred dollars
($200), (2) a distributee may not divide an eligible rollover distribution
into two (2) or more separate distributions to be paid in direct rollovers
to two (2) or more eligible retirement plans; instead, an eligible rollover
distribution that is distributed in a direct rollover may only be paid to
one (1) eligible retirement plan selected by the distributee, (3) if the
distributee elects to have only a portion of an eligible rollover
distribution paid to an eligible retirement plan in a direct rollover, such
portion must equal at least five hundred dollars ($500); if the entire
amount of the eligible rollover distribution is less than five hundred
dollars ($500) the distributee may not divide the distribution, and (4) a
distributee shall not be eligible to elect a direct rollover of an eligible
rollover distribution unless the distributee makes such election within the
time period established by the Committee.
Section 5.10(b) - Eligible rollover distribution - An eligible rollover
distribution is any distribution of all or any portion of the balance of
the credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee's
designated Beneficiary; or for a
35
specified period of ten (10) years or more; any distribution to the
extent such distribution is required under Code Section 401(a)(9);
and the portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
Section 5.10(c! - Eligible retirement plan - An eligible retirement
plan is an individual retirement account described in Code Section
408(a), an individual retirement annuity described in Code Section
408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that accepts the
distributee's eligible rollover distribution. However, in the case of
an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
Section 5.10(d) - Distributee - A distributed includes an Employee or
former Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p), are distributees
with regard to the interest of the spouse or former spouse.
Section 5.10(e) - Direct Rollover - A direct rollover is a payment by
the Plan to the eligible retirement plan specified by the distributed.
36
ARTICLE VI
FUNDING
Section 6.01 Contributions - Contributions by the Employer as
provided for in Article III shall be paid over to the Trustee. All
Contributions by the Employer shall be irrevocable, except as herein
provided, and may be used only for the exclusive benefit of Participants
and their Beneficiaries.
Section 6.02 Trustee - The Corporation will enter into an agreement
with the Trustee "hereunder the Trustee will receive, invest and
administer as a trust fund Contributions made under this Plan in
accordance with the Trust Agreement.
Such Trust Agreement is attached hereto and incorporated by reference
as a part of the Plan, and the rights of all persons hereunder are subject
to the terms of the Trust Agreement. The Trust Agreement specifically
provides, among other things, for the investment and reinvestment of the
Fund and the income thereof, the management of the Fund, the
responsibilities and immunities of the Trustee, removal of the Trustee and
appointment of a successor, accounting by the Trustee and the disbursement
of the Fund.
The Trustee shall, in accordance with the terms of such Trust
Agreement, accept and receive all sums of money paid to it from time to
time by the Employer, and shall hold, invest, reinvest, manage and
administer such moneys and the increment, increase, earnings and income
thereof as a trust fund for the exclusive benefit of Participants and
their Beneficiaries or the payment of reasonable expenses of administering
the Plan.
37
ARTICLE VII
FIDUCIARIES
Section 7.01 General - Each Fiduciary shall discharge his duties
solely in the interest of the Participants and Beneficiaries and for the
exclusive purpose of providing such benefits as stipulated herein to such
Participants and Beneficiaries, or defraying the reasonable expenses of
administering the Plan. Each Fiduciary, in carrying out such duties and
responsibilities, shall act with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims. Further, a Fiduciary
(with investment responsibilities under the Plan) shall have an overall
responsibility to diversify the investments of the Plan so as to minimize
the risk of large losses, unless under the circumstances it is clearly
prudent not to do so.
A Fiduciary may serve in more than one Fiduciary capacity and may
employ one or more persons to render advice with regard to his Fiduciary
responsibilities. If the Fiduciary is serving as such without compensation,
all expenses reasonably incurred by such Fiduciary shall be reimbursed by
the Employer or, at the Corporation's direction, from the Trustee.
A Fiduciary may delegate any of his responsibilities for the
operation and administration of the Plan. In limitation of this right, a
Fiduciary may not delegate any responsibilities as contained herein
relating to the management or control of the Fund except through the
employment of an investment manager as provided in Section 7.03 and in the
Trust Agreement relating to the Fund.
Section 7.02 Corporation - The Corporation has established and
maintains the Plan for the benefit of Participants, Former Participants and
Beneficiaries, and therefore retains control of the operation and
administration of the Plan and shall be designated the plan administrator
of the Plan within the meaning of Section 3(16)(A) of ERISA. The
Corporation in accordance with specific provisions of the Plan
has, as herein indicated, delegated certain of these rights and
obligations to the Employer, the Trustee and the Committee and these parties
shall be solely responsible for these, and only these, delegated rights and
obligations.
38
The Employer shall indemnify each member of the Board, the Committee,
the Trustee and any other person to whom any fiduciary responsibility with
respect to the Plan is allocated or delegated, from and against any and all
liabilities, costs and expenses incurred by such persons as a result of any
act or omission to act in connection with the performance of their
fiduciary duties, responsibilities and obligations under the Plan and under
ERISA, except for liabilities and claims arising from such fiduciary's
willful misconduct or gross negligence. For such purpose, the Employer may
obtain, pay for and keep current a policy or policies of insurance, which
insurance, shall not, however, release the Employer from liability under
this provision.
The Employer shall supply such full and timely information for all
matters relating to the Plan as (a) the Committee, (b) the Trustee, and (c)
the accountant engaged on behalf of the Plan by the Corporation may require
for the effective discharge of their respective duties.
Section 7.03 Trustee - The Trustee, in accordance with the Trust
Agreement, shall have exclusive authority and discretion to manage and
control the Fund, except that the Corporation may in its discretion employ
at any time and from time to time an investment manager (as defined in
Section 3(38) of ERISA) to direct the Trustee with respect to all or a
designated portion of the assets comprising the Fund.
Section 7.04 Administrative Committee - The Corporation by action of
its Board of Directors shall appoint one (1) or more persons to hold office
during the pleasure of the Board of Directors. Such committee to be known
as the Committee. The members of the Committee under the Monroe County Bank
Profit Sharing Plan as in effect on December 31, 1975 shall constitute the
Committee hereunder unless or until replaced. No compensation shall be paid
members of the Committee from the Fund for service on such Committee. The
Committee shall choose from among its members a secretary. Any action of
the Committee shall be determined by the vote of a majority of its members.
The secretary may execute any certificate or other written direction on
behalf of the Committee.
39
The Committee shall hold meetings upon such notice, at such place or
places and at such time or times as the Committee may from time to time
determine. Meetings may be called by the secretary or any two (2) members.
A majority of the members of the Committee at the time in office shall
constitute a quorum for the transaction of business.
In accordance with the provisions hereof, the Committee has been
delegated certain administrative functions relating to the Plan with all
powers necessary to enable it properly to carry out such duties. The
Committee shall have no power in any way to modify, alter, add to or
subtract from, any provisions of the Plan.
The Committee shall have power and discretion to construe the Plan,
and to determine all questions that may arise thereunder relating to (a)
the eligibility of individuals to participate in the Plan, (b) the amount
of benefits to which any Participant or Beneficiary may become entitled
hereunder, and (c) any situation not specifically covered by the
provisions of the Plan. No decision of the Committee shall be subject to
question by any person except when such decision is arbitrary and
capricious. All disbursements by the Trustee, except for the ordinary
expenses of administration of the Fund or the reimbursement of reasonable
expenses at the direction of the Corporation as provided herein, shall be
made upon, and in accordance with, the written directions of the
Committee. When the Committee is required in the performance of its duties
hereunder to administer or construe, or to reach a determination, under
any of the provisions of the Plan, it shall do so on a uniform, equitable
and non-discriminatory basis.
The Committee may employ such counsel, accountants, and other agents
as it shall deem advisable.
Section 7.05 Claims for Benefits - All claims for benefits under the
Plan shall be submitted to the Committee who shall have the responsibility
for determining the eligibility of any Participant or Beneficiary for
benefits. All claims for benefits shall be made in writing and shall set
forth the facts which such Participant or Beneficiary believes to be
sufficient to entitle him to the benefit claimed. The Committee may adopt
forms for the submission of claims for benefits in which case all claims
for benefits shall be filed on such forms. The Committee shall provide
Participants and Beneficiaries with all such forms.
40
Upon receipt by the Committee of a claim for benefits, it shall
determine all facts which are necessary to establish the right of an
applicant to benefits under the provisions of the Plan and the amount
thereof as herein provided. The Committee shall approve, deny and
investigate all questionable claims. In the event any claim for benefits is
denied, the Participant or Beneficiary shall be notified of such decision
in accordance with the provisions of Section 7.06.
Section 7.06 Claims Procedures - The applicant shall be notified in
writing of any adverse decision with respect to his claim within ninety
(90) days after its submission. The notice shall be written in a manner
calculated to be understood by the applicant and shall include:
Section 7.06(a) - The specific reason or reasons for the denial;
Section 7.06(b) - Specific references to the pertinent Plan provisions on
which the denial is based;
Section 7.06(c) - A description of any additional material or information
necessary for the applicant to perfect the claim and an explanation why
such material or information is necessary; and
Section 7.06(d) - An explanation of the Plan's claim review procedures.
If special circumstances require an extension of time for processing
the initial claim, a written notice of the extension and the reason
therefor shall be furnished to the claimant before the end of the initial
ninety (90) day period. In no event shall such extension exceed ninety (90)
days.
In the event a claim for benefits is denied or if the applicant has
had no response to such claim within ninety (90) days of its submission (in
which case the claim for benefits shall be deemed to have been denied), the
applicant or his duly authorized representative, at the applicant's sole
expense, may appeal the denial to the Committee within sixty (60) days of
the receipt of written notice of denial or sixty (60) days from the date
such claim is deemed to be denied. In pursuing such appeal the applicant or
his duly authorized representative:
41
Section 7.06(e) may request in writing that the Committee review the
denial;
Section 7.06(f) may review pertinent documents; and
Section 7-06(g) may submit issues and comments in writing.
The decision on review shall be made within sixty (60) days of
receipt of the request for review, unless special circumstances require an
extension of time for processing, in which case a decision shall be
rendered as soon as possible, but not later than one hundred twenty (120)
days after receipt of a request for review. If such an extension of time
is required, written notice of the extension shall be furnished to the
claimant before the end of the original sixty (60) day period. The
decision on review shall be made in writing, shall be written in a manner
calculated to be understood by the claimant, and shall include specific
references to the provisions of the Plan on which such denial is based. If
the decision on review is not furnished within the time specified above,
the claim shall be deemed denied on review.
Section 7.07 Records - All acts and determinations of the Committee
shall be duly recorded by the secretary and all such records, together
with such other documents as may be necessary in exercising its duties
under the Plan shall be preserved in the custody of such secretary. Such
records and documents shall at all times be open for inspection and for
the purpose of making copies by any person designated by the Corporation.
The Committee shall provide such timely information, resulting from the
application of its responsibilities under the Plan, as needed by the
Trustee and the accountant engaged on behalf of the Plan by the
Corporation, for the effective discharge of their respective
duties.
Section 7.08 Missing Persons - The Committee shall direct the Trustee
to make a reasonable effort to locate all persons entitled to benefits
under the Plan; however, notwithstanding any provision in the Plan to the
contrary, if, after a period of five (5) years from the date such benefit
shall be due, any such persons entitled to benefits have not been located,
their rights under the Plan shall be construed as if the Employee had
died. Before this provisions becomes operative, the Trustee shall send a
certified letter to all such persons at their last known address advising
them that their interest or benefits under the Plan shall be so
42
construed. Any such amounts shall be held by the Trustee for a period of
three (3) additional years (or a total of eight (8) years from the time the
behests first become payable). If no distributed can be found, then any
unclaimed benefits shall be dealt with according to the laws of the State
of Alabama pertaining to abandoned intangible personal property held in a
fiduciary capacity.
43
ARTICLE VIII
AMENDMENT AND TERMINATION OF THE PLAN
Section 8.01 Amendment of the Plan - The Corporation shall have the
right at any time by action of the Board to modify, alter or amend the Plan
in whole or in part; provided, however, that the duties, powers and
liability of the Trustee hereunder shall not be increased without its
written consent; and provided, further, that the amount of benefits which
at the time of any such modification, alteration or amendment shall have
accrued for any Participant or Beneficiary hereunder shall not be adversely
affected thereby; and provided, further, that no such amendment shall have
the effect of reverting to the Employer any part of the principal or income
of the Fund; and provided, further, that no such amendment shall have the
effect of reducing the nonforfeitable percentage of benefits accrued to any
Participant unless any such Participant who has completed at least three
(3) Years of Service with the Employer, may elect during the period (which
begins no later than the date such amendment is adopted and ends no earlier
than the later of (i) the date which is sixty (60) days after the date the
amendment is adopted, or (ii) the date which is sixty (60) days after the
date the amendment becomes effective, or (iii) the date which is sixty (60)
days after the date the Participant is issued written notice of the
amendment by the Committee) to have the nonforfeitable percentage of his
accrued benefit derived from employer contributions determined without
regard to such amendment.
Notwithstanding anything contained herein to the contrary, no
amendment to the Plan shall decrease a Participant's account balance or
eliminate an optional form of distribution for any behests accrued under
the Plan prior to such amendment.
Section 8.02 Termination of the Plan - The Employer expects to
continue the Plan indefinitely, but continuance is not assumed as a
contractual obligation and each Employer reserves the right at any time by
action of its board of directors to terminate the Plan as applicable to
itself without prior notice and for any reason. If the Plan is terminated
or partially terminated or Contributions are completely discontinued, each
Participant affected thereby shall be then fully vested in the amount to
his credit in his Profit Sharing Account.
44
In the event of termination of the Plan by an Employer, the Committee
shall value the Fund as of the date of termination. That portion of the
Fund applicable to any Employer for which the Plan has not been terminated
shall be unaffected. The Profit Sharing Accounts of the Participants and
Beneficiaries affected by the termination, as determined by the Committee,
shall continue to be administered as a part of the Fund or distributed to
such Participants or Beneficiaries pursuant to Section 5.07.
45
ARTICLE IX
PROVISIONS RELATIVE TO EMPLOYERS INCLUDED IN PLAN
Section 9.01 Method of Participation - Any corporation which is a
member of the same controlled group of corporations, as determined pursuant
to IRC Sections 414(b), (c), (m) and (a), as the Corporation, with the
approval of the Board, by taking appropriate board action may become a
party to the Plan, by adopting the Plan. Any corporation which becomes a
party to the Plan shall thereafter promptly deliver to the Trustee provided
for in Article VII hereof a certified copy of the resolutions or other
documents evidencing its adoption of the Plan and also a written instrument
showing the Board's approval of such corporation's becoming a party to the
Plan. The Plan shall be maintained as a single Plan for all participating
Employers.
Section 9.02 Withdrawal - Any one or more of the Employers included in the
Plan may withdraw from the Plan at any time by giving six (6) months
advance notice in writing of its or their intention to withdraw to the Board
and the Committee (unless a shorter notice shall be agreed to by the
Board).
Upon receipt of notice of any such withdrawal, the Committee shall
certify to the Trustee the equitable share of such withdrawing Employer in
the Fund, as applicable (to be determined by the Committee.)
The Trustee shall thereupon set aside from the Fund then held by it
such securities and other property as it shall, in its sole discretion,
deem to be equal in value to such equitable share. If the Plan is to be
terminated with respect to such Employer, the amount set aside shall be
dealt with in accordance with the provisions of Section 8.02. If the Plan
is not to be terminated with respect to such Employer, the Trustee shall turn
over such amount to such trustee as may be designated by such withdrawing
Employer, and such securities and other property shall thereafter be held and
invested as a separate trust of the Employer which has so withdrawn, and shall
be used and applied according to the terms of a new agreement and
declaration of trust between the Employer so withdrawing and the trustee so
designated.
46
Neither the segregation of the Fund assets upon the withdrawal of an
Employer, nor the execution of a new agreement and declaration of trust
pursuant to any of the provisions of this Section, shall operate to permit any
part of the corpus or income of the Fund to be used for or diverted to
purposes other than for the exclusive benefit of Participants and
Beneficiaries.
47
ARTICLE X
TOP HEAVY PLAN PROVISIONS
Section 10.01 General - Notwithstanding anything contained herein to the
contrary, in the event that this Plan when combined with all other plans
required to be aggregated pursuant to IRC Section 416(g) is deemed to be a Top
Heavy Plan for any Plan Year, the following conditions shall become operative.
Section 10.02 Definitions - For purposes of this Article, the following
definitions shall be applicable:
Section 10.02(a) Key Employee means any Employee, former Employee or
beneficiary of a former Employee in an Employer plan (which is qualified under
IRC Section 401(a)) who at any time during the Plan Year or any of the four
(4) preceding Plan Years is:
(i) an officer of the Employer having annual compensation greater than fifty
percent (50%) of the amount in effect under IRC Section 415(b)(1)(A) for any
such Plan Year;
(ii) one (1) of the ten (10) Employees having annual compensation from the
Employer of more than the limitation in effect under IRC Section 415(c)(1)(A)
and owning (or considered as owning within the meaning of IRC Section 318) more
than a one-half of one percent (1/2 of 1%) interest and the largest interest in
the Employer. With respect to this subsection, if two (2) Employees have the
same ownership interest in the Employer, the Employee having the greater
annual compensation shall be treated as having a larger interest.
(iii) a five percent (5%) owner of the Employer; or
(iv) a one percent (1%) owner of the Employer having annual compensation from
the Employer of more than one hundred fifty thousand dollars ($150,000).
48
For purposes of this Section 10.02(a), "compensation" shall
have the same meaning as in Section 1.27, without regard to the
limitation under IRC Section 401(a)(17). This definition shall be
interpreted consistent with IRC Section 416 and rules and regulations
issued thereunder. Further, such law and regulations shall be
controlling in all determinations under this definition, inclusive of
any provisions and requirements stated thereunder but hereinabove
absent.
Section 10.02(b) Non-Key Employee means an Employee, former Employee
or beneficiary of a former Employer who is not a Key Employee.
Section 10.02(c) Top Heavy Plan generally means on or after January
1, 1984, any plan under which, as of any Determination Date the
present value of the cumulative accrued benefits under the plan for
Key Employees exceeds sixty percent (60%) of the present value of the
cumulative accrued benefits under the plan for all Employees.
For purposes of this definition:
(i) If such plan is a Defined Contribution Plan, the present value of
cumulative accrued benefits shall be deemed to be the market value of
all participant accounts under the Plan as of the Top Heavy Valuation
Date plus contributions to the Plan as of the Determination Date. If
the plan is a Defined Benefit Plan, the present value of cumulative
accrued benefits shall be deemed to be the lump sum present value of
a participant's accrued benefit under such plan calculated on the
basis of interest and mortality as set forth in said plan.
Notwithstanding the above, for purposes of determining the present
value of the cumulative accrued benefits, distributions made within a
five (5) year period ending on the Determination Date must be
included. If any Participant is a Non-Key Employee for any Plan Year,
but such Participant was a Key Employee for any prior Plan Year, such
Participant's present value of cumulative accrued benefit shall not
be taken into account in the testing procedure herein described.
49
(ii) A plan shall be considered a Top Heavy Plan for any Plan Year if,
on the last day of the preceding Plan Year, the above rules were
met. For the first Plan Year that the Plan shall be in effect the
determination of whether said Plan is a Top Heavy Plan shall be made
as of the last day of such Plan Year.
(iii) Each Plan of the Employer required to be included in an
Aggregation group" shall be treated as a Top Heavy Plan if such
group-is a top heavy group.
(iv) The term "aggregation group" means
(A) each plan of the Employer which is currently effective or
which has terminated within the five (5) year period ending on the
Determination Date in which a Key Employee is a Participant in
the Plan Year containing the year of determination or any of the
four (4) preceding Plan Years; and
(B) each other plan of the Employer which enables any plan in
(A) to meet the requirements of IRC Sections 401(a)(4) or 410.
A permissive aggregation group consists of plans of the
Employer that are required to be aggregated, plus one (1) or more
plans of the Employer that are not part of a required aggregation
group but that satisfy the requirements of IRC Sections 401(a)(4)
and 410 when considered together with the required aggregation
group.
(v) If any individual has not performed any service for the Employer
at any time during the five (5) year period ending on the
Determination Date, any accrued benefit for such individual shall
not be taken into account in the testing procedure herein described.
50
(vi) This definition shall be interpreted consistent with IRC
Section 416 and rules and regulations issued thereunder. Further, such law and
regulations shall be controlling in all determinations under this definition
inclusive of any provisions and requirements stated thereunder but
hereinabove absent.
Section 10.02(d) Determination Date means the last day of the Plan Year
preceding the Plan Year in which the determination is being made. (In the case
of the first Plan Year, Determination Date means the last day of such Plan
Year.)
Section 10.02(e) Top Heavy Valuation means the most recent Valuation Date
occurring within a twelve (12) month period ending on the Determination Date.
Section 10.03 Minimum Top Heavy Contribution - In the event the Plan
becomes Top Heavy in a Plan Year beginning on or after January 1, 1984 in
which it is not a terminated Plan, the Employer shall contribute to the Plan
for such Plan Years in which the Plan is Top Heavy an
amount necessary, if any, to provide a minimum contribution on behalf of:
(i) all Participants who are Non-Key Employees and who have not separated
from the service of the Employer by the last day of the Plan Year in which
the Plan is Top Heavy; and
(ii) all Non-Key Employees who have become Participants in the
Plan but subsequently fail to complete a Year of Service with the Employer.
Such Minimum Top Heavy Contribution shall be allocated to the Profit
Sharing Accounts of such Non-Key Employees on the basis of the ratio that the
Non-Key Employees' Compensation bears to the total Compensation of all Non-Key
Employees and shall be determined as follows:
(A) the Minimum Top Heavy Contribution shall be the lesser of:
(i) three (3) percent of such Non- Key Employee's Maximum
Compensation; and
51
(ii) the amount of aggregate Profit Sharing Contributions and
allocated Forfeitures made to the Plan for the Plan Year in which the Plan
is Top Heavy on behalf of a Key Employee which represents the
highest percentage of Maximum Compensation for any Key Employee for such Plan
Year.
(B) The Minimum Top Heavy Contribution described above is merely a minimum
Employer contribution and is not in addition to any other Contributions
the Employer may make to the Plan.
Section 10.04 Defined Benefit Plan Minimum Accrued Benefit - In the
event the Employer shall also maintain a Defined Benefit Plan and such
Defined Benefit Plan provides the minimum accrued benefit determined
pursuant to IRC Section 416(c)(1), then the adjustment provided in Section
10.05 below shall not be required.
Section 10.05 Multiple Plan Participation - In the event Section
10.03 or Section 10.04 is applicable, then the multiplier of 1.25 in
Sections 4.02(a) and 4.02(c) shall be reduced to 1.0, unless: (i) All
plans required to be aggregated and any other plans which may be
permissively aggregated pursuant to IRC Section 416(g) are ninety percent
(90%) or less Top Heavy, and (ii) The minimum accrued benefit referenced
in IRC Section 416(c)(1) is modified by IRC Section 416(h)(2)(A)(ii)(I) or
the minimum contribution in subparagraph (c) above is increased from three
percent (3%) to four percent (4%).
Section 10.06 Minimum Vesting - In the event the vesting schedule
provided in Section 5.06 is less liberal than the vesting schedule
hereinafter provided, then the following vesting schedule shall be
substituted for each Participant with an Hour of Service after the plan
becomes a Top Heavy Plan, and such schedule shall remain in effect in all
future Plan Years.
52
<TABLE>
<CAPTION>
Vested
Service Percentage
<S> <C>
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
</TABLE>
Section 10.07 Top Heavy Contribution - With respect to the
operation of these Top Heavy Plan provisions, there shall be no
requirement that the entire defined benefit minimum benefit and the
defined contribution minimum contribution be provided. To the extent
that there shall be a defined benefit accrual of benefit, it shall be
controlling. To the extent that there shall be a Contribution by the
Employer to a Defined Contribution Plan, then there shall be a
determination as to whether the defined contribution amount is
comparable to the difference between the defined benefit minimum benefit
and the minimum defined benefit accrual of benefit required under IRC
Section 416. In the event that the defined contribution amount shall not
be comparable, then the difference shall be provided in the Defined
Benefit Plan, unless the next sentence shall apply. Notwithstanding the
above, if there shall be a Contribution to a Defined Contribution Plan
of the Employer of at least seven and one-half percent (71/2%) of
Maximum Compensation to all Non-Key Employees of the Employer, it shall
be conclusively presumed that the minimum benefit requirements of Top
Heavy Plans have been met.
Section 10.08 Top Heavy Assumptions - For purposes of determining
whether a Defined Benefit Plan is a Top Heavy Plan, calculations shall
be based upon actuarial assumptions stipulated in such plan for this
purpose. If no assumptions are provided, the calculation shall be based
upon The UP-1984 Table of Mortality at five percent (556) interest with
such determination being made on the valuation date which occurs within
the immediately preceding Plan Year.
53
ARTICLE XI
MISCELLANEOUS
Section 11.01 Governing Law - The Plan shall be construed, regulated
and administered according to the laws of the State of Alabama except to
the extent preempted by the laws of the United States of America.
Section 11.02 Construction - The headings and subheadings in the
Plan have been inserted for convenience of reference only and shall not
affect the construction of the provisions hereof. In any necessary
construction the masculine shall include the feminine and the singular the
plural, and vice versa.
Section 11.03 Administrative Expenses - The reasonable expenses of
administering the Fund and the Plan may be paid either by the Employer or
from the Fund.
Section 11.04 No Employment Contracts - No Participant in the Plan
shall acquire any right to be retained in the Employer's employ by virtue
of the Plan, nor, upon his dismissal, or upon his voluntary termination of
employment, shall he have any right or interest in or to the Fund other
than as specifically provided herein. No Participant or Beneficiary shall
have or acquire any right to any benefit hereunder, the payment of which
would cause the Plan to fail to qualify as a tax-exempt employee profit-
sharing plan pursuant to the IRC. The Employer shall not be liable for the
payment of any benefit provided for herein. All benefits hereunder shall
be payable only from the Fund.
Section 11.05 Spendthrift Clause - Except as provided in IRC Section
401(a)(13)(B) related to qualified domestic relations orders (as defined
in IRC Section 414(p)), none of the benefits, payments, proceeds, or
distributions under this Plan shall be subject to the claim of any
creditor of the Participant or to the claim of any creditor of any
Beneficiary hereunder or to any legal process by any creditor of such
Participant or of any such Beneficiary; and neither such Participant or
any such Beneficiary shall have any right to alienate, commute,
anticipate, or assign any of the benefits, payments, proceeds or
distributions under this Plan.
54
If the Committee determines that any person entitled to any payments
under the Plan has become insolvent or bankrupt or has attempted to
anticipate, sell, transfer, assign, pledge, encumber, charge or otherwise
in any manner alienate any benefit or other amount payable to him under the
Plan or that there is any danger of any levy or attachment or other court
process encumbrance on the part of any creditor of such person entitled to
payments under the Plan, against any benefit or other amounts payable to
such person, the Committee may, at any time, in its discretion, direct the
Trustee to withhold any or all payments to such person under the Plan and
apply the same for the benefit of such person in such manner and in such
proportion as the Committee may deem proper. Notwithstanding anything
contained herein to the contrary, with respect to a debt due by the
Participant to the Employer, a Participant, spouse or Beneficiary in pay
status may assign or alienate rights to future benefit payments provided
that any such assignment or alienation:
Section 11.05(a) is voluntary and revocable;
Section 11.05(b) does not exceed ten percent (10%) of any benefit payment;
Section 11.05(c) is neither for the purpose, nor has the effect, of
defraying Plan administrative costs; and
Section 11.05(d! the Employer files a written acknowledgement with the
Committee within ninety (90) days of the assignment that the Employer has
no enforceable right in, or to, any part of a Plan benefit payment except
as may be assigned pursuant to this Section.
Section 11.06 Merger. Consolidation or Transfer - In the event of the
merger or consolidation of the Plan with another plan or transfer of assets
or liabilities Mom the Plan to another plan, each then Participant or
Beneficiary shall not, as a result of such event, be entitled, on the day
following such merger, consolidation or transfer under the termination of
the Plan provisions, to a lesser benefit than the benefit he was entitled
to on the date prior to the merger, consolidation or transfer if the Plan
had then terminated.
55
Section 11.07 Return of Contributions - Notwithstanding anything
herein to the contrary, a Contribution which was (a) made by a mistake of
fact, or (b) in an amount that exceeded the deductible limits on such
Contribution as set forth under IRC Section 404, shall be returned to the
Employer by the Trustee within one (1) year after the payment of the
Contribution or the disallowance of the deduction (to the extent
disallowed), whichever is applicable. Notwithstanding the preceding, any
Contributions returned due to a mistake of fact or disallowance of a tax
deduction shall not include investment earnings and must be reduced by its
share of investment losses. Any determination under item (b) above shall
be made by the Internal Revenue Service or in such manner as may be
permitted by the Internal Revenue Service.
Section 11.08 Indemnification - The Employer shall indemnify and hold
harmless each person or persons who may serve on the Committee from any
and all claims, losses, damages, expenses (including attorney's fees), and
liability (including any amounts paid in settlement) arising from any act
or omission of such member, except when the same is judicially determined
to be due to the gross negligence or willful misconduct of such member. No
Plan assets may be used for any such indemnification.
Section 11.09 Counterparts - The Plan and the Trust Agreement may be
executed in any number of counterparts, each of which shall constitute but
one and the same instrument and may be sufficiently evidenced by any one
counterpart.
Section 11.10 Maximum Deductible Contribution - In no event shall the
Corporation be obligated to make a Contribution for a given Plan Year in
excess of the maximum amount deductible for the Corporation under IRC
Section 404(a)(3)(A), or any statute or rule of similar import.
Section 11.11 Payment of Employer Contributions to Trustee - Each
Employer shall pay to the Trustee its Contributions for each Plan Year
within the time prescribed by law, including extensions of time for the
filing of its federal income tax return for such Plan Year.
56
Section 11.12 Notification of Individual Account Balance - After the
close of each Plan Year or more frequently as determined by the Committee,
the Committee shall notify each Participant of the amount of his share in
the Adjustments and Contributions for the Plan Year (or other period) just
completed, and the new balance of his Profit Sharing Account.
Section 11.13 Exclusive Benefit - The Employer shall be entitled to
no part of the corpus or income of the Fund and no part thereof shall be
used for or diverted to purposes other than for the exclusive benefit of
Participants, former Participants, surviving Spouses and Beneficiaries
hereunder except as provided in Section 11.07.
Section 11.14 Severability - If any provision of the Plan is held
invalid or unenforceable, its invalidity or unenforceability shall not
affect any other provisions of the Plan, and the Plan shall be construed
and enforced as if such provision had not been included herein.
Section 11.15 Misstatement - A misstatement of age, sex, length of
Service, date of employment or birth, or compensation of a Participant, or
any other such matter, shall be corrected when it becomes known that any
such misstatement of fact has occurred.
Section 11.16 Receipt Prior to Payment - The Trustee, the Committee,
or the Employer, jointly or severally, may, but need not, require a
written receipt as a condition precedent to any payment called for by the
Plan to be made to a Participant, surviving Spouse, Beneficiary, or to
their heirs, successors, executors and legal representatives.
Section 11.17 Payments to Minors and Incompetents - Should any
Participant, former Participant, surviving Spouse or Beneficiary be a
minor or in the judgment of the Committee, be physically or mentally
incapable of personally receiving and giving a valid receipt for any
payment due him under the Plan, the Committee may make such payment or any
part thereof to or for the benefit of such Participant, former
Participant, surviving Spouse or Beneficiary, or directly to or for the
benefit of any person determined by the Committee to have incurred expense
or
57
assumed responsibility for the expenses of such Participant, surviving
Spouse or Beneficiary. Any payment of a benefit or installment thereof in
accordance with the provisions of this Section shall be a complete
discharge of all liability for the making of such payment under the
provisions of the Plan.
58
ARTICLE XII
ADOPTION OF THE PLAN
Anything herein to the contrary notwithstanding, this Plan is
amended and maintained under the condition that it shall continue to be
approved and qualified by the Internal Revenue Service under IRC Section
401(a) and that the Trust hereunder is exempt under IRC Section 501(a), or
under any comparable Sections of any future legislation which amends,
supplements or supersedes such Sections. In the event that it should be
found by the Internal Revenue Service that the Plan as amended and
restated hereby is not qualified, the Corporation may modify the Plan to
meet Internal Revenue Service requirements.
As evidence of its adoption of the Plan, The Monroe County Bank has
caused this instrument to be signed by its officers thereunder duly
authorized, and its corporate seal to be affixed here to
this 12th day of December, 1995.
THE MONROE COUNTY BANK
By:/s/Haniel F. Croft
(Title)President and CEO
ATTEST:
By:/s/Paul P. Redmond, Jr.
59
Exhibit (10).24
THE MONROE COUNTY BANK PENSION PLAN
As Amended and Restated
January 1, 1989
TABLE OF CONTENTS
PAGE
INTRODUCTION . . . . . . . . . . . .. . . . . . . . . . . . . 1
ARTICLE I . . . . . . . . . . . .. . . . . . . . . . . . . 2
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.01 Accrued Benefit . . . . . . . . . . . . . . . . . .2
Section 1.02 Actuarial Equivalent. . . . . . . . . . . . . . . .3
Section 1.03 Actuarial Value . . . . . . . . . . . . . . . . . .3
Section 1.04 Adoption Date . . . . . . . . . . . . . . . . . . .3
Section 1.05 Affiliate . . . . . . . . . . . . . . . . . . . . .3
Section 1.06 Anniversary Date . . . . . . . . . . . . . . . . .3
Section 1.07 Annuity Starting Date . . . . . . . . . . . . . . .3
Section 1.08 Attained Age . . . . . . . . . . . . . . . . . . .4
Section 1.09 Average Monthly Earnings . . . . . . . . . . . . .4
Section 1.10 Bank . . . . . . . . . . . . . . . . . . . . . . .5
Section 1.11 Beneficiary . . . . . . . . . . . . . . . . . . . .5
Section 1.12 Board . . . . . . . . . . . . . . . . . . . . . . .7
Section 1.13 Committee . . . . . . . . . . . . . . . . . . . . .7
Section 1.14 Contributions . . . . . . . . . . . . . . . . . . .7
Section 1.15 Contingent Beneficiary . . . . . . . . . . . . . .7
Section 1.16 Credited Service . . . . . . . . . . . . . . . . .7
Section 1.17 Death Benefit . . . . . . . . . . . . . . . . .7
Section 1.18 Defined Benefit Plan . . . . . . . . . . . . . . .7
Section 1.19 Defined Contribution Plan . . . . . . . . . . . . .8
Section 1.20 Delayed Retirement Date . . . . . . . . . . . . . 8
Section 1.21 Disability Retirement Date . . . . . . . . . . . . 8
Section 1.22 Early Retirement Date . . . . . . . . . . . . . . 8
Section 1.23 Effective Date . . . . . . . . . . . . . . . . . . 8
Section 1.24 Employee . . . . . . . . . . . . . . . . . . . . . 8
Section 1.25 Employer . . . . . . . . . . . . . . . . . . . . . 9
Section 1.26 ERISA or Act . . . . . . . . . . . . . . . . . . . 9
Section 1.27 Fiduciary . . . . . . . . . . . . . . . . . . . . 9
Section 1.28 Fund . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.29 Highly Compensated Employee . . . . . . . . . . . 9
Section 1.30 Hours of Service . . . . . . . . . . . . . . . . .12
Section 1.31 IRC or Code . . . . . . . . . . . . . . . . . . .14
Section 1.32 Limitation Year. . . . . . . . . . . . . . . . . .14
Section 1.33 Earnings . . . . . . . . . . . . . . . . . . . . .14
Section 1.34 Monthly Retirement Income. . . . . . . . . . . . .15
Section 1.35 Normal Retirement Age . . . . . . . . . . . . . .15
Section 1.36 Normal Retirement Date . . . . . . . . . . . . . .16
Section 1.37 One Year Break in Service. . . . . . . . . . . . .16
Section 1.38 Participant . . . . . . . . . . . . . . . . . .17
Section 1.39 Participation Date . . . . . . . . . . . . . . . .17
Section 1.40 Plan . . . . . . . . . . . . . . . . . . . . . . .17
Section 1.41 Plan Year. . . . . . . . . . . . . . . . . . . . .17
Section 1.42 Prior Plan . . . . . . . . . . . . . . . . . . .17
Section 1.43 Retired Participant . . . . . . . . . . . . . . .17
Section 1.44 Service . . . . . . . . . . . . . . . . . . . . .18
Section 1.45 Spouse . . . . . . . . . . . . . . . . . . . . .19
Section 1.46 Total and Permanent Disability or Totally and
Permanently Disabled . . . . . . . . . . . . . . . . . . . . .19
Section 1.47 Trust Agreement . . . . . . . . . . . . . . . . . 20
Section 1.48 Trustee . . . . . . . . . . . . . . . . . . . . . 20
Section 1.49 Year of Service . . . . . . . . . . . . . . . . . 20
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . 21
Section 2.01 Eligibility . . . . . . . . . . . . . . . . . . . 21
Section 2.02 Participation . . . . . . . . . . . . . . . . . . 21
Section 2.03 Re-employment Before Annuity Starting Date . . . 21
Section 2.04 Re-employment After Annuity Starting Date . . . . 22
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . 23
RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . 23
Section 3.01 Normal Retirement Benefit . . . . . . . . . . . . 23
Section 3.02 Delayed Retirement Benefit . . . . . . . . . . . 24
Section 3.03 Early Retirement Benefit . . . . . . . . . . . . 25
Section 3.04 Disability Retirement Benefit . . . . . . . . . . 26
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . 28
RETIREMENT BENEFIT PAYMENT FORMS . . . . . . . . . . . . . . . 28
Section 4.01 Basic Form of Payment . . . . . . . . . . . . . . 28
Section 4.02 Automatic Payment Forms . . . . . . . . . . . . . 28
Section 4.03 Optional Payment Forms . . . . . . . . . . . . . 29
Section 4.04 Small Lump Sum Payments . . . . . . . . . . . . . 31
Section 4.05 Consent Prior to Distribution from the Plan . . . 32
Section 4.06 No Reduction of Accrued Benefits . . . . . . . . 32
Section 4.07 Direct Rollover Option . . . . . . . . . . . . . 33
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . 35
BENEFITS ON TERMINATION OF EMPLOYMENT . . . . . . . . . . . . 35
Section 5.01 Vesting of Benefits . . . . . . . . . . . . . . . 35
Section 5.02 Payment of Deferred Vested Benefit . . . . . . . 36
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . 39
BENEFITS ON DEATH . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.01 Death After Eligibility for Retirement . . . . . 39
Section 6.02 Death After Full or Partial Vesting . . . . . . . 40
Section 6.03 Death After Retirement . . . . . . . . . . . . . 41
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . 42
FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.01 Contributions by the Employer . . . . . . . . . . 42
Section 7.02 Trust Fund . . . . . . . . . . . . . . . . . . . 42
Section 7.03 Funding Standard Account . . . . . . . . . . . . 43
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . 44
<PAGE>
FIDUCIARIES AND ADMINISTRATION OF THE PLAN . . . . . . . . . .44
Section 8.01 General . . . . . . . . . . . . . . . . . . . . .44
Section 8.02 Bank's Responsibilities. . . . . . . . . . . . . .44
Section 8.03 Trustee . . . . . . . . . . . . . . . . . . . . .45
Section 8.04 Administrative Committee . . . . . . . . . . . . .45
Section 8.05 Claims for Benefits . . . . . . . . . . . . . . .47
Section 8.06 Claims Procedures . . . . . . . . . . . . . . . .47
Section 8.07 Records . . . . . . . . . . . . . . . . . . . . .49
Section 8.08 Missing Persons . . . . . . . . . . . . . . . . .49
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . .5O
MAXIMUM BENEFITS AND REQUIRED DISTRIBUTION OF BENEFITS . . . 50
Section 9.01 Maximum Retirement Benefit . . . . . . . . . . . 5O
Section 9.02 Multiple Plan Participation . . . . . . . . . . 53
Section 9.03 Required Distribution of Benefits . . . . . . . 54
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . 58
AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . . . . 58
Section 10.01 Amendment of the Plan . . . . . . . . . . . . . 58
Section 10.02 Termination of the Plan . . . . . . . . . . . . 58
Section 10.03 Twenty-f~ve (25) Highest Paid Limitation . . . 60
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . 65
PROVISIONS RELATIVE TO EMPLOYERS INCLUDED IN PLAN . . . . . . 65
Section 11.01 Method of Participation . . . . . . . . . . . . 65
Section 11.02 Withdrawal from Participation . . . . . . . . . 65
ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . 67
TOP HEAVY PLAN PROVISIONS . . . . . . . . . . . . . . . . . . 67
Section 12.01 General . . . . . . . . . . . . . . . . . . . .. 67
Section 12.02 Minimum Benefits . . . . . . . . . . . . . . . 67
Section 12.03 Definitions . . . . . . . . . . . . . . . . . . 67
Section 12.04 Multiple Plan Participation . . . . . . . . . . 71
Section 12.05 No Duplication of Minimum Benefit . . . . . . . 71
Section 12.06 Actuarial Assumptions . . . . . . . . . . . . . 72
ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . 73
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 13.01 Governing Law . . . . . . . . . . . . . . . . . 73
Section 13.02 Construction . . . . . . . . . . . . . . . . . 73
Section 13.03 No Employment Contract . . . . . . . . . . . . 73
Section 13.04 Receipt Prior to Payment . . . . . . . . . . . 73
Section 13.05 Payments to Minors and-Incompetents . . . . . . 74
Section 13.06 Non-Alienability of Benefits . . . . . . . . . 74
Section 13.07 Merger of Plans . . . . . . . . . . . . . . . . 78
Section 13.08 Return of Employer Contributions . . . . . . . 79
Section 13.09 Exclusive Benefit . . . . . . . . . . . . . . . 79
Section 13.10 Indemnification . . . . . . . . . . . . . . . . 79
Section 13.11 Severability . . . . . . . . . . . . . . . . . 80
Section 13.12 Misstatement . . . . . . . . . . . . . . . . . 80
Section 13.13 Benefits Under Other Plans . . . . . . . . . . .80
Section 13.14 Small Payments . . . . . . . . . . . . . . . . .80
Section 13.15 Counterparts . . . . . . . . . . . . . . . . . .80
ADOPTION OF THE PLAN . . . . . . . . . . . . . . . . . . . . 81
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
INTRODUCTION
Effective December 31, 1956, The Monroe County Bank, formerly a member of
the Alabama Bankers Association and a banking institution with principal
offices located at Monroeville, Alabama (hereinafter referred to as the
"Bank"), adopted The Monroe County Bank Pension Plan (hereinafter referred to
as the "Prior Plan") for the benefit of its eligible employees.
Effective January 1, 1976, the Bank amended and restated the Prior Plan
in its entirety as The Monroe County Bank Revised Pension Plan (hereinafter
referred to as the "Plan" or "Revised Plan").
Effective January 1, 1985, the Bank amended and restated the Revised Plan
as The Monroe County Bank Revised Pension Plan (hereinafter referred to as the
"Plan").
The purpose of this Plan is to provide retirement security for eligible
Employees. It is intended that this Plan, together with the Trust Agreement
established to carry out the funding of the Plan, meet all the requirements of
the Employee Retirement Income Security Act of 1974 and the Internal Revenue
Code of 1986, and the Plan shall be interpreted, wherever possible, to
comply with the terms of the Act and Code and all formal regulations and
rulings issued under such Act and/or Code.
Except as otherwise provided herein, the Plan as amended and restated has
the terms and provisions hereinafter set forth effective January 1, 1989.
Any amendments to the Plan made subsequent to the termination of
employment of any Participant shall in no way affect the amount or form of
Monthly Retirement Income benefit to which such Participant is entitled except
as otherwise specifically provided herein.
1
ARTICLE I
DEFINITIONS
As used herein and in the concomitant Trust Agreement, unless
otherwise required by the context, the following words and phrases shall
have the meanings indicated:
Section 1.01 Accrued Benefit means, for any Participant, as of any
date, the Monthly Retirement Income benefit determined in accordance with
Section 3.01(a) with Average Monthly Earnings as of such date and Credited
Service being equal to the Credited Service the Participant will have
completed at his Normal Retirement Date, assuming he remains in service as
an Employee until then (on the same basic work schedule applicable on the
date of such determination); multiplied by the ratio that his Credited
Service as of the date of such determination bears to the Credited Service
he will have completed at his Normal Retirement Date, assuming he remains
in service as an Employee until then.
Notwithstanding the foregoing, for any Employee who was a Participant
in the Plan in any Plan Year beginning on or before the Adoption Date, such
Participant's Accrued Benefit shall not be less than the amount determined
as follows:
Section 1.01(a) If such a Participant is a Highly Compensation Employee (as
defined in Section 1.29(a)(1) or 1.29(a)(2)) for any such Plan Year, his
Accrued Benefit as of the later of December 31, 1988 or the last day of the
Plan Year preceding the Plan Year in which such Participant first becomes
such a Highly Compensated Employee, determined under the provisions of the
Plan as in effect on December 31,1988, except that in determining such
Participant's Accrued Benefit, Earnings and Average Monthly Earnings shall
be as determined under Sections 1.33 and 1.09 hereunder.
2
Section 1.01(b) If such a Participant is not such a Highly Compensated
Employee (as described in Section 1.01(a)), his Accrued Benefit as of the
earlier of the Adoption Date or his termination of employment, determined
under the provisions of the Plan as in effect on December 31, 1988, except
that in determining such Participant's Accrued Benefit, Earnings and
Average Monthly Earnings shall be determined under Sections 1.33 and 1.09
hereunder.
Section 1.02 Actuarial Equivalent means a benefit of equivalent value
when computed on the basis of interest and mortality tables adopted by the
Bank for use in the computation of actuarial equivalents under the Plan.
Such Actuarial Equivalent shall be reflected hereunder by the application
of the factors denoted in the Appendix to this Plan.
Section 1.03 Actuarial Value means the single sum value, as certified
by the actuary, of any income benefit, computed on the basis of interest
and mortality tables adopted by the Bank for use in the computation of
actuarial values under the Plan. Such Actuarial Value shall be reflected
hereunder by the application of the factors denoted in the Appendix to the
Plan.
Section 1.04 Adoption Date means the date on which the amendments
relative to the determination of retirement benefits under this Plan made
to comply with the Tax Reform Act 1986 are adopted by the Bank.
Section 1.05 Affiliate means an organization which is a member of the
same controlled group of organizations [as defined in IRC Sections 414(b),
(c), (m), and (a)] as the Bank but which is not an Employer.
Section 1.06 Anniversary Date means January 1.
Section 1.07 Annuity Starting Date means (i) the first day of the
first period for which an amount is payable as an annuity, or (ii) in the
case of a benefit not payable in the form of an annuity, the first day on
which all events have occurred which entitle the Participant to such
benefit, or (iii) the first day of the first period for which a benefit is
to be received by reason of disability.
3
Section 1.08 Attained Age means, unless clearly indicated to the
contrary, the age of an Employee or Participant as of his last birthday.
Section 1.09 Average Monthly Earnings means the following:
Section 1.09(a) Prior to January 1,1994, Average Monthly Earnings means
one-twelfth (1/12) of the average of Earnings as determined on the five
(5) consecutive Anniversary Dates out of the ten (10) consecutive
Anniversary Dates which coincide with and immediately precede the
Participant's Disability Retirement Date, Early Retirement Date, Normal
Retirement Date, Delayed Retirement Date or termination date under
Section 5.01 hereof which produce the highest average of Earnings.
In determining consecutive Anniversary Dates, any calendar year in
which the Employee had no earnings will be disregarded.
If a Participant has less than five (5) consecutive Anniversary
Dates which coincide with and immediately precede such Participant's
Disability Retirement Date, Early Retirement Date, Normal Retirement
Date, Delayed Retirement Date or termination date under Section 5.01,
Average Monthly Earnings for such Participant shall be the average of
Earnings for all Anniversary Dates of such Participant.
Notwithstanding the foregoing, if a Participant terminates
employment for any reason on December 31 of a calendar year, the
Anniversary Date next following such December 31 shall be deemed an
Anniversary Date coincident with such Participant's Disability Retirement
Date, Early Retirement Date, Normal Retirement Date, Delayed Retirement
Date or termination date under Article V hereof for the purpose of
determining Average Monthly Earnings for such Participant.
4
Section 1.09(b) On or after January 1, 1994, Average Monthly Earnings
means one twelfth (1/12) of the average of the Earnings of an Employee
during the five (5) consecutive calendar years which produce the highest
such average during the last ten (10) consecutive calendar years of an
Employee's period of employment with the Bank, or if an Employee's period
of employment is less than five (5) years, the Employee's period of
employment; provided, however, in determining an Employee's Average
Monthly Earnings, the calendar year in which the Employee terminates
employment with the Bank prior to December 31 shall be completely
disregarded.
Section 1.10 Bank means The Monroe County Bank, a banking institution
with principal offices located at Monroeville, Alabama or any successor
thereto and subject to the provisions of Section 13.07, any corporation
into which the Bank may be merged or consolidated or to which all or
substantially all of its assets may be transferred. For purposes of ERISA
as it relates to the employees of each Employer, the Bank is the sponsor,
the named Fiduciary and the Plan Administrator of the Plan.
Section 1.11 Beneficiary means any person or persons (or trust)
designated by a Participant or otherwise entitled to receive such benefits
as may become payable under the provisions of the Plan after the death of
such Participant.
Except as otherwise provided in Sections 4.02 and 4.03(c) and Article
VI, a Participant's designation of a Beneficiary is subject to the
following:
Section 1.11(a) The designation of a Beneficiary shall be made on forms
provided by the Committee, and such forms shall be maintained in files
held by the Committee.
Section 1.11(b) A Participant may, from time to time, change the
Beneficiary designation by written notice to the Committee and, upon such
change, the rights of all previously designated Beneficiaries to receive
any benefits under the Plan shall cease.
5
Section 1.11(c) If, at the date of death of the Participant, there is no
valid and current designation of Beneficiary or Contingent Beneficiary on
file with the Committee or if all designated Beneficiaries and Contingent
Beneficiaries pre-decease the Participant, then any death benefits which
would have been payable to the designated Beneficiary or Contingent
Beneficiary shall be payable to the Participant's Spouse who survives him,
if any; if none, to the Participant's children who survive him, equally; or
if none survive, then to the Participant's estate.
Section 1.11(d) If payments are continued to a Beneficiary or Contingent
Beneficiary and the Beneficiary or Contingent Beneficiary (as the case may
be) dies prior to receiving the entire Death Benefit, the remaining portion
of such Death Benefit shall be paid in a single sum to the estate of such
deceased Beneficiary (or Contingent Beneficiary, if applicable).
Section 1.11(e) If the designated Beneficiary (or Contingent Beneficiary, if
applicable) is not living at the death of the Participant, the Actuarial
Equivalent of the remaining guaranteed payments shall be paid in a lump sum
to the Beneficiary determined in accordance with this Section 1.11.
Section 1.11(f) The interpretation of the Committee with respect to any
Beneficiary designation, subject to the applicable law, shall be binding and
conclusive upon all parties and no person who claims to be a Beneficiary, or
any other person, shall have the right to question any action of the
Committee, which in the judgment of the Committee fulfills the intent of the
Participant who filed such designation.
If a Beneficiary designated by a Participant is not the Participant's
Spouse, then the Spouse's consent shall be required with respect to such
alternate Beneficiary for such designation to become effective and must be
limited to a benefit for a specific alternate Beneficiary (or form of
benefits). Such consent shall be irrevocable once given and shall be
witnessed by a representative of the Committee or a notary public. Any
change in the designation of an alternate Beneficiary shall also require the
consent of the Spouse for such change to become effective. The Committee may
accept an election other than that provided hereunder without the
6
consent of the Spouse if there is no Spouse, the Spouse cannot be located,
or such other circumstances as may be prescribed by regulations. Any
spousal consent shall only be applicable to the Spouse granting such
consent.
Section 1.12 Board means the Board of Directors or the executive
committee of the Bank as it may be composed from time to time.
Section 1.13 Committee means the administrative committee provided
for in Article VIII. In the event an administrative committee has not been
so appointed hereunder, or resigns from a prior appointment, the Bank
shall be deemed to serve as the administrator in lieu of the administrative
committee.
Section 1.14 Contributions means the payments as provided herein by
an Employer to the Fund.
Section 1.15 Contingent Beneficiary means the person or persons (or
trust) duly designated by the Participant to receive a Death Benefit from
the Plan in the event the designated Beneficiary does not survive the
Participant.
Section 1.16 Credited Service means the number of years for which a
Participant is given credit in calculating his Monthly Retirement Income
or Death Benefit. Except as provided in Sections 1.44(e) and (f), Credited
Service shall be equal to Service as defined in this Article I.
Notwithstanding the above, Credited Service shall not include any
period of employment for which a lump sum settlement was made (and not
repaid) pursuant to Article IV or V.
Section 1.17 Death Benefit means any benefit paid to a Beneficiary
or Contingent Beneficiary or other person at the death of a Participant or
former Participant as provided under the terms of the Plan.
Section 1.18 Defined Benefit Plan means a plan established and
qualified under IRC Section 401 or 403, except to the extent it is, or is
treated as, a Defined Contribution Plan.
7
Section 1.19 Defined Contribution Plan means a plan, which is
established and qualified under IRC Section 401 or 403, which provides for
an individual account for each Participant therein and for benefits based
solely on the amount contributed to each Participant's account and any
income and expenses or gains or losses (both realized and unrealized) which
may be allocated to such accounts.
Section 1.20 Delayed Retirement Date means the first day of any month
coinciding with or next following the actual date the Participant severs
his employment with the Employer after his Normal Retirement Date.
Section 1.21 Disability Retirement Date means in the case of a
Participant who has been credited with at least fifteen (15) Years of
Service and whose Attained Age is at least fifty (50) the first day of any
month, prior to a Participant's Normal Retirement Date, coinciding with or
next following the date a Totally and Permanently Disabled Participant
becomes eligible for (and elects) to commence Monthly Retirement Income
benefits under Section 3.04.
Section 1.22 Early Retirement Date means in the case of each
Participant who has been credited with at least ten (10) years of Service
and whose Attained Age is at least sixty (60), the first day of the month
coincident with or immediately following the later of: (a) the date such
Participant shall leave the employ of the Employer in accordance with
Section 3.03 hereof, or (b) the date the Participant directs in writing
shall be his Early Retirement Date.
Section 1.23 Effective Date means December 31, 1956, or such later
date as of which an Employer shall have adopted the Plan for its Employees.
Section 1.24 Employee means any person employed by the Employer
including officers, and any director who is active in the business of the
Employer in a capacity other than as director only but excluding any person
considered a leased employee within the definition of IRC Section
414(n).
8
Section 1.25 Employer means, collectively or individually as the
context may indicate, the Bank and any other employer which (a) is a
member of the same controlled group of organizations as the Bank as
determined pursuant to IRC Section 414(b), (c), (m) and (a), (b) the Board
shall have authorized to adopt the Plan, and (c) by taking appropriate
action shall have adopted the Plan, any successor to one or more of such
entities; or any organization into which the Employer may be merged or
consolidated or to which all of its assets may be transferred.
Section 1.26 ERISA or Act means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
Section 1.27 Fiduciary means the Bank, the Employer, the Trustee, the
Committee and any individual, corporation, firm or other entity which
assumes in accordance with Article VIII responsibilities of the Bank, the
Employer, the Trustee or the Committee respecting management of the Plan
or the disposition of its assets.
Section 1.28 Fund means the trust fund created in accordance with Article
VII.
Section 1.29 Highly Compensated Employee means an employee who,
during the current Plan Year (the "Determination Year") or the immediately
preceding Plan Year (or twelve-month period for the first Plan Year) (the
"Look-Back Year"): Section 1.29(a) (1) was at any time an owner of five
percent (5%) of the outstanding stock of the Employer or an Affiliate or
five percent (5%) of the total combined voting power of all stock of the
Employer or an Affiliate; or
(2) received annual compensation in excess of $75,000,
which amount shall be adjusted for changes in the cost of living as
provided in regulations issued by the Secretary of the Treasury;
or
(3) received annual compensation in excess of $50,000
which amount shall be adjusted for changes in the cost of living as
provided in regulations issued by the Secretary of the Treasury and who
was within the group consisting of the most highly compensated twenty
percent (20%) of employees; or
9
(4) was at any time an officer or of an Affiliate whose annual compensation
was greater than fifty percent (50%) of the amount in effect
under Code Section 415(b)(1)(A) for the calendar year in which the Plan
Year ends, where the term "officer" means an administrative executive in
regular and continual service to the Employer or an Affiliate; provided,
however, that in no event shall the number of officers exceed the lesser of
Subparagraphs (A) or (B) of this Paragraph (4), where: (A) equals fifty (50)
employees; and (B) equals the greater of (i) three (3) employees or (ii) ten
percent (10%) of the number of employees during the Plan Year with any
non-integer being increased to the next integer.
If for any year no officer of the Employer or an Affiliate meets the
requirements of this Paragraph (4), the highest paid officer of the
Employer or an Affiliate for the Plan Year shall be considered an officer
for purposes of this Paragraph (4).
If during the immediately preceding Plan Year the employee was not
described in Paragraph (2), (3) or (4) of this Section 1.29(a) (without
regard to this sentence), the employee shall not be treated as being
described in Paragraph (2), (3) or (4) unless the employee's annual
compensation is such that the Employee is in the group of the one hundred
(100) employees being paid the greatest amount of annual compensation.
For purposes of Paragraphs (3) and (4) of this Section 1.29(a), the
following shall be excluded when determining the number of employees in
the most highly compensated twenty percent (20%) of the employees and the
number of officers:
(i) Employees who have not completed six (6) months of service;
(ii)Employees who normally work less then seventeen and one-half
(17 1/2) hours per week;
(iii) Employees who normally work during not more than six (6)
months during any Plan Year;
10
(iv)Employees who have not attained age twenty-one (21);
(v) Employees who are nonresident aliens and who received no earned income
(within the meaning of IRC Section 911(d)(2)) from the Employer or an
Affiliate that constitutes income from sources within the United States
(within the meaning of IRC Section 861(a)(3));
(vi) Except to the extent provided in Internal Revenue Service regulations,
employees who are induced in a unit of employees covered
by an agreement which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and the Employer
or its Affiliates, provided ninety percent (90%) or more of the
employees are covered under the collective bargaining agreements and
the Plan only covers employees who are not covered under the collective
bargaining agreements.
Section 1.29(b) For purposes of this Section 1.29, if any employee is
a member of the family of a five percent (5%) owner as defined in
Section 1.29(a)(1) or of a Highly Compensated Employee whose annual
compensation is such that he is among the ten (10) Highly Compensated
Employees receiving the greatest amount of annual compensation during
the Plan Year, then (1) the employee shall not be considered a
separate employee, and (2) any annual compensation paid to the
employee, and any applicable contribution or benefit on behalf of the
employee, shall be treated as if it were paid to, or on behalf of, the
five percent (5%) owner or the employee who is among the ten (10)
Highly Compensated Employees receiving the greatest amount of annual
compensation during the Plan Year. For purposes of this Section
1.29(b), the term "family" means, with respect to any employee, the
employee's spouse and lineal descendants or ascendant and the spouses
of lineal descendants or ascendant.
Section 1.29(c) For purposes of this Section, a former employee who
had separated from service prior to the Determination Year shall be
treated as a Highly Compensated Employee if (1) the former employee
was a Highly Compensated Employee at any time after the former
employee attained age fifty-five (55).
<PAGE>
Section 1.29(d) For purposes of this Section, the term "compensation"
means wages, as defined in Code Section 3401(a), and all other
payments of compensation to an employee by his Employer or Affiliate
(in the course of the Employer's or Affiliate's trade or business)
for which the Employer or Affiliate is required to furnish the
employee a written statement under Code Sections 6401(d), 6051(a)(3)
and 6052 (Form W-2 or substitute). Compensation must be determined
without regard to any rules under Code Section 3401(a) that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)) and without regard to
the application of Code Sections 125, 402(a)(8), 402(h)(1)(B) or 403(b).
Section 1.29(f) For the purpose of determining who is a Highly
Compensated Employee, the Committee may make the calendar year
election for any Plan Year, as defined in Treas. Reg. 1.414(q)-1T,
Q&A-14(b), with respect to this Plan; provided, however, such
election must apply with respect to all plans of the Employer or an
Affiliate for such year.
Section 1.30 Hours of Service means the sum of:
Section 1.30(a) Each hour for which an employee is paid, or entitled
to payment by the Employer for the performance of duties for the
Employer during the applicable computation period.
Section 1.30(b) Each hour for which an employee is paid, or entitled
to payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability except as otherwise provided in
Section 3.04), layoff, jury duty, or leave of absence. However, the
determination of hours under this Section 1.30(b) shall be subject to
the following restrictions:
(i) No more than five hundred one (501) hours shall be credited to an
employee during any single continuous period during which the
employee performs no duties (whether or not such period occurs in a
single computation period).
12
<PAGE>
(ii) No such hours shall be credited to an employee if payment is made or due
under a plan maintained solely for the purpose of complying with
applicable worker's compensation or unemployment compensation or
disability insurance laws.
(iii) Hours shall not be credited for a payment which solely reimburses an
employee for medical or medically related expenses incurred by the
employee.
Section 1.30(c) Each hour during which an employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed due to military duty and any other periods in which
an employee was not paid or entitled to payment and would presumably have
performed services for the Employer but for the fact that such individual
was on a military leave of absence for service in the armed forces of the
United States of America, provided the individual entered such service
directly from the employ of the Employer, was discharged from such service
and was re-employed by the Employer within the period during which his
employment rights as a veteran are protected by law.
Section 1.30(d) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Employer provided,
however, that the same hours shall not be credited both under Section
1.30(a), Section 1.30(b) or Section 1.30(c) above, as the case may be, and
under this Section 1.30(d).
Hours of Service shall not include any period during which the
Employee was employed by a predecessor of the Employer, unless the
predecessor's organization maintained the Plan or a predecessor Plan or
credit for such period of employment is otherwise granted under the Plan.
Hours of Service under Section 1.30(a), Section 1.30(c) and Section
1.30(d) above shall be determined from the Employer records. Hours of
Service under Section 1.30(b) above shall be determined in accordance with
Department of Labor Regulations 2530.200b-2. Hours of Service hereunder
shall be credited to the appropriate computation period in accordance with
Department of Labor Regulations 2530.200b-2(c).
13
Notwithstanding anything herein to the contrary, nothing in this
Section 1.30 shall be construed to alter, amend, modify, invalidate,
impair or supersede any law of the United States or any rule or regulation
issued under any such law.
Section 1.31 IRC or Code means the Internal Revenue Code of 1986, as
amended from time to time. Any reference to any section of the IRC shall
be deemed to include any applicable regulations and rulings pertaining to
such section and shall also be deemed a reference to comparable provisions
of future laws.
Section 1.32 Limitation Year means the twelve (12) month period
commencing on January 1 and ending on December 31.
Section 1.33 Earnings means the following: Section 1.33(a) For calendar
years beginning prior to January 1, 1994, Earnings means the Employee's
total regular basic earnings (exclusive of all forms of extraordinary
earnings such as overtime, bonuses, commissions and reimbursed expenses)
paid by the Employer to the Employee plus salary reductions in effect
under the IRC Section 125 Plan of the Bank during the calendar year
preceding an Anniversary Date, divided by the number of full calendar
months for which such employee received earnings from the Employer, with
the results multiplied by twelve (12). In determining the number of full
calendar months for which an Employee received earnings from the Employer,
an Employee will be deemed to have been employed for one (1) full calendar
month for every calendar month such Employee is employed for fifteen (15)
or more days. Earnings for each Employee shall be determined as of each
January 1 whether or not such Employee is employed on such January 1 and
shall remain in effect for all Plan purposes until the next January 1.
Notwithstanding the foregoing, if an Employee terminates employment for
any reason on December 31 of a calendar year, the Anniversary Date next
following such December 31 shall be deemed an Anniversary Date coincident
with such Employee's Disability Retirement Date, Early Retirement Date,
Normal Retirement Date, Delayed Retirement Date or termination date under
Article V hereof for the purpose of determining Earnings for such Employee.
14
Section 1.33(b) For calendar years beginning on or after January 1, 1994,
Earnings means for any calendar year, for any Employee, the Employee's total
regular basic earnings (exclusive of all forms of extraordinary earnings
such as overtime, bonuses, commissions and reimbursed expenses) paid by the
Bank to the Employee plus salary reductions in effect under the IRC Section
125 Plan of the Bank during the calendar year.
Section 1.33(c) Effective January 1, 1989, in no event shall Earnings
for any calendar year (including calendar years beginning prior to January
1, 1989), as hereinbefore determined, exceed the amount as may be determined
by the Secretary of the Treasury pursuant to IRC Section 401(a)(17) (the
"Compensation Limitation"); provided, however, that the decrease in the
Compensation Limitation to $150,000 effective January 1, 1994, shall not
have the effect of reducing any benefit accrued prior to January 1, 1994.
For all purposes of this Plan, the Compensation Limitation shall be
automatically increased as permitted by Treasury Department regulations to
reflect cost-of-living adjustments. As a result of such an adjustment, the
Compensation Limitation in effect for a Plan Year shall apply only to a
Participant's Earnings for that year and Earnings for any prior Plan Year
shall be subject to the applicable Compensation Limitation in effect for
that prior year. In determining the Compensation Limitation for a
Participant, the family member aggregation rules of Section 1.29(b) shall
apply, except that in applying such rules, the term "family" shall only
include the spouse of the Participant and any lineal descendants of the
Participant who have not attained age nineteen (19) before the close of the
Plan Year for which the determination is being made. If, as a result of the
application of such rules, the Compensation Limitation is exceeded, then the
limitation shall be prorated among the affected individuals in proportion to
each such individual's Earnings as determined under this Section prior to
the application of the Compensation Limitation.
Section 1.34 Monthly Retirement Income means a monthly income due a
Retired Participant under Section 3.01, 3.02, 3.03 or 3.04 and which shall
commence as of his Disability, Early, Normal or Delayed Retirement Date and
based on the payment form determined under Article IV hereof.
Section 1.35 Normal Retirement Age means the date a Participant
attains the age of sixty-five (65).
15
Section 1.36 Normal Retirement Date means the first day of the month
coinciding with or next following the date the Participant attains his
Normal Retirement Age.
Section 1.37 One Year Break in Service means a Plan Year during which
an employee or former employee has not completed more than five hundred
(500) Hours of Service.
For periods commencing on or after January 1, 1985, and to the extent
not already credited, Hours of Service shall be credited solely for
purposes of determining whether a One Year Break in Service has occurred
with respect to an employee who is absent from work regardless of whether
the employee is paid for such absence:
Section 1.37(a) By reason of the pregnancy of the employee,
Section 1.37(b) By reason of the birth of a child of the employee,
Section 1.37(c) By reason of the placement of a child with the employee in
connection with the adoption of such child by such employee, or
Section 1.37(d) For purposes of caring for such child for a period
beginning immediately following such birth or placement.
Hours of Service to be credited for such purpose shall be:
(i) the Hours of Service which otherwise would normally have been credited to
such employee but for such absence, or
(ii) in any case in which the Committee is unable to determine the hours in
(i) above, (8) Hours of Service per normal work day of absence,
except that the total number of hours treated as Hours of Service by
reason of any such pregnancy or placement shall not exceed five hundred
one (501) hours. The hours in items (i) and (ii) above shall be treated as
Hours of Service hereunder:
16
<PAGE>
(iii) only in the Plan Year in which the absence from work begins, if an
employee would be prevented from incurring a One Year Break in Service in
such Plan Year solely because the period of absence is treated as Hours of
Service as provided in Section 1.37(a), Section 1.37(b), Section 1.37(c)
or Section 1.37(d) above; or
(iv) in any other case, in the immediately following Plan Year.
Further, the Committee may request that the employee furnish any
information the Committee may require to establish that the absence is for
the reasons hereinbefore provided arid the number of days for which there
was such an absence. In the event such information is not submitted in a
timely manner, no Hours of Service shall be credited pursuant to this
paragraph.
Section 1.38 Participant means any Employee who becomes a
Participant as provided in Article II.
Section 1.39 Participation Date means January 1.
Section 1.40 Plan means The Monroe County Bank Pension Plan, as
contained herein or as duly amended.
Section 1.41 Plan Year means each twelve (12) month period beginning
on January 1 and ending on December 31.
Section 1.42 Prior Plan means The Monroe County Bank Pension Plan as
constituted on December 31, 1975.
Section 1.43 Retired Participant means any former Participant of the
Plan who has qualified for retirement and who is receiving a Monthly
Retirement Income under the Plan.
17
Section 1.44 Service as of any date shall be the sum of past Service, if
any, under Section 1.44(a) and future Service under Section 1.44(b), subject
to Section 1.44(c), if applicable.
Section 1.44(a) If the Employee was employed by the Employer on December
31, 1975, he shall receive credit for past Service. Past Service shall mean
the number of years of continuous employment by the Employer of an Employee
from his most recent hiring date prior to January 1, 1976, until January 1,
1976, rounded up to the next full year. Past Service shall not be broken
and shall be credited for absences due to:
(i) Vacation, temporary sickness, or injury;
(ii) Leaves of absences duly granted by the Employer continuing for a period
of not more than one (1) year, with all Employees under similar
circumstances being treated alike;
(iii) Service in the armed forces of the United States or any of its allies
during any war or state of emergency in which the United States shall be
engaged, or in the armed forces of the United States while any form of law
requiring compulsory military service shall be in effect and when such law
shall be applicable to the Employee, provided that in either case the
Employee shall have directly entered into such armed forces and shall not
have reenlisted after the date of first entering, and shall have made
application for re-employment within the period and subject to the
conditions for re-employment rights as provided by such law.
Section 1.44(b) Future Service shall be the total number of Plan Years
during which the Employee has at least one thousand (1,000) Hours of
Service for the Employer during the period of time commencing on the later
of (i) January 1, 1976; and (ii) if Section 1.44(c) is applicable, the
Anniversary Date coincident with or immediately preceding the applicable
re-employment date.
18
Section 1.44(c) Notwithstanding the foregoing, if a terminated Participant
is subsequently re-employed and again becomes a Participant, his Service
shall not include any periods of employment prior to re-employment if his
vested Accrued Benefit under Section 5.01 was zero at date of termination
and his consecutive One (1) Year Breaks in Service as of his re-employment
date equal or exceed the greater of (i) five (5) consecutive One (1) Year
Breaks in Service, or (ii) the number of the Participant's Years of Service
as of his termination date.
Section 1.44(d) For purposes of this Section 1.44, periods of employment
with The First National Bank of Monroeville shall be treated as employment
with the Bank.
For purposes of determining eligibility in Article II and vesting in
Article V:
Section 1.44(e) Periods of employment with an Affiliate which would have
constituted Service had the Participant been employed by the Employer shall
be included as if such periods had been performed for the Employer; and
Section 1.44(fl Periods of employment with the Employer other than as an
Employee which would have constituted Service had the Participant been
employed as an Employee shall be included as if such periods had been
performed as an Employee.
Section 1.45 Spouse means the person to whom the Participant is
legally married on the earlier of the Participant's date of death or
Annuity Starting Date.
Section 1.46 Total and Permanent Disability or Totally and
Permanently Disabled means the total incapacity of a Participant due to a
physical or mental condition arising after his original date of employment
which totally and permanently prevents the Participant from engaging in any
occupation or employment for remuneration or profits, except for the
purpose of rehabilitation not incompatible with a finding of total and
permanent disability. The determination as to whether a Participant is
Totally and Permanently Disabled shall be made (a) on medical evidence by a
licensed physician designated by the Committee, (b) on evidence that the
Participant is eligible for disability benefits under any long term
disability plan sponsored by the Employer but
19
administered by an independent third party, or (c) on evidence that the
Participant is eligible for disability benefits under the Social Security
Act in effect at the date of disability. Total and Permanent Disability
shall exclude disabilities arising from:
Section 1.46(a) Chronic or excessive use of intoxicants, drugs or narcotics; or
Section 1.46(b) Intentionally self-inflicted injury or intentionally self-
induced sickness; or
Section 1.46(c) A proven unlawful act or enterprise on the part of the
Participant; or
Section 1.46(d) Military service where the Participant is eligible to
receive a government sponsored military disability pension.
Section 1.47 Trust Agreement means the agreement entered into between
the Employer and the Trustee pursuant to Article VII.
Section 1.48 Trustee means the banking corporation designated in the
Trust Agreement to hold in trust the assets of the Plan, and shall include
any successor Trustee to the Trustee initially designated thereunder.
Section 1.49 Year of Service means, for any Employee, a twelve (12)
consecutive month period (as stated in Section 1.44) during which such
Employee completed one thousand (1,000) or more Hours of Service as an
Employee.
20
ARTICLE II
ELIGIBILITY AND PARTICIPATION
Section 2.01 Eligibility - Each Employee who was a Participant on
December 31, 1988, subject to the provisions hereinafter contained, shall
remain a Participant as of January 1, 1989.
An Employee who is not a Participant shall become a Participant on the
earlier of:
Section 2.01(a) the first Participation Date which coincides with or
immediately follows the date the Employee became an Employee for
Employees who are anticipated to earn at least one thousand (1,000) Hours
of Service during any twelve (12) consecutive month period of employment;
or
Section 2.01(b) the first Participation Date which coincides with or
immediately precedes his completion of one thousand (1,000) Hours of
Service during his first twelve (12) consecutive months of employment
and/or any Plan Year;
Notwithstanding the foregoing, an Employee who does not have at
least one (1) Hour of Service on or after January 1, 1988 shall not
become a Participant if such Employee's Attained Age on his original date
of employment was more than sixty (60).
Section 2.02 Participation - Each person who becomes a Participant
shall remain a Participant so long as he remains an Employee.
Section 2.03 Re-employment Before Annuity Starting Date - In the
event an Employee ceases to be an Employee due to his termination of
employment after he has satisfied the requirements of Section 2.01 but
before he becomes a Participant and such person is reemployed as an
Employee, such re-employed Employee shall become a Participant on the
first Participation Date immediately following the day he again performs
an Hour of Service as an Employee after his re-employment date.
21
In the event an Employee ceases to be a Participant due to his
termination of employment and is later re-employed, he shall once again
become a Participant on his reemployment date.
Section 2.04 Re-employment After Annuity Starting Date - If a
Participant is reemployed as an Employee after his Annuity Starting Date,
his Monthly Retirement Income benefit shall be discontinued. The
Participant's rights to future benefits under the Plan shall be subject to
redetermination upon any subsequent termination of employment or retirement
under the Plan in accordance with the Plan provisions then in effect and by
including any Credited Service or increased Average Monthly Earnings earned
by or in effect for such Participant as of his subsequent termination of
employment.
In the case of a Participant whose most recent Annuity Starting Date
occurred prior to his Normal Retirement Age and who is re-employed as an
Employee, at such Participant's subsequent termination of employment such
Participant shall have a separate Annuity Starting Date for any additional
benefits earned under the Plan after such Participant's previous Annuity
Starting Date which occurred prior to such Participant's re-employment as
an Employee.
Any benefits thereafter payable shall be reduced on an Actuarial
Equivalent basis to reflect the value of the Monthly Retirement Income
benefits received by the Participant in the period during which he was in
receipt of a Monthly Retirement Income benefit. Notwithstanding the
preceding, the Monthly Retirement Income benefit thereafter payable shall
not be less than the Monthly Retirement Income benefit payable immediately
before his latest re-employment plus the Actuarial Equivalent of any
Monthly Retirement Income benefit suspended while the Participant is not
employed in such service as is described in Department of Labor Regulations
Section 2530.203-3(c)(1).
22
ARTICLE III
RETIREMENT BENEFIT'S
Section 3.01 Normal Retirement Benefit - Upon retirement at his
Normal Retirement Date, a Participant who has at least one (1) Hour of
Service on or after January 1, 1989 shall receive a Monthly Retirement
Income benefit as described below which shall commence as of such Normal
Retirement Date and shall be paid in accordance with Article IV. The
amount of such Monthly Retirement Income benefit for such Participant
shall be the largest of Section 3.01(a), Section 3.01(b) or Section 3.01(c)
where:
Section 3.01(a) is the product of Section 3.01(a)(i) and Section
3.01(a)(ii) following:
(i) one and forty-five one hundredths percent (1.45%) of the Participant's
Average Monthly Earnings.
(ii) the Participant's number of years of Credited Service.
Section 3.01(b) is, for any Employee who was a Participant in the Plan in
any Plan Year beginning on or before the Adoption Date and who is a
Highly Compensated Employee (as defined in Section 1.29(a)(1) or
1.29(a)(2)) for any such Plan Year, his Accrued Benefit as of the later
of December 31, 1988 or the last day of the Plan Year preceding the Plan
Year in which such Participant first becomes such a Highly Compensated
Employee, determined under the provisions of the Plan as in effect on
December 31, 1988, except that in determining such Participant's Accrued
Benefit, Earnings and Average Monthly Earnings shall be as determined
under Sections 1.33 and 1.09 hereunder.
23
Section 3.01(c) is, for any Employee who was a Participant in the Plan in
any Plan Year beginning on or before the Adoption Date and who is not such
a Highly Compensated Employee (as described in Section 3.01(b)), his
Accrued Benefit as of the earlier of the Adoption Date or his termination
of employment, determined under the provisions of the Plan as in effect on
December 31, 1988, except that in determining such Participant's Accrued
Benefit, Earnings and Average Monthly Earnings shall be determined under
Sections 1.33 and 1.09 hereunder.
Notwithstanding the foregoing, no Participant's Monthly Retirement
Income benefit shall be less than the amount of any Monthly Retirement
Income benefit payable under the basic form which the Participant could
have received if he had retired pursuant to Section 3.03 at any time after
being eligible to so retire but prior to his Normal Retirement Date and
had received immediate commencement of benefits.
Former Participants who do not have at least one (1) Hour of Service
on or after January 1, 1989 shall have their Monthly Retirement Income
benefit payable at their Normal Retirement Date, if any, determined under
the provisions of the Plan as in effect on the date of such former
Participant's termination of employment.
Section 3.02 Delayed Retirement Benefit - Upon retirement at his
Delayed Retirement Date, a Participant who has at least one (1) Hour of
Service on or after January 1, 1988 shall receive a Monthly Retirement
Income benefit as described below which shall commence on the date of such
Delayed Retirement and shall be paid in accordance with Article IV. The
amount of such Monthly Retirement Income benefit for such Participant
shall be the greater of Section 3.02(a) and Section 3.02(b) where:
Section 3.02(a) is a Monthly Retirement Income benefit determined in the
same manner as for retirement at his Normal Retirement Date with Credited
Service and Average Monthly Earnings computed as of his Delayed Retirement
Date.
24
<PAGE>
Section 3.02(b) is a Monthly Retirement Income benefit determined in the
same manner as for retirement at his Normal Retirement Date with Credited
Service and Average Monthly Earnings computed as of his Normal Retirement
Date, and the amount of Monthly Retirement Income benefit so determined
shall be increased so that such Monthly Retirement Income benefit shall be
the Actuarial Equivalent, as of his Delayed Retirement Date, of the
Monthly Retirement Income benefit that would have been payable had he
retired on his Normal Retirement Date.
Former Participants who do not have at least one (1) Hour of Service
on or after January 1, 1988 shall have their Monthly Retirement Income
benefit payable at their Delayed Retirement Date, if any, determined under
the provisions of the Plan as in effect on the date of such former
Participant's termination of employment.
Section 3.03 Early Retirement Benefit - Upon retirement at his Early
Retirement Date, a Participant shall receive a Monthly Retirement Income
benefit which shall commence on his Normal Retirement Date and shall be
paid in accordance with Article IV. The amount of such Monthly Retirement
Income benefit shall be determined as the Participant's Accrued Benefit as
of his Early Retirement Date under the provisions of the Plan in effect on
such Participant's date of termination of employment.
Notwithstanding anything contained herein to the contrary, a
Participant who retires at an Early Retirement Date shall have the right
to elect, in writing, to receive his Monthly Retirement Income benefit
commencing as of his Early Retirement Date. If the Participant makes the
election to receive his Monthly Retirement Income benefit as of his Early
Retirement Date, the amount of Monthly Retirement Income benefit payable
at such Early Retirement Date shall be based on the Participant's Accrued
Benefit as of his Early Retirement Date under the provisions of the Plan
in effect on his date of termination of employment reduced by one one
hundred eightieth (1/180) for each of the first sixty (60) months by which
the Participant's Annuity Starting Date precedes his Normal Retirement
Date.
25
If the Participant does not make the election to receive his Monthly
Retirement Income benefit commencing as of his Early Retirement Date, he
shall have the right, at any time subsequent to his Early Retirement Date
but prior to his Normal Retirement Date, to request, in writing, that the
Annuity Starting Date be at some earlier date. If the Participant makes
such an election, the amount of Monthly Retirement Income benefit payable
at such Annuity Starting Date shall be the Participant's Accrued Benefit as
of his Early Retirement Date under the provisions of the Plan in effect on
his date of termination of employment and the fractional reduction
hereinbefore provided shall only apply to the number of months by which the
Annuity Starting Date precedes his Normal Retirement Date.
Section 3.04 Disability Retirement Benefit - When a Participant whose
Attained Age is at least fifty (50) and who has been credited with fifteen
(15) or more Years of Service shall be determined to be Totally and
Permanently Disabled, the Committee shall certify such fact to the Trustee
and such Totally and Permanently Disabled Participant shall be entitled to
receive Monthly Retirement Income benefit payments as hereinafter provided.
The timing and amount of such payments shall be determined as follows:
Section 3.04(a) Commencing on his Normal Retirement Date a Totally and
Permanently Disabled Participant shall be entitled to receive a Monthly
Retirement Income benefit equal to his vested Accrued Benefit as of his
Disability Retirement Date based on his Service, Credited Service and
Average Monthly Earnings as of the date he becomes Totally and Permanently
Disabled and the provisions of the Plan in effect on such date.
Notwithstanding the preceding, upon becoming Totally and Permanently
Disabled or at any time thereafter, a Totally and Permanently Disabled
Participant may elect to receive - immediate commencement of Monthly
Retirement Income benefit payments hereunder. If such Totally and
Permanently Disabled Participant elects, upon becoming Totally and
Permanently Disabled or at any time after becoming Totally and Permanently
Disabled, to receive immediate commencement of Monthly Retirement Income
benefit payments hereunder, such Totally and Permanently Disabled
Participant shall be entitled to a reduced Monthly Retirement Income
benefit commencing on the first day of the month coincident with or
immediately following said election which shall be equal to his Accrued
Benefit as of his Annuity Starting Date under the provisions of the Plan in
effect on his
26
Annuity Starting Date, reduced by one one hundred eightieth (1/180)
for each of the first sixty (60) months, one three hundred sixtieth
(1/360) for each of the next sixty (60) months, and on an Actuarial
Equivalent basis thereafter for each additional month by which his
Annuity Starting Date precedes his Normal Retirement Date.
Section 3.04(b) If the Totally and Permanently Disabled Participant
recovers prior to his Normal Retirement Date, his Monthly Retirement
Income benefit payments, if any, shall be immediately discontinued. If
he returns to the employ of the Employer within a reasonable period of
time (as determined conclusively by the Committee under uniform
standards consistently applied), he shall on actual return again
become an active Participant. If he does not return to the Employer's
employ within a reasonable period of time, he shall be deemed
terminated as of his date of recovery, and the benefits, if any, to
which he is entitled shall be calculated pursuant to Section 5.01
based on his Attained Age, Service, and Credited Service and the
provisions of the Plan in effect as of such date of recovery. In
either event, the benefits, if any, which are eventually payable shall
be reduced by the Actuarial Equivalent of the Monthly Retirement
Income benefit payments actually received hereunder.
27
ARTICLE IV
RETIREMENT BENEFIT'S PAYMENT FORMS
Section 4.01 Basic Form of Payment - The basic form of payment (to
which the applicable formula indicated in Section 3.01 applies) shall be a
Monthly Retirement Income benefit commencing on the date as specified in
Section 3.01, 3.02, 3.03 or 3.04 and shall be paid to the Participant on
the first day of each month thereafter during his lifetime only.
Section 4.02 Automatic Payment Forms - A Participant who is not
married on his Annuity Starting Date shall receive his vested Accrued
Benefit in the form of a Single Life Annuity (as described in Section
4.03(a)). A Participant who is married on his Annuity Starting Date shall
receive his vested Accrued Benefit in the form of an immediate Joint and
fifty percent (50%) Survivor Annuity with his Spouse who survives him
designated as his survivor annuitant. The Joint and fifty percent (50%)
Survivor Annuity shall be the Actuarial Equivalent of the basic form of
payment described in Section 4.01. If the Participant's Spouse dies after
the Annuity Starting Date, no alternative Beneficiary can be named. If the
Participant's Spouse is not living at the death of the Participant after
the Annuity Starting Date, no further benefits shall be payable on behalf
of the Participant.
No less than thirty (30) days and no more than ninety (90) days prior
to the Annuity Starting Date, each Participant and his Spouse (if any)
shall be given a written notice to the effect that benefits thereafter
payable will be payable in the applicable automatic payment form described
above unless the Participant, with the consent of his Spouse, elects to the
contrary in a ninety (90) day period which ends on the Annuity Starting
Date. The notice shall describe, in a manner intended to be understood by
the Participant and his Spouse (if any), the terms and conditions of the
applicable automatic payment form described above and shall include a
general explanation of the financial effect of an election or absence of an
election to waive the automatic payment form. In the event a Participant or
his Spouse (if any) requests additional information, as permitted under the
terms of the notice, commencement of benefits for any purpose hereunder
shall not begin until at least ninety (90) days following the Participant's
receipt of such additional information.
28
A married Participant must obtain the written consent of his Spouse
to any form of payment other than that described above in the ninety (90)
day period which ends on the Annuity Starting Date. Such consent shall be
irrevocable once given and shall be witnessed by a representative of the
Committee or a notary public. The Committee may accept an election other
than that provided hereunder without the consent of the Spouse if there is
no Spouse, the Spouse cannot be located, or such other circumstances as may
be prescribed by regulations.
Section 4.03 Optional Payment Forms - Pursuant to the provisions
hereinbefore provided in this Article IV, each Participant, with the
consent of his Spouse (if any), shall have the right to elect to have his
Monthly Retirement Income benefit paid under any one of the options
hereinafter set forth in this Section 4.03 in lieu of the applicable
automatic payment form otherwise provided for in Section 4.02. The amount
of Monthly Retirement Income benefit under any optional payment form shall
be the Actuarial Equivalent of the Monthly Retirement Income benefit that
otherwise would have been payable to him under the basic form as described
in Section 4.01.
A Participant who desires to have his Monthly Retirement Income
benefit paid under one of the optional payment forms provided in this
Section 4.03 shall make such an election by written request to the
Committee on forms provided by the Committee. An election by a Participant
to receive his Monthly Retirement Income benefit under any of the optional
methods of payment as provided in this Section 4.03 and the spousal consent
to such optional form of payment may be revoked by such Participant in
writing to the Committee at any time prior to the Annuity Starting Date.
After the Annuity Starting Date, no future elections or revocations of an
optional form will be permitted under any circumstances.
In the event a Participant who has met the eligibility requirements
for disability, early, normal or delayed retirement should die after making
an election hereunder and after his actual termination of employment but
prior to his Annuity Starting Date any benefits payable under the Plan will
be as provided under Article VI.
29
Section 4.03(a) Single Life Annuity (Basic Form) - A Participant may
elect to receive his Monthly Retirement Income benefit payable for
his life only. Upon the death of the Participant, no further payments
are made.
Section 4.03(b) Single Life Annuity with Guaranteed Payments - A
Participant may elect to receive a reduced amount per month of
Monthly Retirement Income benefit during his lifetime, and in the
event of his death after his Annuity Starting Date but before the
passage of a guaranteed number of Monthly Retirement Income benefit
payments (as elected by the Participant to be either sixty (60), one
hundred twenty (120), one hundred eighty (180) or two hundred forty
(240)), such reduced amount per month of Monthly Retirement Income
benefit shall be continued to his Beneficiary (or Contingent Beneficiary,
if applicable) until the remainder of the guaranteed payments have been paid.
Section 4.03(c) Joint and Survivor Annuity - A Participant may elect
to receive a reduced amount per month of Monthly Retirement Income
benefit during his lifetime and have such reduced amount per month of
Monthly Retirement Income benefit (or fifty percent (50%) or seventy-
five percent (75%) as elected by the Participant) continue after his
death to his designated Beneficiary, during the lifetime of the
Beneficiary. If the designated Beneficiary is not living on the
Annuity Starting Date, the election of this option shall be void and
Monthly Retirement Income benefits shall be paid as if no prior
election of this option had been made. If the designated Beneficiary
dies after the Annuity Starting Date, no alternative Beneficiary can
be named. If the designated Beneficiary is not living at the death of
the Participant after the Annuity Starting Date, no additional
benefits shall be payable on behalf of the Participant.
Section 4-03(d) Installment Option - A Participant may elect to
receive his Monthly Retirement Income benefit for a guaranteed number
of months (of either sixty (60), one hundred twenty (120), one
hundred eighty (180) or two hundred forty (240)) but with no lifetime
guarantee. If the Participant dies after his Annuity Starting Date
but before the guaranteed number of Monthly Retirement Income benefit
payments have been made, the remainder of the guaranteed Monthly
Retirement Income benefit payments shall be
30
continued to the Participant's designated Beneficiary or Contingent
Beneficiary until the remainder of the guaranteed payments have been made.
When the number of guaranteed payments have been made, no further payments
are made. The amount of monthly payment under this option shall be based on
the Actuarial Value of a Participant's Monthly Retirement Income benefit.
For purposes of determining the Actuarial Value of a Participant's Monthly
Retirement Income benefit, the Plan may not use an interest rate greater
than the interest rate or rates used by the Pension Benefit Guaranty
Corporation to value lump sums for plans terminating as of the first day of
the Plan Year that contains the Annuity Starting Date.
Notwithstanding the foregoing, a Participant shall not elect an
optional form of payment and designate a Beneficiary who is not the Spouse
of such Participant, if the option elected would violate the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the
Treasury Regulations or provides an Actuarial Value of payments expected to
be made to the Participant which is fifty percent (demo) or less of the
Actuarial Value of the total payments expected to be made to the
Participant and his Beneficiary.
Section 4.04 Small Lump Sum Payments - Notwithstanding any other
provisions of this Plan, if the Actuarial Value of a retiring Participant's
Monthly Retirement Income benefit is equal to or less than three thousand
five hundred dollars ($3,500) (or such other amount as may be prescribed by
regulations of the Secretary of Treasury), the Committee shall direct that
the Actuarial Value of the Participant's Monthly Retirement Income benefit
be paid in a lump sum to such retiring Participant. For purposes of
determining the Actuarial Value of the benefit payable hereunder, the Plan
may not use an interest rate greater than the interest rate or rates used
by the Pension Benefit Guaranty Corporation to value lump sums for plans
terminating as of the first day of the Plan Year that contains the Annuity
Starting Date. No other benefits of any type shall be payable to such
former Participant or to his Spouse or Beneficiaries.
If such retiring Participant is subsequently re-employed and again
becomes a Participant of this Plan, his Credited Service for purposes of
determining benefit accruals hereunder shall not include any periods of
employment prior to his re-employment date unless (a) the amount of such
payment is repaid to the Fund, plus interest at the annual rate described
in IRC Section
31
411(c)(2)(C) for the period which begins on the date of payment and ends on
the date of repayment, (b) such repayment is made prior to the earlier of
(i) five (5) years after the first day on which the Participant is
subsequently re-employed by the Employer, or (ii) the close of the first
period of five (5) consecutive One (1) Year Breaks in Service commencing
after the distribution, and (c) the distribution is made no later than the
close of the second (2nd) Plan Year following the Plan Year in which the
termination occurs. If such amount (plus interest) is repaid, the
Participant's Credited Service for determining benefit accruals shall be
based on all periods of employment subject to any restriction in Section
1.16.
In the event a Participant who has received a distribution under this
Section 4.04 is reemployed and such distribution was not made by the end of
the second (2nd) Plan Year following the Plan Year in which the termination
of employment occurred, such prior Credited Service for determining benefit
accruals shall be included under the Plan with such result reduced by the
Accrued Benefit attributable to such prior distribution.
Section 4.05 Consent Prior to Distribution from the Plan -
Notwithstanding anything contained in the Plan to the contrary, the written
consent of the Participant and his Spouse who may be entitled to a benefit
under any provisions of the Plan, shall be required prior to any distribution
of any portion of the Accrued Benefit in a payment form other
than the applicable automatic payment form of Section 4.02 when the
Actuarial Value of the nonforfeitable Accrued Benefit is in excess of three
thousand five hundred dollars ($3,500) (or such other amount as may be
prescribed by regulations of the Secretary of Treasury) and any such
distribution is made prior to the date the Participant attains (or would
have attained) his Normal Retirement Age.
Section 4.06 No Reduction of Accrued Benefits - Notwithstanding
anything contained herein to the contrary, in no event shall any amendment
to the Plan decrease a Participant's Accrued Benefit or eliminate an
optional form of payment for benefits accrued as of the date of any such
amendment.
32
Section 4.07 Direct Rollover Option - This Section 4.07 applies to
distributions made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
distributee's election under this Plan, a distributee who is not subject to
any of the four (4) limitations set forth in Section 4.07(a) may elect, at
the time and in the manner prescribed by the Committee, to have any portion
of an eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
Section 4.07(a) The four (4) limitations on a distributee's direct rollover
rights are as follows: (1) a distributee may not elect the direct rollover
option if the distributee's eligible rollover distributions during a Plan
Year are reasonably expected to total less than two hundred dollars ($200),
(2) a distributee may not divide an eligible rollover distribution into two
(2) or more separate distributions to be paid in direct rollovers to two (2)
or more eligible retirement plans; instead, an eligible rollover
distribution that is distributed in a direct rollover may only be paid to
one (1) eligible retirement plan selected by the distributee,(3) if the
distributee elects to have only a portion of an eligible rollover
distribution paid to an eligible retirement plan in a direct rollover, such
portion must equal at least five hundred dollars ($500); if the entire
amount of the eligible rollover distribution is less than five hundred
dollars ($500), the distributee may not divide the distribution, and (4) a
distributee shall not be eligible to elect a direct rollover of an eligible
rollover distribution unless the distributee makes such election within the
time period established by the Committee.
Section 4.07(b) Eligible rollover distribution - An eligible rollover
distribution is any distribution of all or any portion of the balance of the
credit of the distributee, except that an eligible rollover distribution
does not include: any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for life
(or life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
Beneficiary; or for a specified period of ten (10) years or more; any
distribution to the extent such distribution is required under Code Section
401(a)(9); and the portion of any distribution that is not includable in
gross income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
33
Section 4.07(c) Eligible retirement plan - An eligible retirement
plan is an individual retirement account described in Code Section
408(a), an individual retirement annuity described in Code Section
403(a), or a qualified trust described in Code Section 401(a), that
accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
Section 4.07(d) Distributee - A distributed includes an Employee or
former Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p), are distributees
with regard to the interest of the spouse or former spouse.
Section 4.07(e) Direct Rollover - A direct rollover is a payment by
the Plan to the eligible retirement plan specified by the distributed.
34
ARTICLE V
BENEFITS ON TERMINATION OF EMPLOYMENT
Section 5.01 Vesting of Benefits - All rights to all benefits
under the Plan will cease upon a Participant's termination of employment
with the Employer or Affiliate prior to retirement, except as otherwise
provided in this Article V and in Section 6.02.
If the employment of a Participant is terminated with the Employer
or Affiliate prior to such Participant's Early, Normal or Disability
Retirement Date but on or after January 1, 1986 and after he has
completed at least two (2) Years of Service, he shall be entitled to
receive a Monthly Retirement Income benefit commencing on his Normal
Retirement Date, if he is then alive, payable in accordance with Section
5.02. The amount of Monthly Retirement Income benefit payable hereunder
for such Participant shall be determined as the product of Section
5.01(a) and Section 5.01(b) following:
Section 5.01(a) The amount of the Participant's Accrued Benefit as of
his termination of employment;
Section 5.01(b) A vested percentage which varies according to the
Participant's number of Years of Service as of his date of termination
of employment according to the following table:
<TABLE>
<CAPTION>
Service Vested Percentage
<S> <C>
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
</TABLE>
35
If the employment of a Participant is terminated prior to January 1,
1986 and prior to such Participant's Early, Normal or Disability Retirement
Date and after he has completed at least ten (10) Years of Service he shall
be entitled to receive a Monthly Retirement Income benefit commencing on
his Normal Retirement Date, if he is then alive, payable in accordance with
Section 5.02. The amount of Monthly Retirement Income benefit payable
hereunder for such Participant shall be based on the Participant's Accrued
Benefit as of his termination of employment.
Notwithstanding the foregoing, in all events a Participant shall be
one hundred percent (100%) vested upon the attainment of his Normal
Retirement Age while in the employ of the Employer.
Any amendments to the Plan made subsequent to the termination of
employment of any Participant shall in no way affect the amount or form of
Monthly Retirement Income benefit to which such Participant is entitled
except as otherwise specifically provided herein.
In the event that a Participant who is entitled to commencement of a
deferred Monthly Retirement Income benefit under the provisions of this
Section 5.01 should be later re-employed as an Employee prior to his
Annuity Starting Date, his rights to any such Monthly Retirement Income
benefit shall thereupon be suspended, and the Participant's rights to
benefits under the Plan shall be subject to redetermination at any
subsequent termination of employment or retirement under the Plan, in
accordance with the provisions of the Plan then in effect.
Section 5.02 Payment of Deferred Vested Benefit - A terminated
Participant who is entitled to a deferred vested normal retirement benefit
in accordance with the provisions of Section 5.01, shall be entitled to
receive his deferred vested benefit commencing as of his Normal Retirement
Date, if he is then alive and such benefit shall be paid in accordance with
Article IV.
36
Notwithstanding the foregoing, if the Actuarial Value of a terminated
Participant's vested Accrued Benefit, as calculated as of the Annuity
Starting Date but based on the benefit payable at his Normal Retirement
Date, is equal to or less than three thousand five hundred dollars ($3,500)
(or such other amount as may be prescribed by regulations of the Secretary
of Treasury), the Committee shall direct that the Actuarial Value of the
Participant's vested Accrued Benefit, as calculated as of the Annuity
Starting Date but based on the benefit payable at his Normal Retirement
Date, be paid in a lump sum to such terminated Participant. The amount of
Actuarial Value payable at such earlier Annuity Starting Date shall be equal
to the Actuarial Equivalent of the Monthly Retirement Income benefit
otherwise payable as of his Normal Retirement Date. For purposes of
determining the Actuarial Value of the benefit payable hereunder, the Plan
may not use an interest rate greater than the interest rate or rates used by
the Pension Benefit Guaranty Corporation to value lump sums for plans
terminating as of the first day of the Plan Year that contains the Annuity
Starting Date. No other benefits of any type shall be payable to such former
Participant or to his Spouse or Beneficiaries.
If such terminated Participant is subsequently re-employed and again
becomes a Participant of this Plan, his Credited Service for purposes of
determining benefit accruals hereunder shall not include any periods of
employment prior to his re-employment date unless (a) the amount of such
payment is repaid to the Fund, plus interest at the annual rate described in
IRC Section 411(c)(2)(C) for the period which begins on the date of payment
and ends on the date of repayment, (b) such repayment is made prior to the
earlier of (i) five (5) years after the first day on which the Participant
is subsequently re-employed by the Employer, or (ii) the close of the first
period of five (5) consecutive One (1) Year Breaks in Service commencing
after the distribution, and (c) the distribution is made no later than the
close of the second (2nd) Plan Year following the Plan Year in which the
termination occurs. If such amount (plus interest) is repaid, the
Participant's Credited Service for determining benefit accruals shall be
based on all periods of employment subject to any restriction in Section
1.16.
3'
In the event a Participant who has received a distribution under this
Section 5.02 is reemployed and such distribution was not made by the end of
the second (2nd) Plan Year following the Plan Year in which the termination
of employment occurred, such prior Credited Service for determining benefit
accruals shall be included under the Plan with such result reduced by the
Accrued Benefit attributable to such prior distribution.
A non-vested Participant shall be deemed to be paid his entire
interest in the Plan upon his termination of employment and shall forfeit
the non-vested portion of his Accrued Benefit as of such date. However, if
such Participant is re-employed and again becomes a Participant hereunder
prior to incurring five (5) consecutive one year Breaks in Service, such
forfeited portion of the Accrued Benefit shall be reinstated.
Notwithstanding the foregoing, if a Participant had earned ten (10) or
more Years of Service as of his date of termination and his deferred vested
normal retirement benefit is not paid in a lump sum at his termination of
employment date, he may elect in writing, at anytime after reaching his
Attained Age sixty (60) to commence his deferred vested normal retirement
benefit payments as of a date earlier than his Normal Retirement Date.
The amount of such Participant's deferred vested normal retirement benefit
shall be equal to the amount of Monthly Retirement Income benefit otherwise
payable as of his Normal Retirement Date reduced by one one hundred
eightieth (1/180) for each of the first sixty (60) months by which the
earlier Annuity Starting Date precedes the Participant's Normal Retirement
Date. Such benefit will be paid in accordance with Article IV.
38
ARTICLE VI
BENEFIT'S ON DEATH
Section 6.01 Death After Eligibility for Retirement - In the event of
the death of: (a) a Participant or former Participant prior to his Annuity
Starting Date but after having completed the eligibility requirements for
normal, early or disability retirement, or (b) a Participant after
attainment of his Normal Retirement Age but prior to his Annuity Starting
Date, there shall be payable to his surviving Spouse, if any, a monthly
benefit as hereinafter defined. No monthly benefit hereunder shall be
payable if the deceased Participant is not survived by a Spouse. Death
Benefits under this Section 6.01 shall be payable only to the extent they
are not made available pursuant to Section 6.02.
The Participant's surviving Spouse shall receive a monthly benefit which
shall be based
on:
(i) the Participant's vested Accrued Benefit as of the Participant's date
of death, and
(ii) the assumption that the Participant had retired on the day before his
date of death with the automatic joint and fifty percent (50%) survivor
annuity payment form of Section 4.02 in effect.
The monthly benefit shall commence on the first day of the month
coincident with or immediately following the Participant's date of death
and shall be continued to the surviving Spouse on the first day of each
month thereafter during the lifetime of the surviving Spouse. Upon the
death of the Participant's surviving Spouse, no further benefits shall be
payable hereunder.
39
(iii) the Participant died on the day after the date described in (i)
above.
Such monthly benefit shall be payable for the life of the surviving
Spouse and shall commence as of the first day of the month, coinciding with
or next following the earliest date under the Plan on which the Participant
would otherwise have been eligible to commence such benefit. Upon the death
of the Participant's surviving Spouse, no further benefits shall be payable
hereunder.
Notwithstanding the preceding, if the Actuarial Value of a benefit
payable to the surviving Spouse is equal to or less than three thousand
five hundred dollars ($3,500), (or such other amount as may be prescribed
by the Secretary of the Treasury) the Committee shall direct that such
benefit be paid in a lump sum to the surviving Spouse. For purposes of
determining the Actuarial Value of the benefit payable to the surviving
Spouse under this paragraph, the Plan may not use an interest rate greater
than the interest rate or rates used by the Pension Benefit Guaranty
Corporation to value lump sums for plans terminating as of the first day of
the Plan Year that contains the Annuity Starting Date. No lump sum
distribution shall be made hereunder after the Annuity Starting Date unless
the surviving Spouse consents in writing to such distribution.
Section 6.03 Death After Retirement - When a Retired or Totally and
Permanently Disabled Participant dies after his Annuity Starting Date, his
Spouse or Beneficiary shall be entitled to any benefits due under the
automatic or elected alternate form of payment of his Monthly Retirement
Income benefit. Should the period of guaranteed payments be exhausted at
the death of the Retired Participant (including those retired for Total and
Permanent Disability), no Death Benefit shall be payable. If a Death
Benefit is payable under any payment form other
than that provided in this Article VI, Section 4.02 or 4.03(c) the
Beneficiary may request that the Actuarial Value of the outstanding
benefits be paid to him in a lump sum.
41
ARTICLE VII
FUNDING
Section 7.01 Contributions by the Employer - The entire cost of
benefits under the Plan shall be borne by the Employer through the Fund.
The Employer intends to make its Contributions in such actuarially
determined amounts as shall be sufficient to provide the benefits of the
Plan and meet the minimum funding standards as required by law. Funds
released through terminations of employment shall be applied to reduce the
Employer's future Contributions.
Section 7.02 Trust Fund - On behalf of all Employers, the Bank will
enter into an agreement with the Trustee, "hereunder the Trustee will
receive, invest and administer as a trust fund all Contributions made under
this Plan in accordance with the Trust Agreement. The provisions of such
Trust Agreement are incorporated by reference as a part of the Plan, and
the rights of all persons hereunder are subject to the terms of the Trust
Agreement. The Trust Agreement specifically provides, among other things,
for the investment and reinvestment of the Fund and the income thereof, the
management of the Fund, the responsibilities and immunities of the Trustee,
removal of the Trustee and appointment of a successor, accounting by the
Trustee and the disbursement of the Fund.
The Trustee shall at all time be a banking corporation organized and
doing business under the laws of the United States of America or any State
therein, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by Federal or State authority. The
Board of Directors may remove the Trustee at any time upon the notice
required by the terms of the Trust Agreement and, upon such removal or upon
the resignation of the Trustee, the Board of Directors shall designate and
appoint a successor Trustee.
The Trustee shall have such powers to purchase insurance on the lives
of Participants, and hold, invest, reinvest, control, and disburse funds as
at that time shall be set forth in the Trust Agreement.
42
The Fund, resulting from Contributions, earnings, profits, increments
and accruals thereon, may be used only for the exclusive benefit of the
Participants, surviving Spouses and Beneficiaries, or the payment of the
reasonable expenses of administering the Plan except as provided in Section
10.02 and in Section 13.08.
Section 7.03 Funding Standard Account - The Bank (who shall be the
plan administrator for all Employers in regard to this appointment) shall
engage, on behalf of all Participants, an actuary, an insurance company or
an actuarial firm which maintains on its staff at least one (1) person who
is recognized by the Secretaries of Labor and Treasury as an enrolled
actuary. In addition to performing actuarial valuations and providing
actuarial statements as necessary for the annual reports required by the
Secretary of Labor, such actuary shall maintain a funding standard account
in accordance with rules and regulations as from time to time shall be set
forth by the Secretary of the Treasury or his delegate. The status of such
funding standard account shall be reported on an annual basis to the
Employer and such governmental agencies as may be required.
The actuary, in maintaining the funding standard account, (a) may rely
upon any certification or other information relating to employee data, Fund
assets, and Contribution amounts and dates made as provided or caused to be
provided the actuary by the Employer, the Trustee, the independent
qualified public accountant or any Fiduciary to the extent such reliance is
so stated by the actuary in his certification or report; and (b) shall
utilize such actuarial assumptions and methods which are individually
reasonable taking into account the experience of the Plan and reasonable
expectations and which, in combination, offer the actuary's best estimate
of anticipated experience under the Plan.
43
ARTICLE VIII
FIDUCIARIES AND ADMINISTRATION OF THE PLAN
Section 8.01 General - Each Fiduciary shall discharge his duties
solely in the interest of the Participants, surviving Spouses and
Beneficiaries and for the exclusive purpose of providing such benefits as
stipulated herein to such Participants, surviving Spouses and
Beneficiaries, or defraying the reasonable expenses of administering the
Plan. Each Fiduciary in carrying out such duties and responsibilities
shall act with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise
of a like character and with like aims.
A Fiduciary may serve in more than one Fiduciary capacity and may
employ one or more persons to render advice with regard to his Fiduciary
responsibilities. If the Fiduciary is serving as such without compensation,
all expenses reasonably incurred by such Fiduciary shall be
reimbursed by the Employer or, at the Bank's direction, from the Fund.
A Fiduciary may delegate any of his responsibilities for the
operation and administration of the Plan. In limitation of this right, a
Fiduciary may not delegate any responsibilities as contained herein
relating to the management or control of the Fund except through the
employment of an investment manager as provided in Section 8.03 and in the
Trust Agreement.
Section 8.02 Bank's Responsibilities - The Bank established and
maintains the Plan for the benefit of its Employees and of necessity
retains control of the operation and administration of the Plan and shall
be designated the Plan Administrator of the Plan within the meaning of
Section 3(16)(A) of ERISA. The Bank in accordance with specific provisions
of the Plan has, as herein indicated, delegated certain of these rights
and obligations to the Bank, the Trustee and the Committee and these
parties shall be solely responsible for these, and only these, delegated
rights and obligations.
44
The Bank shall cause periodic actuarial valuations of the Plan to be
made which will indicate the amount of Contributions necessary to maintain
the Plan on an actuarially sound basis and comply with the minimum funding
standards as may be required by law, such actuarial valuation to be made at
least as often as required by law. The Bank shall provide the Trustee or an
investment manager, if one has been employed as herein provided, with a
copy of the results of each actuarial valuation or shall otherwise
communicate to the Trustee or investment manager, if applicable, the short
and long-range requirements of the Fund, the anticipated level of annual
Contributions and any material changes thereto occurring between actuarial
valuations.
The Employer shall supply such full and timely information for all
matters relating to the Plan as (a) the Committee, (b) the Trustee, (c) the
actuary and (d) the accountant, if any, engaged on behalf of the Plan by
the Bank, may require for the effective discharge of their respective
duties.
Section 8.03 Trustee - The Trustee, in accordance with the Trust
Agreement, shall have exclusive authority and discretion to manage and
control the Fund, except that the Bank (who shall be the named Fiduciary
for all Employers in regard to this appointment) may in its discretion
employ at any time and from time to time an investment manager (as defined
in section 3(38) of ERISA) to direct the Trustee with respect to all or a
designated portion of the assets comprising the Fund.
Section 8.04 Administrative Committee - The Bank by action of its
Board of Directors shall appoint a committee of one (1) or more persons to
hold office during the pleasure of the Board of Directors. Such committee
shall be known as the Committee. No compensation shall be paid members of
the Committee from the Fund for services on such Committee. The Committee
shall select a secretary, who may or may not be a Participant of the Plan
or a member of the Committee, and any other officers deemed necessary, and
shall adopt rules governing its procedures not inconsistent herewith. The
Committee shall keep a permanent record of its meetings and actions. Any
action of the Committee shall be determined by the vote of a majority of
its members. Either the chairman or the secretary may execute any
certificate or other written direction on behalf of the Committee.
45
The Committee shall hold meetings upon such notice, at such place or
places and at such time or times as the Committee may from time to time
determine. Meetings may be called by the chairman or any two (2) members. A
majority of the members of the Committee at the time in office shall
constitute a quorum for the transaction of business.
In accordance with the provisions hereof, the Committee has been
delegated certain administrative functions relating to the Plan with all
powers necessary to enable it properly to carry out such duties. The
Committee shall have no power in any way to modify, alter, add to or
subtract from, any provisions of the Plan. The Committee shall have power
and discretion to construe the Plan and to determine all questions that may
arise thereunder relating to (a) the eligibility of individuals to
participate in the Plan, (b) the amount of retirement benefit or other
benefits to which any Participant, surviving Spouse or Beneficiary may
become entitled hereunder, and (c) any situation not specifically covered
by the provisions of the Plan. No decision of the Committee shall be
subject to question by any person except when such decision is arbitrary
and capricious. All disbursements by the Trustee, except for the ordinary
expenses of administration of the Fund or the reimbursement of reasonable
expenses at the direction of the Bank as provided herein, shall be made
upon, and in accordance with, the written directions of the Committee. When
the Committee is required in the performance of its duties hereunder to
administer or construe, or to reach a determination, under any of the
provisions of the Plan, it shall do so in a uniform, equitable and
nondiscriminatory basis.
The Committee shall establish rules and procedures to be followed by
Participants, surviving Spouses and Beneficiaries in filing applications
for benefits and for furnishing and verifying proofs necessary to establish
age, years of Credited Service, Service and Average Monthly Earnings and
any other matters required in order to establish their rights to benefits
in accordance with the Plan.
The Committee may employ such counsel, accountants, or other agents as
it shall deem advisable. The Bank may pay or cause to be paid from the
Trust Fund, the compensation of such counsel, accountants and other agents
and any other expenses incurred by the Committee in the administration of
the Plan and Trust.
46
Section 8.05 Claims for Benefits - All claims for benefits under the
Plan shall be submitted to the Committee who shall have the responsibility
for determining the eligibility of any Participant, surviving Spouse or
Beneficiary for benefits. All claims for benefits shall be made in writing
and shall set forth the facts which such Participant, surviving Spouse or
Beneficiary believes to be sufficient to entitle him to the benefit
claimed. The Committee may adopt forms for the submission of claims for
benefits in which case all claims for benefits shall be filed on such
forms. The Committee shall provide Participants, surviving Spouses and
Beneficiaries with all such forms.
Upon receipt by the Committee of a claim for benefits, it shall
determine all facts which are necessary to establish the right of an
applicant to benefits under the provisions of the Plan and the amount
thereof as herein provided. The Committee shall approve, deny and
investigate all questionable claims. In the event any claim for benefits is
denied, the Participant, surviving Spouse or Beneficiary shall be notified
of such decision in accordance with the provisions of Section
8.06.
Section 8.06 Claims Procedures - The applicant shall be notified in
writing of any adverse decision with respect to his claim within ninety
(90) days after its submission. The notice shall be written in a manner
calculated to be understood by the applicant and shall include:
Section 8.06(a) The specific reason or reasons for the denial;
Section 8.06(b) Specific references to the pertinent Plan provisions on
which the denial is based;
Section 8.06(c) A description of any additional material or information
necessary for the applicant to perfect the claim and an explanation why
such material or information is necessary; and
Section 8.06(d) An explanation of the Plan's claim review procedures.
47
If special circumstances require an extension of time for processing
the initial claim, a written notice of the extension and the reason
therefor shall be furnished to the claimant before the end of the initial
ninety (90) day period. In no event shall such extension exceed ninety (90)
days.
In the event a claim for benefits is denied or if the applicant has
had no response to such claim within ninety (90) days of its submission (in
which case the claim for benefits shall be deemed to have been denied), the
applicant or his duly authorized representative, at the applicant's sole
expense, may appeal the denial to the Committee within sixty (60) days of
the receipt of written notice of the denial or sixty (60) days from the
date such claim is deemed to be denied. In pursuing such appeal, the
applicant or his duly authorized representative:
Section 8.06(e) may request in writing that the Committee review the
denial;
Section 8.06(f) may review pertinent documents; and
Section 8.06(g) may submit issues and comments in writing.
The decision on review shall be made within sixty (60) days of
receipt of the request for review, unless special circumstances require an
extension of time for processing, in which case a decision shall be
rendered as soon as possible, but not later than one hundred twenty (120)
days after receipt of the request for review. If such an extension of time
is required, written notice of the extension shall be furnished to the
claimant before the end of the original sixty (60) day period. The decision
on review shall be made in writing, shall be written in a manner calculated
to be understood by the claimant, and shall include specific references to
the provisions of the Plan on which the denial is based. If the decision on
review is not furnished within the time specified above, the claim shall be
deemed denied on review.
48
Section 8.07 Records - All acts and determinations of the Committee
shall be duly recorded and all such records, together with such other
documents as may be necessary in exercising its duties under the Plan shall
be preserved in the custody of the Committee. Such records and documents
shall at all times be open for inspection to, and for the purpose of making
copies by, any person designated by the Bank. The Committee shall provide
such timely information, resulting from the application of its
responsibilities under the Plan, as needed by (a) the Trustee, (b) the
actuary and (c) the accountant, if any, engaged on behalf of the Plan by
the Bank, for the effective discharge of their respective duties.
Section 8.08 Missing Persons - The Committee shall direct the Trustee
to make a reasonable effort to locate all persons entitled to benefits
under the Plan; however, notwithstanding any provision in the Plan to the
contrary, if, after a period of five (5) years from the date such benefit
shall be due, any such persons entitled to benefits have not been located,
their rights under the Plan shall stand suspended. Before this provision
becomes operative, the Trustee shall send a certified letter to all such
persons at their last known address advising them that their interest or
benefits under the Plan shall be suspended. Any such suspended amounts
shall be held by the Trustee for a period of three (3) additional years (or
a total of eight (8) years from the time the benefits first become
payable). Provided, however, that if a person subsequently makes a valid
claim with respect to such suspended benefits, his right to benefits shall
be reinstated.
49
ARTICLE IX
MAXIMUM BENEFITS AND REQUIRED DISTRIBUTION OF BENEFITS
Section 9.01 Maximum Retirement Benefit - Anything herein to
the contrary notwithstanding, effective for Plan Years commencing on
and after January 1, 1987, the following provisions shall be applicable:
Section 9.01(a) The Monthly Retirement Income benefit payable in the
form of a single life annuity from the Plan on behalf of a
Participant when combined with any benefits from another qualified
Defined Benefit Plan maintained by the Employer or Affiliate, shall
not exceed the amount as provided in the following paragraphs of this
Section 9.01, as may be modified by Section 9.02. If the basic form
of payment determined pursuant to Section 4.01 is other than a single
life annuity or a qualified joint and survivor annuity, the amount so
determined hereunder shall be reduced on an Actuarial Equivalent
basis to reflect such other payment form with the exception that the
interest assumption shall be five percent (my).
If a Participant has completed ten (10) or more years of Plan
participation, the maximum Monthly Retirement Income benefit payable
in accordance with this Section 9.01 shall be the smaller of Section
9.01(a)(i) and Section 9.01(a)(ii) where:
Section 9.01(a)(i) is seven thousand five hundred dollars ($7,500).
Such amount shall be automatically increased as permitted by Treasury
Department regulations to reflect cost-of-living adjustments as of
January 1 of each calendar year. Such amount shall be the maximum
monthly amount pursuant to this Section 9.01(a)(i) for that calendar
year and shall apply to the Limitation Year ending with or within
that calendar year. As a result of such cost-of-living adjustment, a
benefit which had been limited by the provisions of this Section in a
previous Plan Year may be increased with respect to future payments
to the lesser of the adjusted dollar limitation amount or the amount
of benefit which would have been payable under this Plan without
regard to the provisions of this Section 9.01.
50
Section 9.01(a)(ii) is the average monthly compensation the
Participant received from the Employer during the three (3)
consecutive calendar years which would produce the highest such
average. For purposes of this Section 9.01(a)(ii), "compensation"
shall mean a Participant's wages, as defined in Code Section 3401(a),
and all other payments of compensation to a Participant by his
Employer or Affiliate (in the course of the Employer's or Affiliate's
trade or business) for which the Employer or Affiliate is required to
furnish the Participant a written statement under Code Sections
6401(d), 6051(a)(3) and 6052 (Form W-2 or substitute). Compensation
must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such
as the exception for agricultural labor in Code Section 3401(a)(2)).
Compensation for any Limitation Year is the compensation actually paid
or includable in gross income during the year.
Section 9.01(b) If the payment of a benefit begins before a
Participant attains Social Security Retirement Age, the amount set
forth in Section 9.01(a) shall be reduced to the Actuarial Equivalent
of the maximum benefit [determined pursuant to Section 9.01(a)(i)].
The adjustments provided for in this subparagraph shall be made
in a manner consistent with the reduction for old age insurance
benefits commencing before the Social Security Retirement Age under
the Social Security Act until age sixty-two (62) is reached.
For the purpose of adjusting the age sixty-two (62) limitation
under this Section 9.01(b), the limitation at any age before age
sixty-two (62) shall be the Actuarial Equivalent of such limitation
determined using a five percent (my) interest rate.
Section 9.01(c) If any benefit commences under this Plan after the
Participant attains his Social Security Retirement Age, the
determination as to whether the dollar limitation referred to in
Section 9.01(a)(i) has been satisfied shall be made by adjusting said
dollar limitation on an Actuarial Equivalent basis with the exception
that the interest assumption shall in no event be greater than five
percent (5%).
51
Section 9.01(d) Notwithstanding the preceding provisions of this
Section 9.01, the benefits payable with respect to a Participant
under this Plan shall be deemed not to exceed the limitations of this
Section 9.01 if:
(i) the Monthly Retirement Income benefits payable with respect to such
Participant under this Plan and under all other "qualified" Defined
Benefit Plans to which the Employer contributes do not exceed ten
thousand dollars ($10,000) for the applicable Plan Year and for any
prior Plan Year, and
(ii) the Employer has not at any time maintained a "qualified" Defined
Contribution Plan in which the Participant participated.
Section 9.01(e) If a Participant has completed less than ten (10)
years of participation, the maximum Monthly Retirement Income benefit
payable in accordance with Section 9.01(a)(i) shall be the amount
determined under Section 9.01(a)(i) multiplied by a fraction the
numerator of which is the number of years (or part thereof) of
participation in the Plan and the denominator of which is ten (10).
The provisions of the preceding sentence shall also apply to the
limitation in Section 9.01(a)(ii) and the ten thousand dollar
($10,000) limit noted in Section 9.01(d) except that it shall be
applied with respect to years of Service rather than years of
participation in the Plan. However, in no event shall this Section
9.01(e) reduce the limits noted in Section 9.01(a) and Section
9.01(d) to an amount less than one-tenth (1/lOth)of such limit
without the application of this Section 9.01(e).
Section 9.01(f) In the event a Participant is covered by one or more
Defined Benefit Plans maintained by the Employer, all such plans
shall be aggregated in determining whether the maximum benefit
limitations hereunder have been met. Further, the maximum Monthly
Retirement Income benefit as noted above may be decreased as
determined necessary by the Employer to ensure that all plans will
remain qualified under the IRC. Any such adjustment by the Employer
shall be communicated in writing to the Committee and the actuary
employed on behalf of the Plan.
52
<PAGE>
Section 9.01(g) If (i) an Employee is a Participant in this Plan as of the
first day of the first Plan Year commencing on or after January 1, 1987,
(ii) the Plan was in existence on May 6, 1986, and (iii) the requirements
of IRC Section 415 have been met for all Plan Years, then to the extent
such Participant's "current accrued benefit" exceeds the limitations
otherwise provided in this Section 9.01, then for purposes of this Section
9.01 and the following Section 9.02, the limitations determined pursuant to
Section 9.01(a)(i) for said Participant shall be equal to his "current
accrued benefit".
For purposes of this Section 9.01(g), "current accrued benefit" means
a Participant's Accrued Benefit as of the last day of the Plan Year prior
to the Plan Year to which this Section 9.01 applies, when expressed as an
annual benefit within the meaning of IRC Section 415(b)(2), and shall
exclude any change in the terms and conditions of the Plan or any cost-of-
living adjustments occurring on and after May 5, 1986.
Section 9.02 Multiple Plan Participation - If an Employee is a
Participant in one or more Defined Benefit Plans and one or more Defined
Contribution Plans maintained by the Employer, the sum of his Defined
Benefit Plan Fraction and his Defined Contribution Plan Fraction shall not
exceed 1.0 during any Limitation Year.
The limitation on aggregate benefits from a Defined Benefit Plan and
a Defined Contribution Plan which is contained in Section 2004 of ERISA
shall be complied with by a reduction (if necessary) in the Participant's
benefits under the Defined Benefit Plan before a reduction of any such
Defined Contribution Plan.
For purposes of maximum Annual Additions to Defined Contribution
Plans and maximum annual benefits payable from Defined Benefit Plans, all
Defined Contribution Plans and all Defined Benefit Plans respectively,
whether or not terminated, shall be combined and treated as one plan.
53
For purposes of this Section 9.02, the term, "Defined Benefit Plan
Fraction" shall mean a fraction the numerator of which is the
Participant's projected annual benefit (as defined in the said defined
benefit plan) determined as of the close of the Limitation Year and the
denominator of which is the lesser of:
Section 9.02(a) the product of 1.25 multiplied by the dollar limitation in
effect in Section 9.01(a)(i) for such Limitation Year; or
Section 9.02(b) the product of 1.4 multiplied by the amount which may be
taken into account in Section 9.01(a)(ii) with respect to each individual
under the Plan for such Limitation Year.
The term "Defined Contribution Plan Fraction" shall mean a fraction
the numerator of which is the sum of all of the Annual Additions to the
Participant's individual account under the plan as of the close of the
Limitation Year and the denominator of which is the sum of the lesser of
the following amounts determined for such Limitation Year and for each
prior Limitation Year of employment with the Employer:
Section 9.02(c) the product of 1.25 multiplied by the dollar limitation in
effect pursuant to IRC Section 415(c)(1)(A) for such year determined
without regard to IRC Section 415(c)(6); or
Section 9.02(d) the product of 1.4 multiplied by an amount determined
pursuant to IRC Section 415(e)(1)(B) with respect to each individual under
the Plan for such Limitation Year.
Section 9 03 Required Distribution of Benefits - Unless the Participant
otherwise elects under the provisions of the Plan, any payment of benefits to
the Participant shall begin not later than sixty (60) days after the close of
the Plan Year in which occurs the latest of:
Section 9.03(a) the date on which the Participant attains his Normal
Retirement Age;
54
Section 9-03(b) the tenth (1Oth) anniversary of the date the Employee
becomes a Participant; and
Section 9.03(c) the date the Participant terminates his service with the
Employer.
Notwithstanding anything contained herein to the contrary, the Plan
shall begin to distribute the entire vested Accrued Benefit of each
Participant not later than a date prescribed in paragraph (d) below with
such payment(s) being made at least as rapidly as that described in
paragraph (e) below.
Section 9.03(d) In all events, benefits shall commence by the April 1
following the calendar year in which a Participant attains age seventy and
one-half (70 1/2). Notwithstanding the foregoing, Participants who have
never been five percent (5%) owners as defined in IRC Section 401(a)(9) and
reached age seventy and one-half (70 1/2) before January 1, 1988 may elect
to defer benefit commencement under the Plan until the April 1 which
follows the calendar year in which such Participants retire from the employ
of the Employer.
Section 9.03(e) The payment of benefits hereunder shall be made in
accordance with IRC Section 401(a)(9) and the regulations issued
thereunder, inclusive of the minimum distribution incidental benefit
requirement of Section 1.401(a)(9)-2 of the Treasury Regulations:
(i) over the life of such Employee or over the lives of such Employee and his
Beneficiary, or
(ii) over a period not extending beyond the life expectancy of such Employee
or the life expectancies of such Employee and his Beneficiary.
Further, except as provided in paragraph (e) following, if an Employee
dies before the distribution of the Employee's interest begins pursuant to
paragraph (d) above, the entire interest of the Employee shall be
distributed within five (S) years after the death of such Employee.
55
Section 9.03(f) The immediately preceding sentence shall not be applicable
provided:
(i) any portion of the Employee's interest is payable to (or for the
benefit of) a designated Beneficiary;
(ii) such portion will be distributed (in accordance with regulations)
over the life of such designated Beneficiary (or over a period not
extending beyond the life expectancy of such Beneficiary);
(iii) such distributions begin not later than one (1) year after the date
of the Employee's death or such later date as the Secretary of the
Treasury may by regulation prescribe; or
(iv) the designated Beneficiary is the Spouse of the Employee and
distributions commence on or before the date on which the Employee
would have attained age seventy and one-half (70 1/2).
If the Spouse dies before the distribution to such Spouse, this
paragraph (f) shall be applied as if the Spouse were the Employee.
Section 9.03(~ If distributions have begun and if the Participant dies
before his entire interest has been paid to him, then the remainder of
the interest will be distributed to his Beneficiary at least as
rapidly as it would have been distributed to the Participant, under
the method of distribution in effect as of the date of the Participant's death.
Section 9.03(h) For purposes of this Section, the life expectancy of
an Employee and the Employee's Spouse (other than in the case of a
life annuity) will not be redetermined unless the Employee or the
Employee's Spouse (as the case may be) elects no later than the date
benefit commencement is required under IRC Section 401(a)(9) to have
his (or her) life expectancy re-determined (but not more frequently
than annually).
56
<PAGE>
Section 9.03(i) Under regulations prescribed by the Secretary of
Treasury for purposes of this Section, any amount paid to a child of
the Participant shall be treated as if it had been paid to the Spouse
if such amount will become payable to the Spouse upon such child
reaching majority (or other designated event permitted by regulation).
57
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
Section 10.01 Amendment of the Plan - The Bank shall have the right at
any time by action of the Board to modify, alter or amend the Plan in whole
or in part; provided, however, that the duties, powers and liability of the
Trustee hereunder shall not be increased without its written consent; and
provided, further, that the amount of benefits which at the
time of any such modification, alteration or amendment shall have accrued for
any Participant, surviving Spouse or Beneficiary hereunder shall not
be adversely affected thereby; and provided, further, that no such amendment
shall have the effect of revesting in the Employer any part of the principal
or income of the Fund except as provided in Section 13.08; and provided,
further, that no such amendment shall have the effect of reducing the
nonforfeitable percentage of benefits accrued to any Participant unless any
such Participant who has completed at least three (3) Years of Service with the
Employer, may elect during the period (which begins no later than the date such
amendment is adopted and ends no earlier than the later of (i) the date which
is sixty (60) days after the date the amendment is adopted, or (ii) the date
which is sixty (60) days after the date the amendment becomes effective, or
(iii) the date which is sixty (60) days after the date the Participant is
issued written notice of the amendment by the Committee) to have the
nonforfeitable percentage of his Accrued Benefit derived from employer
contributions determined without regard to such amendment.
Section 10.02 Termination of the Plan - The Employer expects to continue
the Plan indefinitely, but continuance is not assumed as a contractual
obligation and each Employer reserves the right at any time by action of its
Board of Directors to terminate the Plan as applicable to itself. If the
Employer terminates or partially terminates the Plan, or it is otherwise
terminated or partially terminated, the rights of the Participants affected
thereby to benefits then accrued shall be nonforfeitable and the Trustee
shall continue to administer the Fund as instructed by the Committee in
accordance with the provisions hereof, and the expenses of the Trustee shall
be paid out of the assets then remaining in the Fund. Notwithstanding the
above, no Participant shall have any recourse toward the satisfaction of
his Accrued Benefit from other than assets of the Plan or the Pension Benefit
Guaranty Corporation (PBGC) if there shall be a PBGC liability present.
58
In the event of termination of the Plan as provided in this Article X,
the Committee shall determine the equitable share of the Fund with respect
to any Employer for whom the Plan has terminated. The administration of
that portion of the Fund applicable to any Employer for which the Plan has
not been terminated shall be unaffected and any references hereinafter
contained in this Article X to the Fund shall refer only to that portion
applicable to the Employer for whom the Plan has terminated. Reasonable
expenses incurred by the Committee in the termination of the Plan shall be
payable from the Fund unless paid directly by such Employer.
The Committee shall allocate and administer the Fund to provide
benefits for the Participants on the date of termination and any surviving
Spouses or Beneficiaries then receiving benefits in accordance with Article
IV. Such allocation of the Fund shall be made in the order of precedence
indicated and in the amounts indicated in Section 4044 of ERISA according
to principles set forth in said Section and such other portions of said Act
as it incorporates by reference. For the purpose of making such allocation,
any regulations issued pursuant to that Section shall be deemed part of
such Section.
The allocation of that portion of the Fund computed above shall be
based on the method of payment of Monthly Retirement Income benefits or
Death Benefits as specified in the Plan. In the event that Fund assets on
or after the date of termination are insufficient to fund all benefits
within any class, the benefits of all higher order of precedence shall be
funded, the benefits of all lower order of precedence shall be unfunded,
and the assets remaining shall be allocated among members of that class on
the basis of their respective actuarial reserves, subject to the provisions
of Section 4044 of ERISA.
In the event of failure of an Employer upon termination of its
participation in this Plan to pay or to reimburse the Trustee, the actuary,
accountant or attorney for the outstanding charges or expenses incurred
hereunder, the Trustee is empowered to satisfy such claims by lien upon
that portion of the Fund attributable to that Employer, prior to making any
allocation to Participants, vested terminated Participants, retired
Participants, Totally and Permanently Disabled Participants, surviving
Spouses and Beneficiaries of the Plan in accordance with this Article X.
59
The application of the Fund on the foregoing basis shall be calculated
by the actuary and certified to the Trustee by the Committee as of the date
on which the Plan terminated. Subject to the restrictions of ERISA when the
calculations shall be completed, the interest of each Participant, vested
terminated Participant, Retired Participant, Totally and Permanently Disabled
Participant, surviving Spouse and Beneficiary shall continue to be held
in the Fund pursuant to the terms of this Article X, or, at the direction of
the Committee, the appropriate portion of the Fund shall be liquidated and each
of their interests distributed to them in the form of annuity contracts;
provided, however, that any funds remaining after the satisfaction of all
liabilities to such Participants, vested terminated Participants, Retired
Participants, Totally and Permanently Disabled Participants, surviving
Spouses and Beneficiaries under this Plan due to erroneous actuarial
computation or assumptions shall be returned to the appropriate Employer. In
the event of Plan termination, the benefit of any Highly Compensated Employee
shall be limited to a benefit that is nondiscriminatory under Code Section
401(a)(4).
Section 10.03 Twenty-five (25) Highest Paid Limitation - In the event
that the Plan is terminated or a lump sum distribution is made to a
Participant who is one of the Twenty- five (25) Highest Paid Employees at any
time before the Expiration Date, the following rules under Sections 10.03(a),
(b), (c), (d) and (e) shall apply prior to January 1, 1994:
Section 10.03(a) Upon the occurrence of either of the above conditions, the
Basic Benefit and any Additional Benefit which may be provided from
Contributions by the Employer for any of its Twenty-five (25) Highest Paid
Employees shall not be greater than the amount of
benefits which can be provided by the larger of the following amounts prior to
the satisfaction of all Plan liabilities relating to other Plan
Participants to whom this Section 10.03 does not apply:
(i) Twenty thousand dollars ($20,000).
(ii) An amount equal to twenty percent (20%) of the first fifty thousand
dollars ($50,000) of the Employee's average annual compensation for the
preceding five (5) years multiplied by the number of years since the Revision
Date, as hereinafter defined.
60
(iii) With respect to a Substantial Owner, the dollar amount which
equals the Actuarial Equivalent of the benefit guaranteed for such
affected Participant under Section 4022 of ERISA, or if the Plan has
not terminated, the Actuarial Equivalent of the benefit that would be
guaranteed if the Plan terminated on the date the benefit commences,
determined in accordance with regulations of the Pension Benefit
Guaranty Corporation (PBGC).
With respect to Participants other than Substantial Owners, the
dollar amount which equals the Actuarial Equivalent of the maximum
benefit described in Section 4022(b)(3)(B) of ERISA (determined on
the date the Plan terminates or on the date benefits are distributed,
as if the Plan terminated, whichever is earlier and determined in
accordance with PBGC regulations) without regard to any other
limitation in Section 4022 of ERISA.
Section 10.03(b) The provisions of Section 10.03(a) shall not
restrict the current payment of full retirement benefits called for
by the Plan for any retired Employee while the Plan is in full
effect. In the event that any funds are realized by operation of the
restrictions set forth in Section 10.03(a), they shall be used to
reduce subsequent Contributions by the Employer or if the Employer
has ceased its Contributions, they shall be used for the benefit of
Employees other than those restricted by Section 10.03(a), on a basis
which shall not result in substantial discrimination in favor of the
more highly-compensated Employees, but subject to any reversion of
assets on Plan termination pursuant to Section 10.02.
Section 10.03(c) For purposes of this Section 10.03, the following
definitions shall apply:
(i) Additional Benefits - the benefits provided by the Plan which are
over and above those which would have been provided by the provisions
of the Plan in effect prior to the applicable Revision Date had the
Plan been continued without changes;
(ii) Basic Benefit - the benefit initially provided by the Plan less any
Additional Benefits;
61
(iii) Expiration Date - the tenth (1Oth) anniversary of any Revision
Date;
(iv) Revision Date - the effective date of adoption of the Plan by the
Employer or the effective date of any amendment to the Plan which
increases the benefits;
(v) Substantial Owner - a Participant defined in Section 4022(b)(5) of
ERISA; and
(vi) Twenty-five (25) Highest Paid Employees - the twenty-five (25)
highest paid Employees of the Employer as of the applicable Revision
Date, excluding, however, any Employee whose anticipated annual
benefits are not expected to exceed fifteen hundred dollars ($1,500).
Section 10.03(d) If, during the first ten (10) years after a Revision
Date, any benefit is to be distributed to a Participant to whom this
Section 10.03 is applicable in a lump sum (the amount of which
represents the lump sum Actuarial Equivalent of the Monthly Retirement
Income benefit to which the Participant otherwise would be entitled to
receive as the basic form of benefit), the Participant, prior to the
payment of such lump sum, shall enter into an agreement with the
Employer. This agreement shall be in accordance with requirements
prescribed by the Committee, Revenue Ruling 81-135 and any rulings or
regulations amendatory thereof, including provisions that the
Participant (or in the event of his death, his estate) will repay to
the Fund a sum, as determined by the actuary, equal to the Actuarial
Equivalent of the amounts by which the Participant's Monthly
Retirement Income benefit under the Plan would have been decreased
during his then remaining lifetime in accordance with this Section
10.03, and secure such obligations to repay in the event the
limitations contained in this Section 10.03 become effective. The
agreement shall further require the Participant, promptly after the
distribution to him of the lump sum payment under the Plan, to deposit
as security with a depository, satisfactory to the Employer and the
Committee, property real or personal, having a market value, as
determined by the depository, as of the date of deposit at least equal
to one hundred twenty-five percent (125%) of the amount which would be
repayable if the Plan had terminated on the date of distribution of
such lump sum. In the event that the market value, as determined by
the depository, of such property falls
62
below one hundred ten percent (110%) of the amount as determined by
the actuary, which would have been repayable to the Fund, the
Participant shall deposit with the depository additional properties so
as to render the total market value, as determined by the depository,
of the security deposited equal to one hundred twenty-five percent
(125%) of the amount which would have been repayable as determined by
the actuary. If the conditions of this Section 10.03(d) are met for
the ten (10) year period following such Revision Date, and the Plan is
not terminated, such property deposited as security in the Fund shall
be redelivered to such Participant.
Section 10.03(e) The provisions of this Section 10.03 apply to former
or Retired Participants, as well as to Participants in active service.
Section 10.03(f) This Section 10.03(f) sets forth limitations required
by the Internal Revenue Service, that are effective January 1,1994, on
the benefits payable to certain Participants. These limitations shall
apply to a Participant only if he is a Highly Compensated Employee or
a Highly Compensated former Employee and the Participant is among the
25 highest-paid Highly Compensated Employees or Highly Compensated
former Employees of the Employer and its Affiliates in the Plan Year
(a "Restricted Employee") in which benefit payments begin. If a
Participant is subject to the provisions of this Section 10.03(f), the
annual benefit payments to him or on his behalf are restricted to an
amount equal to the payments that would be made on behalf of the
Participant under a single life annuity that is the Actuarial
Equivalent of the sum of his Accrued Benefit and his other benefits
under the Plan ("Total Benefits"). For purposes of this Section
10.03(f), the term Total Benefits shall include loans in excess of the
amounts set forth in Code Section 72(p)(2)(A), any periodic income,
any withdrawal values payable to a living Employee, and any death
benefits not provided for by insurance on the Employee's life.
The restrictions in this Section 10.03(f) do not apply to the
annual benefit payments to or on behalf of a Restricted Employee,
however, if any one of the following requirements is satisfied:
63
(i) After payment to or on behalf of a Restricted Employee of all of
his benefits
under the Plan, the value of Plan assets equals or exceeds one hundred
ten percent (110%) of the value of current liabilities, as defined in
Code Section 412(1)(7), or
(ii)The Actuarial Equivalent lump sum value of the benefits payable to or on
behalf of a Restricted Employee is less than one percent (1%) of the value of
such current liabilities; or
(iii) The Actuarial Equivalent lump sum value of the benefits payable to
or on behalf of the Restricted Employee does not exceed three thousand
five hundred dollars ($3,500).
Section 10.03(g) In the event that it should be determined by statute,
court decision in which the Internal Revenue Service acquiesces,
ruling by the Internal Revenue Service, or otherwise, that the
provisions of this Section 10.03 are no longer necessary to qualify
the Plan under the IRC, this Section 10.03 shall be ineffective
without amendment to the Plan.
64
ARTICLE XI
PROVISIONS RELATIVE TO EMPLOYERS INCLUDED IN PLAN
Section 11.01 Method of Participation - Any organization which is a
member of the same controlled group of organizations as the Bank, with the
approval of the Board, by taking appropriate action may become a party to
the Plan, by adopting the Plan as a retirement plan for its employees. Any
organization which becomes a party to the Plan shall thereafter promptly
deliver to the Trustee under the Trust Agreement provided for in Article
VII a certified copy of the resolutions or other documents evidencing its
adoption of the Plan and also a written instrument showing the Board's
approval of such organization's becoming a party to the Plan. This Plan
shall be construed as a single Plan for all participating Employers.
Section 11.02 Withdrawal from Participation - Any one or more of the
Employers included in the Plan may withdraw from the Plan at any time by
giving six (6) months advance notice in writing of its or their intention
to withdraw to the Board and the Committee (unless a shorter notice shall
be agreed to by the Board).
Upon receipt of notice of any such withdrawal, the Committee shall
certify to the Trustee the equitable share of such withdrawing Employer in
the Fund (to be determined by the actuary employed on behalf of the Plan by
the Bank), and the Trustee shall thereupon set aside from the Fund then
held by it such securities and other property as it shall, in its sole
discretion, deem to be equal in value to such equitable share. If the Plan
is to be terminated with respect to such Employer, the amount set aside
shall be dealt with in accordance with the provisions of Section 10.02. If
the Plan is not to be terminated with respect to such Employer, the Trustee
shall turn over such amount to the trustee as may be designated by such
withdrawing Employer, and such securities and other property shall
thereafter be held and invested as a separate retirement trust of the
Employer which has so withdrawn, and shall be used and applied according to
the terms of a new agreement and declaration of trust between the Employer
so withdrawing and the trustee so designated.
65
Neither the segregation of the Fund assets upon the withdrawal of an
Employer, nor the execution of a new agreement and declaration of trust
pursuant to any of the provisions of this Section 11.02, shall operate to
permit any part of the corpus or income of the Fund to be used for or
diverted to purposes other than for the exclusive benefit of Participants,
surviving Spouses and Beneficiaries (including the payment of reasonable
expenses of administering the Plan), except as may be otherwise provided in
Section 10.02 and Section 13.08.
66
ARTICLE XII
TOP HEAVY PLAN PROVISIONS
Section 12.01 General - Notwithstanding anything contained herein to
the contrary, in the event that this Plan when combined with all other
plans required to be aggregated pursuant to IRC Section 416(g) is deemed
to be a Top Heavy Plan for any Plan Year, the following conditions shall
become operative.
Section 12.02 Minimum Benefits - For the first Plan Year commencing
on or after January 1, 1984 and any Plan Year thereafter in which the Plan
is a Top Heavy Plan, there shall be a minimum annual accrual of benefits
applicable to all Non-Key Employees who are Participants equal to the
lesser of two percent (2%) of Top Heavy Compensation multiplied by the
Participant's number of years of Top Heavy Service or twenty percent (20%)
of his Top Heavy Compensation. This "Minimum Top Heavy Benefit" is merely
a minimum benefit accrual under the Plan and shall not be in addition to
the benefits otherwise accruing under the Plan which equal or exceed this
"Minimum Top Heavy Benefit".
Section 12.03 Definitions - For purposes of this Article XII, the
following definitions shall be applicable:
Section 12.03(a) Key Employee any employee, former employee or the
beneficiary of a former employee in an Employer sponsored, qualified plan
who at any time during the Plan Year or any of the four (4) preceding Plan
Years is:
(i) an officer of the Employer having an annual compensation greater than
fifty percent (50%) of the amount in effect under IRC Section 415(b)(1)(A)
for any such Plan Year; For purposes of this subsection, no more than
fifty (50) employees [or, if lesser, the greater of three (3) or ten
percent (10%) of employees] shall be treated as officers. Further, for
purposes of determining the number of officers taken into account under
this section, employees described in IRC Section 414(q)(8) shall be
excluded.
67
(ii) one (1) of the ten (10) employees having annual compensation from
the Employer of more than the limitation in effect under IRC Section
415(c)(1)(A) and owning (or considered as owning within the meaning
of IRC Section 318) more than a one-half of one percent (1/2 of 1%)
interest and the largest interest in the Employer. With respect to
this subsection, if two (2) Employees have the same ownership
interest in the Employer, the Employee having the greater annual
compensation from the Employer shall be treated as having a larger
interest.
(iii) a five percent (5%) owner of the Employer; or
(iv) a one percent (1%) owner of the Employer having an annual
compensation from the Employer of more than one hundred fifty
thousand dollars ($150,000).
For purposes of this Section 12.03(a), "compensation" shall
have the same meaning as in Section 12.03(f), without regard to the
limitation under IRC Section
401(a)(17).
This definition shall be interpreted consistent with IRC
Section 416 and rules and regulations issued thereunder. Further,
such law and regulations shall be controlling in all determinations
under this definition, inclusive of any provisions and requirements
stated thereunder but hereinabove absent.
Section 12.03(b) Non-Key Employee means an employee, former employee
or beneficiary of a former employee who is not a Key Employee.
Section 12.03(c) Top Heavy Plan generally means, on or after January
1, 1984, any plan under which, as of any determination date the
Actuarial Value of the cumulative accrued benefits under the plan
for Key Employees exceed sixty percent (60%) of the Actuarial Value
of the cumulative accrued benefits under the plan for all Employees.
For purposes of this definition:
68
(i) If such a plan is a Defined Benefit Plan, the Actuarial Value of
cumulative accrued benefits shall be the Actuarial Value determined
pursuant to this Article XII. If such plan is a Defined Contribution
Plan, the Actuarial Value of cumulative accrued benefits shall be
deemed to be the market value of all Employee accounts under the
plan. Notwithstanding the above, for purposes of determining the
Actuarial Value of the cumulative accrued benefits, distributions
made within a five (5) year period ending on the determination date
must be included.
(ii) A plan shall be considered a Top Heavy Plan for any Plan Year if,
on the last day of the preceding Plan Year, the above rules are met.
For the first Plan Year that the Plan shall be in effect the
determination of whether said Plan is a Top Heavy Plan shall be made
as of the last day of such Plan Year. Any such determination shall be
based on the valuation date falling within that Plan Year. For this
purpose, the valuation date must be the same valuation date used for
computing Plan costs for minimum funding.
(iii) Each plan of the Employer required to be included in an
"aggregation group" shall be treated as a Top Heavy Plan if such
group is a top heavy group.
(iv) The term "aggregation group" means
(A) each plan of the Employer which is currently effective or which has
terminated within the five (5) year period ending on the
determination date in which a Key Employee is a Participant in the
Plan Year containing the year of determination or any of the four (4)
preceding Plan Years;
(B) each other plan of the Employer which enables any plan in (A) to
meet the requirements of IRC Section 401(a)(4) or 410.
69
A permissive aggregation group consists of plans of the Employer
that are required to be aggregated, plus one (1) or more plans of the
Employer that are not part of a required aggregation group but that
satisfy the requirements of IRC Sections 401(a)(4) and 410 when
considered together with the required aggregation group.
(v) If any individual has not performed any service for the Employer at
any time during the five (5) year period ending on the determination
date, any accrued benefit for such individual shall not be taken into
account in the testing procedure herein described.
(vi) This definition shall be interpreted consistent with IRC Section
416 and rules and regulations issued thereunder. Further, such law
and regulations shall be controlling in all determinations under this
definition inclusive of any provisions and requirements stated
thereunder but hereinabove absent.
Section 12.03(d) Top Heavy Compensation means his average annual Full
Compensation during that period of five (5) consecutive Testing Years
for which his aggregate Full Compensation was the greatest. If he
shall have fewer than five (5) consecutive Testing Years, his Top
Heavy Compensation shall mean his average annual Full Compensation
during that period containing the largest number of consecutive
Testing Years; provided that, if there shall be more than one such
period, Top Heavy Compensation shall be calculated on the basis of
such period for which such average is the greatest.
Section 12.03(e) Testing Year means a Plan Year which (i) constitutes
a year of Service for such Participant and (ii) begins prior to the
end of the last Plan Year for which the Plan was a Top Heavy Plan.
Except to the extent excluded under the preceding sentence, Plan Years
beginning before 1984 shall be Testing Years.
70
Section 12.03(f) Full Compensation means, for any Employee for any Plan
Year, his compensation [as such term is defined in section 9.01(a)(ii)]
from the Employer or Affiliate for such Plan Year except that Full
Compensation for any Plan Year shall not exceed the amount as may be
determined by the Secretary of Treasury pursuant to IRC Section 401(a)(17).
Section 12.03(~) Top Heavy Service means a Year of Service in which the
Plan is deemed to be a Top Heavy Plan with the exception that Service
prior to January 1, 1984, shall be excluded.
Section 12.04 Multiple Plan Participation - In the event the Plan is
deemed to be a Top Heavy Plan for the Plan Year, then the multiplier of
1.25 in Section 9.02(a) and Section 9.02(c) shall be reduced to 1.0
unless:
(i) All plans required to be aggregated and any other plans which may be
permissively aggregated pursuant to IRC Section 416(g) are ninety percent
(90%) or less top heavy, and
(ii) The minimum accrued benefit referenced in IRC Section 416(c)(1) is
modified by substituting in Section 12.02 three percent (3%) for two
percent (2%) and by increasing twenty percent (20%) by one (1) percentage
point for each year of Top Heavy Service (but not by more than ten (10)
percentage points).
Section 12.05 No Duplication of Minimum Benefit - With respect to the
operation of these Top Heavy Plan provisions, there shall be no
requirement that the entire defined benefit minimum benefit and the
defined contribution minimum contribution be provided. To the extent that
there shall be a defined benefit accrual of benefit, it shall be
controlling. To the extent that there shall be an Employer contribution to
a Defined Contribution Plan, then there shall be a determination as to
whether the defined contribution amount is comparable to the difference
between the defined benefit minimum benefit and the minimum defined
benefit accrual of benefit required under IRC Section 416. In the event
that the defined contribution amount shall not be comparable, then the
difference shall be provided in the Defined Benefit Plan.
71
Section 12.06 Actuarial Assumptions - For purposes of determining
whether a Defined Benefit Plan is a Top Heavy Plan, calculations shall be
based upon the UP-1984 Table of Mortality at five percent (5%) interest
with such determination being made on the valuation date which occurs
within the immediately preceding Plan Year. In the event more than one (1)
plan is being used for Top Heavy Plan testing, the same actuarial
assumptions shall be used for all such plans. Further, pursuant to
Internal Revenue Service Regulations 1.416-1, T-26 and T-27, proportional
subsidies shall be ignored and non-proportional subsidies shall be
considered.
72
ARTICLE XIII
MISCELLANEOUS
Section 13.01 Governing Law - The Plan shall be construed, regulated
and administered according to the laws of the State of Alabama except to
the extent preempted by the laws of the United States of America.
Section 13.02 Construction - The headings and subheadings in the Plan
have been inserted for convenience of reference only and shall not affect
the construction of the provisions hereof any necessary construction, the
masculine shall include the feminine and the singular the plural, and vice
versa.
Section 13.03 No Employment Contract - This Plan shall not be deemed
to constitute a contract between the Employer and any Participant or to be
a consideration or inducement for the employment of any Participant or
employee. No Participant in the Plan shall acquire any right to be retained
in the Employer's employ by virtue of the Plan, nor, upon his dismissal or
upon his voluntary termination of employment shall he have any right or
interest in and to the Fund other than as specifically provided herein.
Except to the extent required by law, the Employer shall not be liable for
the payment of any benefit provided for herein; all benefits hereunder
shall be payable only from the Fund, and only to the extent that the Fund
is sufficient therefor.
Section 13.04 Receipt Prior to Payment - The Trustee, the Committee,
or the Employer, jointly or severally, may, but need not, require a written
receipt as a condition precedent to any payment called for by the Plan to
be made to a Participant, Spouse, Beneficiary, or to their heirs, successors,
executors and legal representatives.
73
Section 13.05 Payments to Minors and Incompetents - Should any
Participant, surviving Spouse or Beneficiary be a minor or in the judgment
of the Committee, be physically or mentally incapable of personally
receiving and giving a valid receipt for any payment due him under the
Plan, the Committee may make such payment or any part thereof to or for the
benefit of such Participant, surviving Spouse or Beneficiary, or directly
to or for the benefit of any person determined by the Committee to have
incurred expense or assumed responsibility for the expenses of such
Participant, Spouse or Beneficiary.
Section 13.06 Non-Alienability of Benefits - No benefits or other
amounts payable under the Plan shall be subject in any manner to
anticipation, sale, transfer, assignment, pledge, encumbrance, charge or
alienation. If the Committee determines that any person entitled to any
payments under the Plan has become insolvent or bankrupt or has attempted
to anticipate, sell, transfer, assign, pledge, encumber, charge or
otherwise in any manner alienate any benefit or other amount payable to him
under the Plan or that there is any danger of any levy or attachment or
other court process or encumbrance on the part of any creditor of such
person entitled to payments under the Plan, against any benefit or other
amounts payable to such person, the Committee may, at any time, in its
discretion, direct the Trustee to withhold any or all payments to such
person under the Plan and apply the same for the benefit of such person in
such manner and in such proportion as the Committee may deem proper.
Notwithstanding anything contained herein to the contrary, with respect to
a debt due by the Participant to the Employer, a Participant, surviving
Spouse or Beneficiary in pay status may assign or alienate rights to future
benefit payments provided that any such assignment or alienation:
Section 13.06(a) is voluntary and revocable,
Section 13.06(b) does not exceed ten percent (10%) of any benefit payment,
and
Section 13.06(c) is neither for the purpose, nor has the effect, of
defraying plan administrative costs.
74
Notwithstanding anything contained herein to the contrary, upon the
receipt by the Plan of a Domestic Relations Order, the following
provisions of this Section 13.06 shall become effective.
Section 13.06(d) Determination of Qualified Domestic Relations Order -
Upon receipt by the Plan of a Domestic Relations Order, the Committee
shall promptly notify the Participant and any Alternate Payee of such
receipt and the Plan's procedures for determining if such order is a
Qualified Domestic Relations Order. Within a reasonable time thereafter
in accordance with reasonable procedures established by the Committee,
the Committee shall determine whether such order is a Qualified Domestic
Relations Order and notify the Participant and Alternate Payee of such
determination. Not withstanding anything contained herein to the
contrary, if a benefit is being paid pursuant to a Domestic Relations
Order on January 1, 1985, such order shall be considered to be a
Qualified Domestic Relations Order. During the period of time in which
the Committee is making the determination of whether the Domestic
Relations Order is a Qualified Domestic Relations Order, the Trustee
shall segregate in a separate account in the Plan or in an escrow account
the amounts which would have been payable to the Alternate Payee during
such period if the order had been determined to be a Qualified Domestic
Relations Order.
In the case of any payment before a Participant has terminated
employment with the Employer, a Domestic Relations Order shall be a
Qualified Domestic Relations Order regardless of the fact that such order
requires that payment of benefits be made to an Alternate Payee:
(i) on or after the date on which the Participant attains or first would
have attained his Early Retirement Date,
75
(ii) as if the Participant had retired on the date on which such payment
is to begin under such order taking into account only the Actuarial
Value of the benefits actually accrued and not taking into account
the Actuarial Value of any Employer subsidy for early retirement
based on the interest rate specified in the Plan or, if no rate is
specified, five percent (5%), and
(iii) in any form in which such benefits may be paid under the Plan to
the Participant (other than in the form of a joint and survivor
annuity with respect to the Alternate Payee and his or her subsequent
spouse).
Section 13.06(e) Payment to Alternate Payee - If, within eighteen
(18) months, the Domestic Relations Order is determined to be a
Qualified Domestic Relations Order, the Trustee shall pay the
segregated amounts to the person or persons entitled thereto.
If, within eighteen (18) months, it is determined that the order
is not a Qualified Domestic Relations Order, or the issue as to
whether such order is a Qualified Domestic Relations Order is not
resolved, then the Trustee shall pay the segregated amounts to the
person who would have been entitled to such amounts as if there had
been no order.
Any determination that an order is a Qualified Domestic
Relations Order which is made after the close of the eighteen (18)
month period shall be applied prospectively only.
Section 13.06(f) Definitions - For purposes of this Section 13.06,
the following definitions shall be applicable:
(i) Alternate Payee means any spouse, child or other dependent of a
Participant who is recognized by a Domestic Relations Order as having
a right to receive all, or a portion of, the benefits payable under a
Plan with respect to such Participant.
76
<PAGE>
(ii) Domestic Relations Order - Any judgment, decree or order
(including approval of a property settlement agreement) which:
(A) relates to the provision of child support, alimony payments, or
marital property rights to a spouse, child or other dependent of a
Participant, and
(B) is made pursuant to a state domestic relations law (including a
community property law).
(iii) Qualified Domestic Relations Order - A Domestic Relations Order
which creates or recognizes the existence of an Alternate Payee's
right to, or assigns to an Alternate Payee the right to, receive all
or a portion of the benefits payable with respect to a Participant
under the Plan; provided that such Domestic Relations Order clearly
specifies:
(A) the name and last known mailing address (if any) of the
Participant and the name and mailing address of each Alternate Payee
covered by the order,
(B) the amount or percentage of the Participant's benefit to be paid by the
Plan to each Alternate Payee, or the manner in which such amount or
percentage is to be determined,
(C) the number of payments or period to which such order applies,
and
(D) each plan to which such order applies.
A Domestic Relations Order meets the requirements of this
subsection only if such order does not require the Plan:
(i) to provide any type or form of benefits, or any optional payment
form, not otherwise provided under the Plan,
77
(ii) to provide increased benefits (determined on the basis of Actuarial
Equivalent value), and
(iii) to make payment of benefits to an Alternate Payee which are required
to be paid to another Alternate Payee under another order previously
determined to be a Qualified Domestic Relations Order.
Section 13.06(g) Establishment of Plan Procedures - For purposes of this
Section 13.06, reasonable procedures shall be established under the Plan
to determine the qualified status of Domestic Relations Orders and to
administer distributions under Qualified Domestic Relations Orders. The
procedures established by the Plan shall:
(i) be set forth in writing,
(ii) provide for the notification of each person specified in a Domestic
Relations Order as entitled to payment of benefits under the Plan (at the
address included in the Domestic Relations Order) of such procedures
promptly upon receipt by the Plan of the Domestic Relations Order, and
(iii) permit an Alternate Payee to designate a representative for receipt of
copies of notices that are sent to the Alternate Payee with respect to a
Domestic Relations Order.
Section 13.07 Merger of Plans - In the event of the merger or
consolidation of the Plan with another plan or transfer of assets or
liabilities from the Plan to another plan, each then Participant shall
not, as a result of such event, be entitled on the day following such
merger, consolidation or transfer under the termination of Plan
provisions to a lesser benefit than the benefit he was entitled to on the
date prior to the merger, consolidation or transfer if the Plan had then
terminated.
78
In the event of a merger or consolidation of the Employer or transfer
of all or substantially all of its assets to any other corporation,
partnership or association, provision may be made by such successor
corporation, partnership or association at its election for the continuance
of this agreement and the retirement plan created hereunder by such
successors entity. Such successor shall, upon its election to continue this
Plan, be substituted in place of the Employer by an instrument duly
authorizing such substitution and duly executed by the Employer and its
successor. Upon notice of such substitution accompanied by a certified copy
of the resolutions of the Board of Directors of the Employer and its
successor authorizing such substitution and delivered to the Trustee, the
Trustee and all Participants hereunder shall be authorized to recognize
such successor in the place of the Employer.
Section 13.08 Return of Employer Contributions - Contributions made
to this Plan by the Employer are expressly conditioned upon the
deductibility under IRC Section 404 of Contributions made to provide Plan
benefits. Notwithstanding anything herein to the contrary, upon the
Employer's request, a Contribution which was made by a mistake of fact, or
conditioned upon the deductibility of the Contribution under IRC Section
404, shall be returned to the Employer by the Trustee within one (1) year
after the payment of the Contribution or the disallowance of the deduction
(to the extent disallowed), whichever is applicable. The portion of any
Contribution which is to be returned to the Employer pursuant to this
Section 13.08 must be reduced by its proportionate share of losses and
expenses of the Fund, if any, but shall not be increased by any
income or
gains of the Fund, if any.
Section 13.09 Exclusive Benefit - The Employer shall be entitled to
no part of the corpus or income of the Fund and no part thereof shall be
used for or diverted to purposes other than for the exclusive benefit of
Participants, Spouses, Surviving Spouses and Beneficiaries hereunder except
as provided in Section 10.02 and in Section 13.08.
Section 13.10 Indemnification - The Employer shall indemnify and hold
harmless each person or persons who may serve on the Committee from any and
all claims, losses, damages, expenses (including attorney's fees), and
liability (including any amounts paid in settlement) arising from any act
or omission of such person or persons, except when the same is judicially
determined to be due to the gross negligence or willful misconduct of such
person or persons.
79
No Plan assets may be used for any such indemnification.
Section 13.11 Severability - If any provision of the Plan is held
invalid or unenforceable, its invalidity or unenforceability shall not
affect any other provisions of the Plan, and the Plan shall be construed
and enforced as if such provision had not been included herein.
Section 13.12 Misstatement - A misstatement of age, sex, length of
Service, date of employment or birth, or compensation of a Participant, or
any other such matter, shall be corrected when it becomes known that any
such misstatement of fact has occurred.
Section 13.13 Benefits Under Other Plans - If any Participant is, or
becomes, or upon proper application would become entitled to a pension or
other benefits under any other "qualified" defined benefit pension plan or
which the Employer has borne, or is required to bear, any part of the cost,
the Monthly Retirement Income payable to such Participant under the
provisions of this Plan shall be reduced to reflect the value of such other
defined benefit pension plan to the extent that credit is granted under
both Plans for the same period of Service. The term "other defined benefit
pension plan" shall not include any plan or program under which benefits
are provided wholly or in part by public funds, state or federal.
Section 13.14 Small Payments - If the Monthly Retirement Income
benefit payable to a Participant at retirement is less than twenty-five
dollars ($25.00) per month, such benefit payments shall be made on a
quarterly basis.
Section 13.15 Counterparts - The Plan and the Trust Agreement may be
executed in any number of counterparts, each of which shall constitute but
one and the same instrument and may be sufficiently evidenced by any one
counterpart.
80
ADOPTION OF THE PLAN
Anything herein to the contrary notwithstanding, this Plan is
amended and maintained under the condition that it shall continue to
be approved and qualified by the Internal Revenue Service under IRC
Section 401(a) and that the Trust hereunder is exempt under IRC
Section 501(a), or under any comparable Sections of any future
legislation which amends, supplements or supersedes such Sections. In
the event that it should be found by the Internal Revenue Service that
the Plan as amended and restated hereby is not qualified, the Bank may
modify the Plan to meet Internal Revenue Service requirements.
As evidence of its adoption of the Plan, The Monroe County Bank
has caused this instrument to be signed by its duly authorized officers and
its corporate seal to be affixed hereto this 12th day of
December, 1995.
ATTEST: THE MONROE COUNTY BANK
By /s/ Paul P. Redmond Jr. By:/s/Haniel F. Croft
Vice Provident & Cashier (Title) President & CEO)
81
APPENDIX
TO THE MONROE COUNTY BANK PENSION PLAN
FACTORS TO CALCULATE OPTIONAL BENEFITS
Factor to be Applied to the Basic Form of
Benefit to Determine the Optional Form of Benefit
Base Additional
Option Adjustment Factor Adjustment Factor
Single life annuity 1.000 N/A
Single life annuity
with sixty (60)
monthly payments
guaranteed 0.975 N/A
Single life annuity
with one hundred
twenty (120) monthly
payments guaranteed 0.917 N/A
Single life annuity
with one hundred
eighty (180) monthly
payments guaranteed 0.852 N/A
Single life annuity
with two hundred
forty (240) monthly
payments guaranteed 0.794 N/A
Joint and fifty percent
(50%) survivor annuity 0.905 .0041 adjustment for each year
age difference between
Beneficiary or Spouse and
Employee exceeds five (5);
adjustment is added to base
factor if the Beneficiary or
Spouse is older than the
Employee (but with a final fixed
reduction factor in no event to
exceed 1.000), and is subtracted
from base adjustment factor if
Beneficiary or Spouse is
younger than Employee.
82
Base Additional
Option Adjustment Factor Adjustment Factor
Joint and seventy
five percent (75%)
survivor annuity 0.867 .0054 adjustment for each year age
difference between Beneficiary or
Spouse and Employee exceeds five
(5); adjustment is added to base
factor if the Beneficiary or Spouse
is older than the Employee (but
with a final fixed reduction factor in
no event to exceed 1.000), and is
subtracted from base adjustment
factor if Beneficiary or Spouse is
younger than Employee.
Joint and one hundred
percent (100%) survivor
annuity 0.828 .0067 adjustment for each year age
difference between Beneficiary or
Spouse and Employee exceeds five
(5); adjustment is added to base
factor if the Beneficiary or Spouse
is older than the Employee (but
with a final fixed reduction factor in
no event to exceed 1.000), and is
subtracted from base adjustment
factor if Beneficiary or Spouse is
younger than Employee.
For all other purposes not covered above or in the Plan, Actuarial Equivalent
and Actuarial Value shall be based upon the following assumptions:
Interest: Eight percent (8%)*
Mortality: The Up-1984 Table of Mortality set back one (1) year
This Appendix is effective for benefits calculated on or after August 1, 1983.
*For purposes of calculating the Actuarial Equivalent or Actuarial
Value of a benefit payable under Sections 4.03(d), 4.04, 5.02, 6.01 and
6.02, the Plan may not use an interest rate greater than the interest
rate or rates used by the Pension Benefit Guaranty Corporation to value
lump sums for plans terminating as of the first day of the Plan Year that
contains the Annuity Starting Date.
83
Exhibit (13).1
Index
2 Consolidated Financial Highlights
3 Letter to Shareholders'
4 Directors and Officers
Financial Highlights
8 Management's Discussion and
Analysis of Financial Condition
and Results of Operations
23 Selected Quarterly Financial Data
24 Selected Financial Data
26 Management's Report on
Financial Statements and
Independent Auditors' Report
Financial Statements
27 Consolidated Statements of
Condition
28 Consolidated Statements of
Income
29 Consolidated Statements of
Changes in Shareholders' Equity
30 Consolidated Statements of Cash Flows
31 Notes to Consolidated Financial Statements
South Alabama Bancorporation, Inc. operates as a bank holding company
headquartered in Mobile, Alabama. Its subsidiaries are The Bank of Mobile,
First National Bank, Brewton and Monroe County Bank.
The annual meeting of shareholders will be held May 8, 1997, at 10:00 a.m.
C.D.T., at The Bank of Mobile, 100 St. Joseph Street, Mobile, Alabama 36602.
The Annual Report to the Securities and Exchange Commission (Form 10-K) is
available upon request to: South Alabama Bancorporation, 100 St. Joseph
Street, Mobile, Alabama 36602, (334) 431-7800.
South Alabama's common stock is traded on NASDAQ under the symbol SABC. NASDAQ
Market Makers are: The Robinson-Humphrey Co. Inc. and Sterne Agee & Leach, Inc.
Transfer Agent: Trust Department, The Bank of Mobile, Post Office Box 3067,
Mobile, Alabama 36652, (334) 431-7835.
This Annual Report reflects the consolidated financial position and results of
operations of the company, with all significant intercompany transactions
eliminated.
GRAPH SHOWING EARNINGS PER SHARE AND DIVIDENDS PER SHARE BY YEAR
EPS DIVIDENDS
1992 .67 .14
1993 .79 .22
1994 .93 .26
1995 1.00 .32
1996 1.05 .40
<TABLE>
Consolidated Financial Highlights
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996 1995 Change
Net income $3,354 $3,007 +11.5%
Per common share 1.05 1.00 + 5.0%
Cash dividends per share .40 .32 +25.0%
AT DECEMBER 31, 1996 1995 Change
Total assets $350,077 $244,949 +42.9%
Total deposits 295,287 210,092 +40.6%
Total loans 189,160 144,147 +31.2%
Total investment securities 117,773 62,193 +89.4%
Shareholders' equity 47,088 28,797 +63.5%
Per common share 11.14 9.59 +16.2%
Common shares outstanding (000's) 4,227 3,002
</TABLE>
Dear Shareholder:
We are pleased to report another exciting and successful year of operation
for South Alabama Bancorporation. We welcome the prestigious Monroe County
Bank to our South Alabama family. This fine banking institution of long
standing tradition further enhances the quality of our company.
South Alabama's earnings for 1996 were $3,354,000, 11.5 percent greater than
1995. Earnings per share were $1.05 compared to $1.00 in 1995.
As a result of the company's successful performance in 1995, we increased the
quarterly dividend in early 1996 by 25 percent, from $.08 to $.10 per share.
Total assets at year-end 1996 were $350.1 million compared to $244.9 million
on December 31, 1995. The Monroe County acquisition accounted for $97.8
million of this growth. Loans increased by approximately $45.0 million, a
result of $21.0 million of internal growth and $24.0 million of Monroe County
Bank loans. Deposits grew to $295.3 million in 1996 of which Monroe County
added $80.3 million. Shareholders' equity at December 31, 1996 was $47.1
million. Tangible equity (shareholders' equity less goodwill) was 12.3 percent
of total assets. The Monroe County transaction was accounted for as a purchase
and resulted in the addition of $4.2 million of goodwill to total
shareholders' equity.
We continue to stress asset quality. Our ratio of non-performing assets to
loans and other real estate rose slightly during 1996 from 0.60 percent to
0.69 percent. The loan loss reserve as a percent of loans was 1.37 at the end
of 1996 compared to 1.54 at the end of 1995. Net charge-offs for 1996 were
approximately $420,000, or 0.27 percent of average loans.
Our strong capital provides South Alabama Bancorporation an opportunity for
additional growth in the southern portion of Alabama. As we have previously
mentioned to you, we will begin operations in Baldwin County later this year.
We are appreciative of your investment in our company and anticipate an
exciting 1997.
Sincerely,
/s/ J. Stephen Nelson /s/W. Bibb Lamar, Jr
J. Stephen Nelson W. Bibb Lamar, Jr.
Chairman of the Board President and Chief Executive Officer
South Alabama Bancorporation
Directors John B. Barnett, Jr.
Vice Chairman, Monroe County Bank
John B. Barnett, III
Executive Vice President,
South Alabama Bancorporation, Inc., Chairman, Monroe County Bank
and Partner, Barnett, Bugg & Lee, Attorneys
Stephen G. Crawford
Member, Hand Arendall, L.L.C., Attorneys
Haniel F. Croft
President and CEO, Monroe County Bank
David C. De Laney
President, First Small Business Investment Company of Alabama
Lowell J. Friedman
President, Creola Investment Corporation
Broox G. Garrett, Jr.
Partner, Thompson, Garrett & Hines, Attorneys
W. Dwight Harrigan
President, Scotch Lumber Company
James P. Hayes, Jr.
President, J.P. Hayes & Co., Inc.
Clifton C. Inge
Chairman, Willis Corroon Corporation of Mobile
W. Bibb Lamar, Jr.
President and CEO, South Alabama Bancorporation, Inc. and
President and CEO, The Bank of Mobile
Thomas E. McMillan, Jr.
President of General Partner, Smackco, Ltd.
J. Richard Miller, III
Managing Partner, Miller Investments
J. Stephen Nelson
Chairman, South Alabama Bancorporation, Inc. and Chairman and CEO,
First National Bank, Brewton
Earl H. Weaver
Earl H. Weaver Management Services
Officers J. Stephen Nelson
Chairman of the Board
W. Bibb Lamar, Jr.
President and Chief Executive Officer
John B. Barnett, III
Executive Vice President
W. Gaillard Bixler
Executive Vice President and Chief Operating Officer
F. Michael Johnson
Chief Financial Officer and Secretary
Mark E. McVay
Auditor
The Bank Of Mobile
Directors Stephen G. Crawford
David C. De Laney
Ann W. Delchamps
Lowell J. Friedman
W. Dwight Harrigan
James M. Harrison, Jr.
Walter L. Hovell
Clifton C. Inge
Kenneth S. Johnson
W. Bibb Lamar, Jr.
Thomas W. Leavell
John H. Lewis, Jr.
J. Richard Miller, III
Harris V. Morrissette
Paul D. Owens, Jr.
Charles L. Rutherford, Jr.
Directors Emeritus T. Massey Bedsole
J. Robert Boykin, Sr.
William J. Hearin, Jr.
Joseph N. Langan
Dwain G. Luce
John R. Miller, Jr.
James L. Murray
Robert H. Radcliff, Jr.
B.R. Wilson, Jr.
Officers W. Bibb Lamar, Jr.
President and Chief Executive Officer
Percy C. Fountain, Jr.
Executive Vice President
H. Harrell Galloway
Executive Vice President and Trust Officer
F. Michael Johnson
Executive Vice President
Bruce C. Finley, Jr.
Senior Vice President and Senior Loan Officer
Kay I. McKee
Senior Vice President and Trust Officer
Ray H. Miller, III
Senior Vice President
Melvin R. Coxwell
Baldwin Count y Executive
James G. Beck
Vice President and Trust Officer
L. Russell Brandau, Jr.
Vice President
Harry D. Henson
Vice President
Joy W. Lyons
Vice President and Credit Administration Officer
Robert S. Murray, Jr.
Vice President
Karen P. Sullivan
Vice President and Branch Manager
Pamela S. Watson
Vice President
Paul J. England
Assistant Vice President and Branch Manager
Lisa H. Owen
Assistant Vice President
Maria K. Papastefan
Assistant Vice President and Branch Manager
Carolyn T. Peterson
Assistant Vice President
Cathy S. Rayford
Assistant Vice President and Branch Manager
Alexia G. Beegle
Real Estate Officer
Donna L. Gatlin
Operations Officer
Helen W. Inge
Assistant Cashier
Deirdre M. Pearman
Branch Officer
Grace D. Phelps
Assistant Trust Officer
Marianne S. Taul
Auditor
Mark E. Thompson
Accounting Officer
Sandra J. Wilson
Branch Officer
First National Bank, Brewton
Directors W. Gaillard Bixler
Dan Britton
John David Finlay, Jr.
Broox G. Garrett, Jr.
Billy Joe Griffin
James P. Hayes, Jr.
Jack W. Hines, Jr.
Thomas E. McMillan, Jr.
J. Richard Miller, III
J. Stephen Nelson
Earl H. Weaver
Directors Emeritus Bryars Byrd
John R. Miller, Jr.
Lee M. Otts
Clarence L. Turnipseed
Officers J. Stephen Nelson
Chairman and Chief Executive Officer
W. Gaillard Bixler
President and Chief Operating Officer
Dan Britton
Executive Vice President, Trust
Raymond F. Lynn, Jr.
Senior Vice President and Trust Officer
James L. Stark
Senior Vice President
Mary M. Thompson
Senior Vice President and Secretary to the Board
Elaine Catoe
Vice President and Trust Officer
R. Jerry Jackson
Vice President
Cindy W. Madden
Vice President
Daniel C. Thomas
Vice President
Hilda Baggett
Assistant Vice President
Joyce Baker
Trust Officer
Doris B. Morris
Assistant Vice President
Janis B. Norman
Assistant Vice President
James William Luker, Jr.
Auditor
D. Wade Anthony
Loan Officer
Charlene B. Godwin
Compliance Officer
Carrie L. King
Operations Officer
Alexis A. Maloy
Trust Officer
Sandra B. Neeley
Branch Manager
Debbie C. Hardee
Branch Manager
Deborah W. Roberson
Accounting Officer
Ann H. Coale
Credit Administration Officer
Susan P. Reeves
Administrative Officer
Monroe County Bank
Directors John B. Barnett, Jr.
John B. Barnett, III
Haniel F. Croft
Sloan R. Fountain, Jr.
Karl M. Lazenby
Alice F. Lee
Edwin C. Lee, Jr.
John T. Lee, III
Lloyd T. McCall, Jr.
J. C. Niehuss
R. A. Smith, Jr.
Joe R. Whatley
Officers John B. Barnett, III
Chairman
John B. Barnett, Jr.
Vice Chairman
Haniel F. Croft
President and Chief Executive Officer
Paul P. Redmond, Jr.
Senior-Vice President and Cashier
Samuel C. Jackson
Vice President
Elaine P. Brooks
Vice President
Dereck P. Dillow
Vice President
Harold W. Grimes, III
Senior-Vice President
Marzola T. McNiel
Vice President
Susan D. O'Brien
Administrative Officer
At first glance a surveyor's tripod might seem an odd choice for our annual
report cover. Actually, it's an appropriate symbol for South Alabama
Bancorporation. With its three legs, the tripod is among the most stable of
structures. Similarly, with the recent a cquisition of Monroe County Bank,
South Alabama Bancorporation now has three supportive pillars to better serve
Southern Alabama.
Our new addition represents a major milestone. It confirms the soundness of a
growth philosophy that places utmost importance on quality bankin services
for our customers. The Monroe County Bank has served the citizens of
Monroeville and its environs for many years and will continue to provide
Monroe County with quality banking for many more years under the South
Alabama umbrella.
With the addition of our new banking partner, South Alabama Bancorporation
continues to maintain its balance of profitability, growth and exceptional
service. This is why stability, quality and strength will continue to guide
our business plans.
PICTURED
W. Bibb Lamar, Jr.,
President and CEO, South Alabama Bancorporation, Inc. and
President and CEO, The Bank of Mobile
J. Stephen Nelson,
Chairman, South Alabama Bancorporation, Inc. and
Chairman and CEO, First National Bank, Brewton
John B. Barnett, III,
Executive Vice President, South Alabama Bancorporation, Inc. and
Chairman, Monroe County Bank
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis focuses on information about South
Alabama Bancorporation, Inc. (the "Company" or "South Alabama") and its
subsidiaries, The Bank of Mobile (the "Mobile Bank"), First National Bank,
Brewton (the "Brewton Bank") and The Monroe County Bank of Monroeville
(the "Monroeville Bank"), that is not otherwise apparent from the consolidated
financial statements and related footnotes appearing later in this annual
report. Reference should be made to those statements and the financial data
presented elsewhere in this report for a complete understanding of the
following discussion and analysis.
On September 30, 1993, South Alabama Bancorporation, Inc., a Brewton, Alabama,
bank holding company, was merged into Mobile Nat ional Corporation, with the
resulting company changing its name to South Alabama Bancorporation, Inc.
The merger between South Alabama Bancorporation, Inc., and Mobile National
Corporation has been accounted for as a pooling-of-interests; accordingly, the
pre-merger accounts of the former South Alabama Bancorporation, Inc., have been
combined with those of Mobile National Corporation for the years 1992 and 1993.
On October 31, 1996, First Monco Bancshares, Inc., a Monroeville, Alabama,
bank holding company, was merged into South Alabama. The merger between First
Monco Bancshares, Inc. and South Alabama has been accounted for as a purchase
(the "Monroeville purchase").
Summary
The Company recorded net income of $3.4 million in 1996, an increase of 11.5
percent from $3.0 million in 1995. Of the increase, $.2 million resulted from
the Monroeville purchase and the remainder resulted primarily from higher net
interest revenue. Non-interest expense increased 8.4 percent while
non-interest revenue increased 15.4 percent. Both of these increases were
caused primarily by the Monroeville purchase.
Financial Condition
Average Assets and Liabilities
Average assets in 1996 were $260.6 million, compared to $228.4 million in
1995, an increase of 14.1 percent, with approximately half of the growth being
attributable to the Monroeville purchase. Average loan volume increased 11.8
percent for 1996 compared to 1995, following a 13.7 percent increase for 1995
compared to 1994. The loan growth in 1996 was funded primarily by an increase
in deposits.
Average total deposits in 1996 were 14.0 percent higher than in 1995. Average
interest bearing demand deposits increased 14.4 percent. Average non-interest
bearing deposits increased 13.5 percent. Similar increases occurred in average
time deposits and in average savings deposits. Approximately half of these
increases resulted from the Monroeville purchase.
Short-term borrowings consist of federal funds purchased, overnight repurchase
agreements and deposits into the treasury tax and loan account. Management has
sought to reduce the volume of these funds relative to total assets. In 1996
average short-term borrowings were reduced to 1.6 percent of total average
assets compared to 2.0 percent in 1995.
The Company's average equity as a percent of average total assets in 1996 was
12.4 percent, compared to 11.9 percent in 1995. Included in average equity in
1996 is approximately $.7 million recorded as goodwill related to the
Monroeville purchase.
<TABLE>
Distribution of Average Assets, Liabilities and Shareholders' Equity
<CAPTION>
(In Millions) 1996 1995 1994 1993 1992
Average Assets
<S> <C> <C> <C> <C> <C>
Cash and non-interest
bearing deposits $ 12.0 $ 11.4 $ 11.6 $ 11.5 $ 11.2
Interest bearing deposits .3 .7 1.0 1.1 1.2
Federal funds sold 8.2 8.6 6.6 8.5 10.9
Investment securities 75.1 62.2 68.9 72.4 70.6
Loans, net 154.5 138.2 121.6 106.5 94.2
Premises and equipment, net 5.7 3.7 3.5 3.6 3.4
Other real estate owned, net .1 .3 .4 .6 1.6
Deferred tax asset .8 .7 .7 .9
Intangible assets .7
Other assets 3.2 2.6 2.5 2.3 2.6
Average Total Assets $260.6 $228.4 $216.8 $207.4 $195.7
Average Liabilities and Shareholders' Equity
Non-interest bearing
demand deposits $ 39.6 $ 34.9 $ 31.6 $ 29.2 $ 27.4
Interest bearing
demand deposits 78.7 68.8 79.6 79.5 63.7
Savings deposits 15.6 13.6 13.9 12.3 11.3
Time deposits 87.3 76.7 59.5 58.0 65.3
Total deposits 221.2 194.0 184.6 179.0 167.7
Short-term borrowings 4.2 4.6 4.7 3.6 6.5
Other liabilities 2.8 2.6 1.9 1.7 1.2
Shareholders' Equity 32.4 27.2 25.6 23.1 20.3
Average Total Liabilities
and Shareholders' Equity $260.6 $228.4 $216.8 $207.4 $195.7
</TABLE>
Loans
The largest and highest yielding category of interest earning assets at South
Alabama is the loan portfolio. Since 1992, one of Management's primary
objectives has been to increase loans. As a result, average net loans have
increased by 64.0 percent since 1992 and totaled $186.4 million at year-end
1996. Growth has occurred in all categories of loans. The distribution of the
various loan categories compared to total loans at year-end 1996 remained
relatively unchanged from year-end 1995. Approximately 14.0 percent of the
31.0 percent total loan growth from year-end 1995 to year-end 1996 resulted
from the Monroeville purchase and 17.0 percent resulted from internal loan
growth.
It is Management's goal to continue to make loans with relatively short
maturities or, in the case of loans with longer maturities, with floating
rate arrangements when possible. Of the outstanding loans in the categories
of commercial, financial and agricultural, real estate-construction and real
estate-mortgage at December 31, 1996, $90.1 million or 55.8 percent mature
within one year and are therefore available for interest rate changes, if
needed, to adjust for asset/liability management purposes. Of the remaining
loans in these categories maturing after one year, 28.0 percent are on a
floating rate basis. Of the total loan portfolio outstanding at December
31, 1996, 66.2 percent is available for repricing, either because the loans
mature within one year or are based on a variable rate arrangement.
PIE CHART
Distribution of Loans by Category
Commercial, financial and agricultural 32.9%
Real estate mortgage 46.6%
Real estate construction 5.9%
Installment 14.6%
The Company makes available to its customers fixed rate, longer term loans,
especially in the residential real estate-mortgage area. South Alabama is
able to offer through third party arrangements certain loan products which do
not require that the longer term loans be carried on the books of the Company
but which allow the Company to gain the benefit of a larger variety of product
offerings and generate fee income.
The table below shows the classifications of loans by major category at
December 31, 1996, and at each of the previous four year-ends. The second
table depicts maturities of selected loan categories and the interest rate
structure for such loans maturing after one year.
<TABLE>
Distribution of Loans by Category
(In Millions) December 31,
----------------------------------------
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Commercial, financial,
and agricultural $ 62.2 $ 47.2 $ 53.3 $ 44.3 $ 43.5
Real estate - construction 11.2 8.6 6.7 6.0 3.2
Real estate - mortgage 88.1 65.9 53.1 50.0 42.5
Installment 27.7 22.4 20.7 18.2 11.9
Bankers acceptances 3.0
Total loans $189.2 $144.1 $133.8 $118.5 $104.1
</TABLE>
<TABLE>
Selected Loans by Type and Maturity
(In Millions) December 31, 1996
<CAPTION>
Maturing
Within After One But After
One Year Within Five Years Five Years Total
<S> <C> <C> <C> <C>
Commercial, financial, and
agricultural $41.5 $16.3 $ 4.4 $ 62.2
Real estate - construction 11.0 .1 .1 11.2
Real estate - mortgage 37.6 44.2 6.3 88.1
$90.1 $60.6 $10.8 $161.5
Loans maturing after one year with:
Fixed interest rates $44.2 $ 7.2
Floating interest rates 16.4 3.6
$60.6 $10.8
</TABLE>
The Company's rollover policy consists of an evaluation of maturing loans to
determine whether such loans will be renewed (or rolled over) and, if so, at
what amount, rate and maturity.
Investment Securities
Loan demand has been strong for several years and as a result the amount of
funds allocated to the investment portfolio declined until 1996. The loan to
deposit ratio of the Monroeville Bank at the time of the Monroeville purchase
was 28.1 percent, compared to 76.9 percent at the Company. The Monroeville
purchase significantly increased the size of the investment portfolio from 62.2
million at December 31, 1995 to 117.8 million at December 31, 1996. This
increase in funds will allow the Company to continue the loan growth
experienced in prior years.
The Company adopted SFAS No. 115, Accounting for Certain Investments in Debt
and Equity Securities, as of January 1, 1994. SFAS No. 115 requires that
securities be classified into one of three categories: held to maturity,
available for sale, or trading. Securities classified as held to maturity
will be stated at amortized cost. This classification means that the Company
has the positive intent and ability to hold the securities until they mature.
Securities classified as available for sale will be stated at fair value.
Securities in this category are held for indefinite periods of time, and
include securities that Management intends to use as part of its
asset/liability strategy, or that may be sold in response to changes in
interest rates, changes in prepayment risks, the need to increase regulatory
capital or other similar factors. The Company holds no trading securities.
The maturities and weighted average yields of securities held to maturity and
securities available for sale at December 31, 1996, are presented in the
following table using the average stated contractual maturities. The average
stated contractual maturities may differ from the average expected life
because borrowers may have the right to call or prepay obligations. Tax
equivalent adjustments, using a 34 percent tax rate, have been made when
calculating yields on tax-exempt obligations. For purposes of this table,
securities available for sale are shown at amortized cost.
<TABLE>
Maturity Distribution of Investment Securities
December 31, 1996
<CAPTION>
(Dollars in Thousands) After one but After five but
Within one year within five years within ten years After ten years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
Securities held to maturity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
US Treasury securities $ 5,046 6.68% $ 4,012 7.05% $ 9,058 6.84%
US Government agencies 162 6.54 512 6.03 $ 2,500 6.19% $ 1,001 7.16% 4,175 6.42
State and political
subdivisions 55 8.70 793 8.54 1,619 9.58 913 8.76 3,380 9.10
Other investments 248 6.65 248 6.65
Total securities
held to maturity 5,263 6.70 5,317 7.17 4,367 7.47 1,914 7.92 16,861 7.19
Securities available for sale
US Treasury securities 1,002 5.50 6,102 6.37 988 6.98 8,092 6.34
US Government agencies 5,046 5.37 17,074 6.26 15,433 6.40 4,148 6.55 41,701 6.23
State and political
subdivisions 2,545 5.27 5,990 5.66 11,107 7.60 8,559 8.65 28,201 7.30
Other investments 1,805 5.90 10,227 6.15 2,964 5.57 7,516 6.15 22,512 6.05
Total securities
available for sale 10,398 6.68 39,393 6.67 30,492 7.63 20,223 8.12 100,506 6.50
Total investments $15,661 5.87% $44,710 6.28% $34,859 6.86% $22,137 7.34% $117,367 6.60
</TABLE>
Deposits and Short-Term Borrowings
Between 1994 and 1995 a notable shift from interest bearing demand deposits
into time deposits occurred. During 1995 the Mobile Bank introduced two
promotions aimed at attracting longer term, small denomination certificates
of deposit in the retail area of the bank. The efforts were successful in
that average time deposits increased by 28.9 percent, with approximately half
of this growth resulting from the two promotions. A partial effect of the
promotions was that existing customers were attracted to the certificates of
deposit and a certain amount of funds flowed from the customers demand
account into time deposits. Additionally, in 1995 the general perception of
lower future interest rates caused some customers to seek fixed rate
investments. As a result, average interest bearing demand deposits fell 13.6
percent in 1995 compared to 1994. Between 1995 and 1996 the Company
experienced an increase of 14.0 percent in total average deposits, with about
half of this average growth coming from the Monroeville purchase. The growth
occurred in all categories and at approximately the same rate.
<TABLE>
Average Deposits
(Dollars in Millions) Average for the year
<CAPTION>
1996 1995 1994
Average Average Average Average Average Average
Amount Rate Amount Rate Amount Rate
Outstanding Paid Outstanding Paid Outstanding Paid
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand deposits $ 39.6 N/A $ 34.9 N/A $ 31.6 N/A
Interest bearing
demand deposits 78.7 3.40% 68.8 3.72% 79.6 3.01%
Savings deposits 15.6 3.04 13.6 3.14 13.9 2.83
Time deposits 87.3 5.47 76.7 5.47 59.5 3.85
Total average deposits $221.2 $194.0 $184.6
</TABLE>
The following table reflects maturities of time deposits of $100 thousand or
more at December 31, 1996. Deposits of $35.0 million in this category
represented 11.9 percent of total deposits at year-end 1996, compared to 14.4
percent at year-end 1995. Management views these deposits as the most volatile
of all deposit categories and does not pursue these deposits as aggressively
as smaller denomination consumer deposits.
<TABLE>
Maturities of Time Deposits of $100,000 or More
(In Millions) At December 31, 1996
---------------------------
<CAPTION>
Under Over
3 3-12 12
Months Months Months Total
<S> <C> <C> <C> <C>
$17.4 $12.0 $5.6 $35.0
</TABLE>
Short-term borrowings include three items: 1) federal funds purchased,
2) securities sold under agreements to repurchase, which are overnight
transactions with large corporate customers, commonly referred to as repos,
and 3) other, representing borrowings from the Federal Home Loan Bank, from
the Federal Reserve through its discount operations and U.S. Treasury tax and
loan funds on deposit subject to a note payable to the U.S. Treasury
Department. The Company purchased a small amount of federal funds during 1996.
Average securities sold under agreements to repurchase in 1996 increased to
$3.4 million compared to $2.7 million in 1995. Management has sought to
control the volume of funds in this category within certain acceptable limits.
One of Management's asset/liability management goals is to maintain a net
sold position (whereby federal funds sold exceeds short term borrowings). The
Company has maintained this position, on average, for all years shown.
<TABLE>
Short-Term Borrowings
<CAPTION>
(Dollars in Thousands) 1996 1995 1994
---------------------------- ---------------------------- ----------------------------
Average Weighted Average Weighted Average Weighted
Maximum Balance Average Maximum Balance Average Maximum Balance Average
Month-end During Interest Month-end During Interest Month-end During Interest
Balance Year Rate Balance Year Rate Balance Year Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds purchased $2,000 $ 142 4.86% $4,600 $ 766 3.06% $4,550 $ 213 3.87%
Securities sold under
agreement to repurchase 5,858 3,422 4.44 3,599 2,682 4.24 6,818 3,335 2.99
Other 1,836 664 6.67 2,980 1,185 6.47 2,542 1,123 4.14
Total short-term
borrowings $4,228 4.80% $4,633 4.62% $4,671 3.30%
</TABLE>
Asset/Liability Management
The purpose of asset/liability management is to maximize return while
minimizing risk. Maximizing return means achieving the Company's profitability
and growth goals. Minimizing risk means considering four key risk factors:
1) liquidity, 2) interest-rate sensitivity, 3) capital adequacy, and 4) asset
quality. Asset/liability management at the Company involves a comprehensive
approach to balance sheet management which meets the risk and return criteria
established by Management and the Board of Directors.
Liquidity
Liquidity represents the ability of a bank to meet loan commitments as well
as deposit withdrawals. Liquidity is derived from both the asset side and the
liability side of the balance sheet. On the asset side, liquidity is provided
by marketable investment securities, maturing loans, federal funds sold and
cash and cash equivalents. On the liability side, liquidity is provided by a
stable base of core deposits. Additionally, the Company has available, if
needed, federal funds lines of credit, Federal Home Loan Bank lines of credit
and Federal Reserve discount window operations.
Interest Rate Sensitivity
By monitoring the Company's interest rate sensitivity, Management attempts to
maintain a desired balance between the growth of net interest revenue and the
risks that might result from significant changes in interest rates in the
market. One tool for measurement of this risk is gap analysis, whereby the
repricing of assets and liabilities is compared within certain time categories.
By identifying mismatches in repricing opportunities within a time category,
interest rate risk can be identified. The interest sensitivity analysis
presented in the table below is based on this type of gap analysis, which
assumes that rates earned on interest earning assets and rates paid on
interest bearing liabilities will move simultaneously in the same direction
and to the same extent. However, the rates associated with these assets and
liabilities actually change at different times and in varying amounts.
Changes in the composition of earning assets and interest bearing liabilities
can increase or decrease net interest revenue without affecting interest
sensitivity. The interest rate spread between assets and their corresponding
liability can be significantly changed while the repricing interval for both
remain unchanged, thus impacting net interest revenue. Over a period of time,
net interest revenue can increase or decrease if one side of the balance sheet
reprices before the other side. An interest sensitivity ratio of 1.0
(earning assets divided by interest bearing liabilities), which represents a
matched interest sensitive position, does not guarantee maximum net interest
revenue. Management must evaluate several factors, including the general
direction of interest rates, before investing in order to determine the type
of investment and the maturity needed. Management may, from time to time,
accept calculated risks associated with interest sensitivity in order to
maximize net interest revenue. The Company does not currently use derivative
financial instruments to manage interest rate sensitivity.
At December 31, 1996, the Company's three-month interest sensitivity gap
position was .95 percent, and at twelve months the gap position, on a
cumulative basis, was .94 percent, well within the range established by
Management as acceptable. The Company's three month gap position indicates that,
in a period of rising interest rates, each $1.00 of assets which reprice upward
could be followed with slightly more than $1.00 in liabilities which could
reprice upward within three months. Thus, under this scenario, net interest
revenue might decrease slightly during the three-month period of rising rates.
In a period of falling rates, the opposite effect would occur. While certain
categories, such as some loans and certain certificates of deposit, are
contractually tied to interest rate movements, most are subject only to
competitive pressures. Management has a certain amount of flexibility when
adjusting rates on these funds. Management is confident of and has demonstrated
over the years its ability to adjust to interest rate changes in a manner that
minimizes any significant adverse effect on the net interest margin.
<TABLE>
Interest Sensitivity Analysis
(Dollars in Thousands) Non-Interest
December 31, 1996 Sensitive
Interest Sensitive Within (Cumulative) Within
<CAPTION>
3 Months 3-12 Months 1-5 Years 5 Years Total
EARNING ASSETS
<S> <C> <C> <C> <C> <C>
Loans (1) $100,083 $125,294 $179,667 $ 9,493 $189,160
Unearned income (130) (130)
Less allowance for loan losses (2,600) (2,600)
Net loans 100,083 125,294 179,667 6,763 186,430
Investment securities 5,322 17,866 64,127 53,646 117,773
Federal funds sold and
resale agreements 9,683 9,683 9,683 9,683
Interest bearing deposits in other
financial institutions 100 100 100 100
Total earning assets $115,188 $152,943 $253,577 $60,409 $313,986
INTEREST BEARING LIABILITIES
Non-Interest bearing deposits $58,196 $ 58,196
Interest bearing demand deposits (2) $ 59,430 $ 59,430 $ 59,430 42,955 102,385
Savings deposits (2) 22,823 22,823
Large denomination
time deposits 18,589 30,575 34,980 34,980
Other time deposits 37,704 67,604 76,903 76,903
Short-term borrowings 5,162 5,162 5,162 5,162
Total interest bearing liabilities $120,885 $162,771 $176,475 $123,974 $300,449
Interest sensitivity gap $(5,697) $ (9,828) $ 77,102
Earning assets/interest
bearing liabilities .95 .94 1.44
Interest sensitivity gap/
earning assets (.05) (.06) .30
(1) Non-accrual loans are included in the "Non-Interest Sensitive Within 5 Years" category.
(2) Certain types of savings and NOW accounts (included in interest bearing
demand deposits) are included in the "Non-Interest Sensitive Within 5
Years" category. In Management's opinion these liabilities do not reprice
in the same proportions as rate-sensitive assets, as they are not
responsive to general interest rate changes in the economy.
</TABLE>
Capital Resources
The merger between South Alabama Bancorporation and First Monco Bancshares in
1996 was accounted for as a purchase and the transaction resulted in the
addition of $16.6 million in capital, of which $4.2 million is attributable to
goodwill. The goodwill is being amortized over 25 years at approximately $168
thousand per year.
Tangible shareholders' equity (shareholders' equity less goodwill
and unrealized gains and losses of available for sale securities) was
$42.7 million at December 31, 1996, compared to $28.2 million at December 31,
1995, an increase of 51.1 percent. Approximately $12.4 million, or 85.9 percent,
of this increase resulted from the Monroeville purchase. The Company's leverage
ratio, defined as shareholders' equity divided by quarterly average assets,
was 13.87 percent, well above peer group averages. The Federal Reserve and the
FDIC require that bank holding companies and banks maintain certain minimum
levels of capital as defined by risk-based capital guidelines. These guidelines
consider risk factors associated with various components of assets, both on
and off the statement of condition. Under these guidelines capital is measured
in two tiers and these capital tiers are used in conjunction with "risk-
based" assets in determining "risk-based" capital ratios. The Company's
Tier I capital, which is tangible shareholders' equity less certain adjustments,
was $42.7 million at December 31, 1996. Total capital, which is Tier I plus
the allowable portion of the allowance for loan losses, was $45.3 million at
December 31, 1996. The ratios expressed as a percent of total risk-adjusted
assets for Tier I and Tier II were 19.31 percent and 20.48 percent,
respectively, at December 31, 1996. The Company exceeded the minimum risk-based
capital guidelines at December 31, 1996, 1995, and 1994 (see Footnote 13 of
Notes to Consolidated Financial Statements.)
<TABLE>
Risk-Based Capital
(Dollars in Thousands) December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Tier I capital -
Tangible common shareholders' equity $ 42,675 $ 28,239 $ 26,161
Tier II capital -
Allowable portion of the allowance
for loan losses 2,600 2,222 2,212
Total capital (Tier I and Tier II) $ 45,275 $ 30,461 $ 28,373
Risk-adjusted assets $221,035 $247,956 $207,140
Quarterly average assets 307,602 239,467 220,024
Risk-based capital ratios:
Tier I capital 19.31% 11.39% 12.63%
Total capital (Tier I and Tier II) 20.48% 12.28% 13.70%
Minimum risk-based capital guidelines:
Tier I capital 4.00% 4.00% 4.00%
Total capital (Tier I and Tier II) 8.00% 8.00% 8.00%
Tier I leverage ratio 13.87% 11.79% 11.89%
</TABLE>
Results of Operations
Net interest revenue, the difference between amounts earned on assets and the
amounts paid on liabilities, is the most significant component of earnings for
a financial institution. Changes in interest rates, changes in the volume of
assets and liabilities, and changes in the asset/liability mix are the major
factors that influence net interest revenue. Presented below is an analysis
of net interest revenue, weighted average yields on earning assets and weighted
average rates paid on interest bearing liabilities for the past three years.
Net yield on interest earning assets is net interest revenue, on a tax
equivalent basis, divided by total interest earning assets. This ratio is a
measure of the Company's effectiveness in pricing interest earning assets and
funding them with both interest bearing and non-interest bearing liabilities.
The Company's net yield, on a tax equivalent basis, decreased to 5.09 percent
in 1996 from 5.24 percent and 5.22 percent in 1995 and 1994, respectively.
Interest rates in general began to rise in 1994 and interest earning assets
repriced upward sooner in 1994 than interest bearing liabilities. This trend
continued into the first quarter of 1995. As interest rates began to fall in
mid-1995, the opposite effect occurred and the net yield began to close
somewhat. The result for the year, however, aided by an increase in average
loans of 13.4 percent, was an improvement in the net yield in 1995 of two
basis points over 1994.
During 1996 the trend in interest rates continued generally slightly lower;
however, the cost of time deposits remained unchanged from 1995. This was due
to intensified competition in the markets served by the Company. The result
was a 15 basis point decline in the net yield on interest earning assets in
1996 compared to 1995. Management expects increased pressures on rates, both
for loans and for deposits, in 1997.
<TABLE>
Net Interest Revenue
(Dollars in Thousands)
<CAPTION>
1996 1995 1994
---------------------------- ---------------------------- -----------------------------
Average Interest Average Interest Average Interest
Amount Average Earned/ Amount Average Earned/ Amount Average Earned/
Outstanding Rate Paid Outstanding Rate Paid Outstanding Rate Paid
Interest Earning Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Taxable securities $ 57,664 6.64% $ 3,829 $ 50,676 6.53% $ 3,308 $ 57,283 6.33% $ 3,628
Non-taxable securities 17,444 5.25 916 11,486 6.01 690 11,619 6.36 739
Total securities 75,108 6.32 4,745 62,162 6.43 3,998 68,902 6.34 4,367
Loans(1) 156,606 9.34 14,632 140,431 9.67 13,579 123,839 8.53 10,567
Federal funds sold 8,155 5.33 435 8,615 5.54 477 6,607 4.10 271
Deposits 336 7.44 25 656 6.10 40 985 6.60 65
Total interest earning assets 240,205 8.26 19,837 211,864 8.54 18,094 200,333 7.62 15,270
Non-interest earning assets
Cash and due from banks 11,997 11,388 11,615
Premises and equipment, net 5,690 3,758 3,514
Other real estate 147 252 421
Deferred tax asset 777 666 726
Other assets 3,143 2,628 2,387
Intangible assets 694
Allowance for loan losses (2,103) (2,198) (2,223)
Total $260,550 $228,358 $216,773
Interest Bearing Liabilities
Interest bearing demand and
savings deposits $ 94,345 3.34 3,152 $ 82,391 3.63 2,987 $ 93,562 2.98 2,789
Time deposits 87,253 5.47 4,777 76,777 5.47 4,196 59,452 3.85 2,291
Short-term borrowing 4,228 4.80 203 4,633 4.62 214 4,671 3.30 154
Total interest bearing
liabilities 185,826 4.38 8,132 163,801 4.52 7,397 157,685 3.32 5,234
Non-interest bearing liabilities
Demand deposits 39,629 34,855 31,609
Other 2,732 2,538 1,877
42,361 37,393 33,486
Shareholders' equity 32,363 27,164 25,602
Total $260,550 $228,358 $216,773
Net Interest Revenue 3.88% $11,705 4.02% $10,697 4.30% $10,036
Net yield on interest
earning assets 4.87% 5.05% 5.01%
Tax equivalent adjustment 0.22% 0.19% .21%
Net yield on interest
earning assets (tax equivalent) 5.09% 5.24% 5.22%
(1) Loans classified as non-accruing are included in the average volume
classification. Loan fees for all years shown are included in the
interest amounts for loans.
</TABLE>
The following table reflects the changes in sources of taxable-equivalent
interest income and expense between 1996 and 1995 and between 1995 and 1994.
The variances resulting from changes in interest rates and the variances
resulting from changes in volume are shown.
<TABLE>
Analysis of Taxable-Equivalent Interest Increases (Decreases)
<CAPTION>
(Dollars in Thousands) 1996 Change From 1995 1995 Change From 1994
Due to(1) Due to(1)
Amount Volume Rate Amount Volume Rate
Interest Revenue:
<S> <C> <C> <C> <C> <C> <C>
Taxable securities $ 521 $ 457 $ 64 $ (320) $ (419) $ 99
Non-taxable securities 359 547 (188) (77) (14) (63)
Total securities 880 1,004 (124) (397) (433) 36
Loans 1,053 1,551 (498) 3,012 1,510 1,502
Federal funds sold (42) (25) (17) 206 98 108
Deposits (15) (20) 5 (25) (21) (4)
Total 1,876 2,510 (634) 2,796 1,154 1,642
Interest Expense:
Interest bearing demand
and savings deposits 165 420 (255) 198 (376) 574
Other time deposits 581 573 8 1,905 828 1,077
Short-term borrowing (11) (19) 8 60 (2) 62
Total 735 974 (239) 2,163 450 1,713
Net interest revenue $1,141 $1,536 $(395) $ 633 $ 704 $ (71)
(1)The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amount of the change in each.
</TABLE>
In 1995 taxable-equivalent net interest revenue increased by $633 thousand
compared to 1994. This growth resulted from an increase in the volume of
funds employed by the Company, primarily in loans. Average time deposits
volume increased 29.1 percent in 1995 compared to 1994 and significant
increases in average rates paid were incurred. However, this was offset by
even higher positive variances in loan income.
Taxable-equivalent net interest revenue was $1.14 million higher in 1996
compared to 1995. The decrease due to lower rates was offset by increases
in volume, primarily on loans and investments.
GRAPH SHOWING NET INTEREST MARGIN BY YEAR
1992 4.52%
1993 4.81%
1994 5.22%
1995 5.24%
1996 5.09%
Provision for Loan Losses and Allowance for Loan Losses
The provision for loan losses is the cost of providing an allowance that is
adequate to absorb inherent losses on loans in the portfolio. Management
reviews the adequacy of the allowance for loan losses on a continuous basis
by assessing the quality of the loan portfolio and adjusting the allowance
when appropriate. Management's evaluation of each loan includes a review of
the financial condition and capacity of the borrower, the value of the
collateral, current economic trends, historical losses, workout and collection
arrangements and possible concentrations of credit.
Loan review procedures are in place to insure that potential problem loans
are identified and include a continuous review of the portfolios at the
affiliate banks by the Company's loan review department. Each quarter this
review is quantified in a report to Management which uses it to determine
whether an appropriate allowance is maintained. This report is then submitted
to the Company's Board of Directors and to the appropriate Board committee
quarterly. The amount of the allowance is affected by: (i) loan charge-offs,
which decrease the allowance; (ii) recoveries on loans previously charged-off,
which increase the allowance; and (iii) the provisions for loan losses charged
to income, which increase the allowance. The table below sets forth certain
information with respect to the Company's average loans, allowance for loan
losses, charge-offs and recoveries for the five years ended December 31, 1996.
<TABLE>
Summary of Loan Loss Experience
(Dollars in Thousands) Year Ended December 31,
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Allowance for loan losses -
Balance at beginning of year $ 2,222 $ 2,212 $ 2,250 $ 2,230 $ 2,009
Balance acquired 500
Charge-offs
Commercial, financial and
agricultural 341 60 101 239 50
Real estate - construction
Real estate -mortgage 9 17 30
Installment 193 88 99 104 120
Total charge-offs 534 148 209 360 200
Recoveries
Commercial, financial and
agricultural 28 31 59 66 42
Real estate - construction
Real estate -mortgage 7 15 33 8 3
Installment 79 34 27 58 42
Total recoveries 114 80 119 132 87
Net charge-offs 420 68 90 228 113
Addition to allowance charged to
operating expense 298 78 52 248 334
Allowance for loan losses-
Balance at end of year $ 2,600 $ 2,222 $ 2,212 $ 2,250 $ 2,230
Loans at end of year $189,160 $144,147 $133,821 $118,454 $104,102
Ratio of ending allowance
to ending loans 1.37% 1.54% 1.65% 1.90% 2.14%
Average loans, net of
unearned income $156,606 $140,431 $123,839 $108,699 $ 96,348
Non-performing loans $ 1,288 $ 552 $ 564 $ 1,483 $ 1,069
Ratio of net charge-offs
to average loans .27% .05% .07% .21% .12%
Ratio of ending allowance to total
non-performing loans 201.86% 402.54% 392.20% 151.72% 208.61%
</TABLE>
The addition to the allowance charged to operating expense increased from $78
thousand in 1995 to $298 thousand in 1996. The allowance at year-end 1996 was
$2.6 million, compared to $2.2 million at year-end 1995. All of the increase
resulted from the Monroeville purchase.
The allowance for loan losses at December 31, 1996, and December 31, 1995, as
a percent of loans, was 1.37 percent and 1.54 percent, respectively. The
allowance for loan losses represented 2.0 times non-performing loans at
December 31, 1996, and 4.0 times non-performing loans at December 31, 1995.
Management reviews the adequacy of the allowance for loan losses on a
continuous basis by assessing the quality of the loan portfolio, including
non-performing loans, and adjusting the allowance when appropriate. The
allowance was considered adequate at December 31, 1996.
Total charge-offs increased from $148 thousand in 1995 to $534 thousand in
1996, while net charge-offs increased from $68 thousand to $420 thousand. All
of the charge-offs in 1996 occurred in the commercial, financial and
agricultural category and in the installment category. These loans were
previously identified and fully reserved for prior to charge-off. Commercial,
financial and agricultural loans represented 63.9 percent of total charge-offs
while installment loans represented 36.1 percent. Recoveries in 1996 were $114
thousand, an increase from $80 thousand in 1995. Management will continue to
vigorously pursue efforts in 1997 to collect previously charged-off loans.
Management currently anticipates that in 1997 total non-performing assets
will decrease by approximately $350 thousand, resulting in an improvement in
the ratio of ending allowance to total non-performing loans. Management further
anticipates that net charge-offs for all loan categories except commercial,
financial and agricultural, as a percent of average loans in these categories,
will be approximately the same as in 1996. Management anticipates net
charge-offs in the commercial, financial and agricultural category will be
approximately $100 thousand lower than in 1996.
Non-Performing Assets
Non-performing assets include accruing loans 90 days or more past due, loans
on non-accrual, renegotiated loans and other real estate owned. Commercial,
business and installment loans are classified as non-accrual by Management
upon the earlier of: (i) a determination that collection of interest is
doubtful; or (ii) the time at which such loans become 90 days past due, unless
collateral or other circumstances reasonably assure full collection of
principal and interest.
The table below sets forth certain information with respect to accruing loans
90 days or more past due, loans on non-accrual, renegotiated loans and other
real estate owned.
<TABLE>
Summary of Non-Performing Assets
(Dollars in Thousands) December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C> <C>
Accruing loans 90 days or more past due $ 190 $ 62 $ 4
Loans on non-accrual 1,098 490 560
Renegotiated loans
Total non-performing loans 1,288 552 564
Other real estate owned 15 308 240
Total non-performing assets $1,303 $ 860 $804
Loans 90 days or more past due
as a percent of loans 0.10% 0.04% --
Total non-performing loans
as a percent of loans 0.68% 0.38% 0.42%
Total non-performing assets as a percent
of loans and other real estate owned 0.69% 0.60% 0.60%
</TABLE>
Total non-performing assets as a percent of loans and other real estate owned
at year-end 1996 was 0.69 percent compared to 0.60 percent at year-end 1995.
Although total non-performing loans increased by $736 thousand, other real
estate owned decreased by $293 thousand.
Any loans classified for regulatory purposes as loss, doubtful, substandard or
special mention, and not included above, do not (i) represent or result from
trends or uncertainties which Management reasonably expects will materially
impact future operating results, or (ii) represent material credits about
which Management is aware of any information which causes Management to have
serious doubts as to the ability of such borrower to comply with the loan
repayment terms.
Details of Non-Accrual Loans
The table below shows the impact of non-accrual loans on interest income the
past three years. Not included in the table are loans totaling $2.2 million
at December 31, 1996, as to which Management has reservations about the
ability of the borrowers to comply with present repayment terms. These credits
were considered in determining the adequacy of the allowance for possible loan
losses and, while current, are regularly monitored for changes within a
particular industry or general economic trends which could cause the borrowers
severe financial difficulties.
<TABLE>
Details of Non-Accrual Loans
<CAPTION>
(Thousands) 1996 1995 1994
Principal balance at December 31, $1,098 $490 $560
<S> <C> <C> <C>
Interest that would have been
recorded under original terms
for the years ended December 31, $ 71 $ 40 $ 50
Interest actually recorded
in the financial statements for
the years ended December 31, $ 30 $ 5 $ 1
</TABLE>
Non-Interest Revenue and Non-Interest Expense
Trust department revenue is an important component of non-interest revenue at
the Company, accounting for 45.5 percent of that category in 1996. Trust
department revenue of $1.2 million was an increase of 13.0 percent from 1995.
The Company operates trust departments at two of its banks, with total assets
of approximately $359 million.
Service charges on deposit accounts increased 10.7 percent in 1996, a result
of an increase in the number of accounts, increases in certain charges, and
the Monroeville purchase.
Other income charges and fees increased by $49 thousand in 1996 compared to
1995. The increase resulted primarily from an increase in fees earned on
credit life insurance and to a smaller extent from the Monroeville purchase.
Income in this category during 1995 was $41 thousand lower than in 1994, a
result of decreased credit card fee income.
<TABLE>
Non-Interest Revenue
(In Thousands) Year Ended December 31,
<CAPTION>
1996 1995 1994
Non-Interest Revenue:
<S> <C> <C> <C>
Trust department revenue $1,177 $1,042 $ 912
Service charges on deposit accounts 944 853 829
Securities gains, net 108 56 137
Gain on sale of other real
estate owned 18
Other income, charges and fees 342 293 334
Total $2,589 $2,244 $2,212
</TABLE>
Personnel costs rose 11.8 percent in 1996 compared to 1995. The increase was
a result of merit salary increases, a small increase in the number of employees
and the Monroeville purchase. The 14.8 percent increase in occupancy resulted
largely from the move into the new main office of the Mobile Bank in the
spring of 1996. Other operating expenses increased only 2.5 percent,
principally a result of a significant decrease in the assessment for FDIC
insurance. Management is currently intensifying efforts to improve the
efficiency ratio, calculated as non-interest expense divided by net interest
revenue (tax adjusted) plus non-interest revenue. The goodwill associated with
the Monroeville purchase is being amortized over 25 years at approximately
$14 thousand per month.
<TABLE>
Non-Interest Expense
(In Thousands) Year Ended December 31,
<CAPTION>
1996 1995 1994
Non-Interest Expense:
<S> <C> <C> <C>
Salaries $4,043 $3,582 $3,263
Pension and other employee benefits 997 927 862
Furniture and equipment expenses 825 826 722
Net occupancy expenses 684 596 534
Intangible amortization 28
Other operating expense 2,579 2,515 2,796
Total $9,156 $8,446 $8,177
</TABLE>
GRAPH SHOWING EFFICIENCY RATIO BY YEAR
1992 70.31%
1993 63.81%
1994 65.18%
1995 63.55%
1996 62.26%
Income Taxes
At December 31, 1992, the Company had a net operating loss carryforward for
tax purposes. Accordingly, the provision for income taxes during 1992 was
offset by an extraordinary item relating to utilization of the net operating
loss carryforwards. Under SFAS No. 109 the Company recorded a deferred tax
asset and a Cumulative Effect of Change in Accounting for Income Taxes as of
January 1, 1993. Subsequent to implementation of SFAS No. 109 the Company is
recognizing income tax expense without any extraordinary item for utilization
of the net operating loss carryforward. The effect of applying the new
accounting method was an addition to net income in 1993 of approximately $1.0
million.
Income tax expense was $1.5 million in 1996, compared to $1.4 million and
$1.2 million in 1995 and 1994, respectively.
Inflation and Other Issues
Because the Company's assets and liabilities are essentially monetary in
nature, the effect of inflation on the Company's assets differs greatly from
that of most commercial and industrial companies. Inflation does have an
impact on the growth of total assets in the banking industry and the resulting
need to increase capital at higher than normal rates in order to maintain an
appropriate equity to assets ratio. Inflation also has a significant effect on
other expenses, which tend to rise during periods of general inflation.
Management believes, however, that the Company's financial results are
influenced more by its ability to react to changes in interest rates than by
inflation.
Except as discussed in this Management's Discussion and Analysis, Management
is not aware of trends, events or uncertainties that will have or that are
reasonably likely to have a material effect on the liquidity, capital resources
or operations of the Company. Management is not aware of any current
recommendations by regulatory authorities which, if they were implemented,
would have such an effect.
Forward Looking Statements
This Annual Report contains certain forward looking information with respect
to the financial condition, results of operations and business of the Company,
including the Notes to Consolidated Financial Statements and statements
contained in the discussion above with respect to security maturities,
loan maturities, loan growth, expectations for and the impact of interest rate
changes, improvement in the level of non-performing assets, the adequacy of the
loan loss reserve, expected loan losses, the ability to improve the efficiency
ratio, and the impact of inflation. The Company cautions readers that forward
looking statements, including without limitation those noted above, are subject
to risks and uncertainties that could cause actual results to differ materially
from those indicated in the forward looking statements. Factors that may cause
actual results to differ materially from those contemplated include, among
others, the stability of interest rates, the rate of growth of the economy in
the Company's market area, the success of the Company's marketing efforts, the
ability to expand into new segments of the market area, competition, changes
in technology, the strength of the consumer and commercial credit sectors,
levels of consumer confidence, the impact of regulation applicable to the
Company and the performance of stock and bond markets.
<TABLE>
Selected Quarterly Financial Data (Unaudited)
(Dollars in Thousands Except Per Share Amounts)
1996
----------------------------------------------
<CAPTION>
First Second Third Fourth Total
<S> <C> <C> <C> <C> <C>
Interest revenue $4,630 $4,617 $4,791 $5,799 $19,837
Interest expense 1,947 1,863 1,953 2,369 8,132
Net interest revenue 2,683 2,754 2,838 3,430 11,705
Provision for loan losses 101 30 36 131 298
Non-interest revenue 670 604 583 732 2,589
Non-interest expense 2,155 2,188 2,209 2,604 9,156
Income before income taxes 1,097 1,140 1,176 1,427 4,840
Income tax expense 343 355 354 434 1,486
Net income $ 754 $ 785 $ 822 $ 993 $ 3,354
Net income per share $ .25 $ .26 $ .27 $ .27 $ 1.05
</TABLE>
<TABLE>
(Dollars in Thousands Except Per Share Amounts)
1995
<CAPTION>
First Second Third Fourth Total
<S> <C> <C> <C> <C> <C>
Interest revenue $4,221 $4,500 $4,633 $4,740 $18,094
Interest expense 1,601 1,850 1,962 1,984 7,397
Net interest revenue 2,620 2,650 2,671 2,756 10,697
Provision for loan losses 3 4 71 78
Non-interest revenue 513 575 537 619 2,244
Non-interest expense 2,081 2,129 2,068 2,168 8,446
Income before income taxes 1,052 1,093 1,136 1,136 4,417
Income tax expense 334 333 366 377 1,410
Net income $ 718 $ 760 $ 770 $ 759 $ 3,007
Net income per share $ .24 $ .25 .26 $ .25 $ 1.00
</TABLE>
<TABLE>
Selected Financial Data
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
1996 1995 1994 1993 1992
RESULTS OF OPERATIONS:
<S> <C> <C> <C> <C> <C>
Interest revenue $ 19,837 $ 18,094 $ 15,270 $ 13,520 $ 13,459
Interest expense 8,132 7,397 5,234 4,801 5,751
Net interest revenue 11,705 10,697 10,036 8,719 7,708
Provision for loan losses 298 78 52 248 334
Non-interest revenue 2,589 2,244 2,212 2,322 2,403
Non-interest expense 9,156 8,446 8,177 7,149 7,062
Income before income taxes,
extraordinary item and
cumulative effect of change
in accounting for income taxes 4,840 4,417 4,019 3,644 2,715
Income taxes 1,486 1,410 1,237 1,263 773
Net income before extraordinary item
and cumulative effect of change in
accounting for income taxes 3,354 3,007 2,782 2,381 1,942
Extraordinary item 273
Cumulative effect of change in
accounting for income taxes 1,010 57
Net income $ 3,354 $ 3,007 $ 2,782 $ 3,391 $ 2,272
Earnings per share:
Before extraordinary item and
cumulative effect of change in
accounting for income taxes $ 1.05 $ 1.00 $ .93 $ .79 $ .67
Extraordinary item .09
Cumulative effect of change in
accounting for income taxes .34 .02
Net income $ 1.05 $ 1.00 $ .93 $ 1.13 $ .78
Average number of shares
outstanding (000's) 3,209 2,999 2,999 2,999 2,902
YEAR-END STATEMENT OF CONDITION:
Total assets $350,077 $244,949 $218,506 $218,704 $212,979
Loans 189,160 144,147 133,821 118,454 104,102
Deposits 295,287 210,092 185,842 187,392 184,298
Shareholders' equity 47,088 28,797 26,104 24,158 21,033
AVERAGE BALANCES:
Total assets $260,550 $228,358 $216,773 $207,397 $195,716
Average earning assets 240,205 211,864 200,333 190,716 179,053
Loans 156,606 140,431 123,839 108,699 96,348
Deposits 221,227 194,023 184,623 178,925 167,619
Shareholders' equity 32,363 27,164 25,602 23,101 20,337
PERFORMANCE RATIOS:
Net income to:
Average total assets 1.29% 1.32% 1.28% 1.64% 1.16%
Average shareholders' equity 10.36% 11.07% 10.87% 14.68% 11.17%
Average shareholders' equity to
average total assets 12.42% 11.90% 11.81% 11.14% 10.39%
Dividend payout ratio 38.10% 32.00% 27.96% 19.47% 17.95%
</TABLE>
Market Prices And Cash Dividends Per Share
The Company's common stock is traded in the over-the-counter market. Bid and
asked prices (symbol "SABC") are quoted in the NASDAQ inter-dealer system of
the National Association of Securities Dealers.
The high and low bid prices shown represent inter-dealer prices without
adjustment for retail markup, markdown or commission and do not represent
actual transactions. Trades have generally occurred in small lots, and the
prices quoted are not necessarily indicative of the market value of a
substantial block.
At December 31, 1996, the Company had approximately 1,335 shareholders, of
record or through registered clearing agents.
<TABLE>
Market Prices Per Share Cash Dividends Declared
Bid Per Share
<CAPTION>
High Low
1996
<S> <C> <C> <C>
1st Quarter 14 1/2 13 .10
2nd Quarter 14 1/2 13 1/4 .10
3rd Quarter 14 1/2 13 .10
4th Quarter 14 1/4 12 1/2 .10
1995
1st Quarter 12 3/4 12 3/4 .08
2nd Quarter 12 3/4 12 1/2 .08
3rd Quarter 14 1/4 12 1/2 .08
4th Quarter 14 1/4 12 1/2 .08
1994
1st Quarter 12 3/4 12 1/4 .06
2nd Quarter 12 1/2 12 1/2 .06
3rd Quarter 12 3/4 12 1/2 .07
4th Quarter 12 3/4 12 1/2 .07
</TABLE>
Management's Report on Financial Statements
The Management of South Alabama Bancorporation, Inc. is responsible for the
preparation, content, integrity, objectivity and reliability of the financial
statements and all other financial information included in this annual report.
These statements have been prepared in accordance with generally accepted
accounting principles appropriate within the banking industry to reflect, in
all material respects, the substance of events and transactions that should
be included. In preparing the consolidated financial statements, Management
made judgements and estimates based upon currently available facts, events
and transactions.
Management depends upon the Company's accounting system and the internal
control structure to meet its responsibility for the reliability of these
statements. These systems and controls are designed to provide reasonable
assurance that the assets are safeguarded from material loss and that the
transactions executed are in accordance with Management's authorizations and
are properly recorded in the financial records. The concept of reasonable
assurance recognizes that the cost of internal accounting controls should not
exceed the benefits derived and that there are inherent limitations of any
system of internal accounting controls.
The independent public accounting firm of Arthur Andersen LLP has been engaged
to audit the Company's financial statements and to express an opinion as to
whether the Company's statements present fairly, in all material respects,
the financial position, cash flows and the results of operations in accordance
with generally accepted accounting principles. Their audit is conducted in
conformity with generally accepted auditing standards and includes procedures
believed by them to be sufficient to provide reasonable assurance that the
financial statements are free of material misstatement.
The Audit Committee of the Board of Directors, composed of directors who are
not employees of the Company, oversees Management's responsibility in the
preparation of these statements. This committee has the responsibility to
periodically review the scope, findings and the opinions of the audits of the
independent and internal auditors. The external accountants and the internal
auditors have free access to the Audit Committee and also to the Board of
Directors to meet independent of Management to discuss the internal control
structure, accounting, auditing and other financial reporting concerns.
We believe these policies and procedures provide reasonable assurance that
our operations are conducted with a high standard of business conduct and that
the financial statements reflect fairly the financial position, results of
operations and the cash flows of the Company.
/s/J. Steve Nelson /s/W. Bibb Lamar, Jr.
Chairman President and CEO
/s/ F. Michael Johnson
Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
To South Alabama Bancorporation, Inc. and Subsidiaries:
We have audited the accompanying consolidated statements of condition of South
Alabama Bancorporation, Inc. (an Alabama Corporation) and Subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. The financial statements of South Alabama Bancorporation, Inc.,
as of December 31, 1994 were audited by other auditors, whose report dated
January 27, 1995, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of South
Alabama Bancorporation, Inc. and Subsidiaries as of December 31, 1996 and 1995
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Birmingham, Alabama
January 24, 1997, except for Note 17,
as to which the date is March 25, 1997
<TABLE>
Consolidated Statements of Condition
As of December 31, 1996 and 1995
South Alabama Bancorporation, Inc. and Subsidiaries
(Dollars and Shares in Thousands)
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS:
Cash and due from banks $ 20,230 $ 15,604
Federal funds sold 9,683 16,800
Total cash and cash equivalents 29,913 32,404
Interest-bearing bank balances 100 652
Investment securities available for sale,
including net unrealized gains
of $406 in 1996 and $898 in 1995 100,912 40,752
Investment securities held to maturity
(market value: 1996-$17,015, 1995-$21,664) 16,861 21,441
Loans 189,160 144,147
Less: Unearned income (130) (122)
Allowance for loan losses (2,600) (2,222)
Loans, net 186,430 141,803
Premises and equipment, net 7,151 4,585
Other real estate owned 15 308
Accrued income receivable 3,453 2,377
Deferred tax asset 70 462
Intangible assets 4,160
Other assets 1,012 165
Total $350,077 $244,949
LIABILITIES:
Deposits
Interest bearing $237,091 $168,006
Non-interest bearing 58,196 42,086
Total deposits 295,287 210,092
Short-term borrowings 5,162 4,050
Other liabilities 2,540 2,010
Total liabilities 302,989 216,152
SHAREHOLDERS' EQUITY:
Preferred stock - no par value
Shares authorized - 500
Shares outstanding - none
Common stock - $.01 par value
Shares authorized - 5,500
Shares outstanding - 4,227 in 1996 and
3,002 in 1995 42 30
Capital surplus 33,092 16,538
Net unrealized gain on securities
available for sale, net of taxes of
$154 in 1996 and $339 in 1995 253 558
Retained earnings 13,701 11,671
Total shareholders' equity 47,088 28,797
Total $350,077 $244,949
</TABLE>
<TABLE>
Consolidated Statements of Income
For the Years Ended December 31, 1996, 1995 and 1994
South Alabama Bancorporation, Inc. and Subsidiaries
(In Thousands, Except Earnings Per Share)
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
INTEREST REVENUE:
Interest and fees on loans $14,632 $13,579 $10,567
Federal funds sold 435 477 271
Interest-bearing bank balances 25 40 65
Investment securities - taxable 3,829 3,308 3,628
Investment securities - non-taxable 916 690 739
Total interest revenue 19,837 18,094 15,270
INTEREST EXPENSE
Deposits 7,929 7,183 5,080
Short-term borrowings 203 214 154
Total interest expense 8,132 7,397 5,234
Net interest revenue 11,705 10,697 10,036
Provision for loan losses 298 78 52
Net interest revenue after provision
for loan losses 11,407 10,619 9,984
NON-INTEREST REVENUE:
Trust department income 1,177 1,042 912
Service charges on deposit accounts 944 853 829
Securities gains, net 108 56 137
Gain on sale of other real estate owned 18
Other income,charges and fees 342 293 334
Total non-interest revenue 2,589 2,244 2,212
NON-INTEREST EXPENSE:
Salaries 4,043 3,582 3,263
Pensions and other employee benefits 997 927 862
Furniture and equipment expense 825 826 722
Net occupancy expense 684 596 534
Intangible amortization 28
Other expense 2,579 2,515 2,796
Total non-interest expense 9,156 8,446 8,177
Income before income taxes 4,840 4,417 4,019
Income tax expense 1,486 1,410 1,237
NET INCOME $ 3,354 $ 3,007 $ 2,782
Earnings per share $ 1.05 $ 1.00 $ .93
Average shares outstanding 3,209 2,999 2,999
</TABLE>
<TABLE>
Consolidated Statements of Changes in Shareholders' Equity
For the Years Ended December 31, 1996, 1995 and 1994
South Alabama Bancorporation, Inc. and Subsidiaries
(Dollars and Shares in Thousands)
<CAPTION>
Net
Unrealized
Common Stock Gain (Loss) On
Securities
Shares Capital Available Retained
Issued Amount Surplus For Sale Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 2,999 $30 $16,507 $7,621 $24,158
Dividends paid ($.26 per share) (779) (779)
Impact at January 1, 1994 of
adoption of Statement of Financial
Accounting Standards No. 115,
net of taxes of $711 $1,088 1,088
Net change in unrealized gain (loss)
on securities available
for sale, net of taxes of $681 (1,145) (1,145)
Net income 2,782 2,782
Balance, December 31, 1994 2,999 30 16,507 (57) 9,624 26,104
Dividends paid($.32 per share) (960) (960)
Net change in unrealized gain (loss)
on securities, due to the
reclassification of securities from
held to maturity to available for
sale, net of taxes of $59 101 101
Net change in unrealized gain(loss)
on securities available for sale,
net of taxes of $362 514 514
Common stock issued 3 31 31
Net income 3,007 3,007
Balance, December 31, 1995 3,002 30 16,538 558 11,671 28,797
Dividends paid($.40 per share) (1,324) (1,324)
Net change in unrealized gain (loss)
on securities available for sale,
net of taxes of $185 (305) (305)
Common stock issued in business
combination 1,225 12 16,554 16,566
Net income 3,354 3,354
Balance, December 31, 1996 4,227 $42 $33,092 $ 253 $13,701 $47,088
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
South Alabama Bancorporation, Inc. and Subsidiaries
(Dollars in Thousands)
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,354 $ 3,007 $ 2,782
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 948 821 613
Provisions for losses on loans 298 78 52
Gain on sale of other real estate (18)
Securities (gains) and losses, net (108) (56) (137)
Deferred income tax provision (benefit) 11 (71) 8
(Increase) decrease in:
Accrued income receivable (99) (138) (475)
Other assets (391) 86 192
(Decrease) increase in other liabilities (273) 435 (82)
Net cash provided by operating activities 3,722 4,162 2,953
INVESTING ACTIVITIES:
Net decrease in interest-bearing bank balances 552 8 609
Net increase in loans (23,379) (10,421) (15,536)
Purchase of premises and equipment (1,383) (1,773) (665)
Proceeds from sale of other real estate 311 213
Proceeds from maturities of securities held
to maturity 5,461 6,926 11,554
Proceeds from maturities of securities
available for sale 9,484 3,658 8,199
Proceeds from sales of securities available
for sale 9,713 1,943 13,481
Purchases of securities held to maturity (995) (5,294) (25,228)
Purchases of securities available for sale (21,438) (5,490) (2,334)
Net cash acquired from business combination 9,001
Net cash used in investing activities (12,673) (10,443) (9,707)
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 6,672 24,250 (1,550)
Net increase (decrease) in short-term borrowings 1,112 (935) (512)
Dividends paid (1,324) (960) (779)
Proceeds from issuance of stock 31
Net cash provided by (used in) financing activities 6,460 22,386 (2,841)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,491) 16,105 (9,595)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 32,404 16,299 25,894
CASH AND CASH EQUIVALENTS AT
END OF YEAR $29,913 $32,404 $16,299
</TABLE>
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1996, 1995 and 1994
South Alabama Bancorporation, Inc. and Subsidiaries
(Dollars and Shares in Thousands)
Note 1. Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of South Alabama Bancorporation, Inc.
(the "Company") and its wholly-owned subsidiaries, The Bank of Mobile
(the "Mobile Bank"), First National Bank, Brewton (the "Brewton Bank")
and Monroe County Bank (the "Monroeville Bank") (collectively the
"Banks"). All significant intercompany accounts and transactions are
eliminated. The Banks are engaged in the business of obtaining funds,
primarily in the form of deposits, and investing such funds in
commercial and real estate loans and investment securities in Mobile,
Brewton, Monroeville and the surrounding area. The Banks also offer a
range of other commercial bank services including trust and investment
products.
BASIS OF FINANCIAL STATEMENT PRESENTATION - The financial statements
have been prepared in conformity with generally accepted accounting
principles and with general practices within the banking industry. In
preparing the financial statements, Management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the statement of financial condition
and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant
change in the near-term relate to the determination of the allowance
for loan losses and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans. In connection
with the determination of the allowance for loan losses and real estate
owned, Management obtains independent appraisals for significant
properties.
A substantial portion of the Company's loans are secured by real estate
in Mobile, Baldwin, Monroe and Escambia Counties of Alabama. In
addition, the real estate owned by the Company is located in this same
area. Accordingly, the ultimate collectibility of a substantial
portion of the Company's loan portfolio and the recovery of real
estate owned are susceptible to changes in market conditions in this
area.
Management believes that the allowances for losses on loans and real
estate owned are adequate. While Management uses available information
to recognize losses on loans and real estate owned, future additions
to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Company's
allowance for losses on loans and real estate owned. Such agencies may
require the Company to recognize additions to the allowances based on
their judgment about information available to them at the time of their
examination.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, amounts due from banks and
federal funds sold. Federal funds are generally purchased and sold for
one day periods.
Supplemental disclosures of cash flow information and non-cash
transactions related to cash flows for the years ended December 31,
1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash Paid For:
Interest $ 8,191 $ 6,946 $ 5,073
Income taxes 1,819 1,475 998
Non-cash transactions
Reclassification of securities
from held to maturity to
available for sale 20,263
Details of acquisition:
Fair value of tangible assets
acquired 96,593
Liabilities assumed (80,027)
Stock issued (16,566)
Cash paid 0
Less cash acquired (9,001)
Net cash acquired $ (9,001)
</TABLE>
INVESTMENT SECURITIES - In May 1993 the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The Company adopted SFAS No. 115 effective January
1, 1994. In accordance with the provisions of this pronouncement, prior
years' financial statements were not restated. At January 1, 1994, the
adoption of SFAS No. 115 resulted in $1,088 of unrealized gain being
recorded as a separate component of shareholders' equity.
Securities available for sale are carried at fair value. Unrealized
gains and losses are excluded from earnings and reported net of tax,
as a separate component of shareholders' equity until realized.
Securities within the available for sale portfolio may be used as part
of the Company's asset/liability strategy and may be sold in response
to changes in interest rate risk, prepayment risk or other similar
economic factors. The specific identification method is used to
compute gains or losses on the sale of these assets.
Investment securities not classified as available for sale or trading
are carried at cost, adjusted for the amortization of premiums and
the accretion of discounts. Premiums and discounts are amortized and
accreted to operations using the level yield method, adjusted for
prepayments as applicable. Management has the intent and the Company
has the ability to hold these assets as long-term investments until
their maturities. Under certain circumstances (including the
significant deterioration of the issuer's credit worthiness or a
significant change in tax-exempt status or statutory or regulatory
requirements), securities classified as held to maturity may be sold
or transferred to another portfolio.
On December 1, 1995, the Company changed classifications for certain
investment securities from securities held to maturity to securities
available for sale, as permitted by the FASB report entitled "A Guide
to Implementation of Statement No. 115 on Accounting for Certain
Investments in Debt and Equity Securities."
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is maintained
at a level considered by Management to be sufficient to absorb losses
inherent in the loan portfolio. Management"s determination of the
adequacy of the allowance and the amount of the provision charged to
expense is based on periodic reviews of the portfolio, past loan loss
experience, current and expected economic conditions and such other
factors which, in Management's judgement, deserve current recognition
in estimating loan losses. This determination also considers the
balance of impaired loans (which are generally considered to be
nonperforming loans, excluding residential mortgages and other
homogeneous loans). Specific allowances for impaired loans are based
on comparisons of the recorded carrying values of the loans to the
present value of these loans estimated cash flows at each loan's
effective interest rate, the fair value of the collateral, or the loans
observable market price. Recovery of the carrying value of loans is
dependent to a great extent on economic, operating and other conditions
that may be beyond the Company's control.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost
less accumulated depreciation and amortization. The provision for
depreciation and amortization is computed using the straight-line
method over the estimated useful lives of the assets or terms of the
leases as applicable.
OTHER REAL ESTATE OWNED - Other real estate owned is carried at the
lower of recorded investment or fair value less costs to dispose. Any
excess of the recorded investment over fair value, less cost to dispose,
is charged to the allowance for loan losses at the time of foreclosure.
A provision is charged to earnings and a related valuation account for
subsequent losses on other real estate owned is established when, in
the opinion of Management, such losses have occurred. The ability of
the Company to recover the carrying value of real estate is based upon
future sales of the real estate. The ability to effect such sales is
subject to market conditions and other factors, all of which are beyond
the Company's control. The recognition of sales and sales gains is
dependent upon whether the nature and term of the sales and upon the
future involvement of the Company, if any, meet certain defined
requirements. If not met, sale and gain recognition would be deferred.
INTEREST INCOME - Interest on loans is recorded generally over the
term of the loan based on the unpaid principal balance. Accrual of
interest is discontinued when, in Management's opinion, collectibility
of interest and principal becomes doubtful. Upon such discontinuance,
all unpaid accrued interest is reversed.
INCOME TAXES - The Company files a consolidated federal income tax
return. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
INTANGIBLE ASSETS - Intangible assets, primarily goodwill, are
amortized on the straight-line basis over 25 years. The Company
continually evaluates whether events and circumstances have occurred
that indicate that such assets have been impaired. Measurement of any
impairment of such assets is based on those assets' fair value, with
the resulting charge recorded as a loss. There were no significant
impairment losses recorded in 1996.
TRUST DEPARTMENT ASSETS AND INCOME - Assets held by the Banks in a
fiduciary capacity for customers are not included in the consolidated
financial statements. Fiduciary fees on trust accounts are generally
recognized on the cash basis. The income recognized on the cash basis
is not materially different from that which would be reported on the
accrual basis.
PER SHARE AMOUNTS - Per share amounts are based on the weighted average
number of shares of common stock outstanding during the year. Shares
issuable upon exercise of stock options have not been included in the
per share computations because the effect is not significant.
OTHER - In June 1996, the FASB issued SFAS No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. SFAS No. 125 provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components
approach that focuses on control. Under that approach, after a transfer
of financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes
liabilities when extinguished. This statement is effective for
transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, and is to be applied
prospectively. Earlier or retroactive application is not permitted.
The Company will adopt the provisions of the Standard on January 1,
1997. Based on the Company's current operating activities, Management
does not believe that the adoption of this statement will have a
material impact on the Company's financial condition or results of
operations.
Certain reclassifications of 1995 and 1994 balances have been made to
conform with classifications used in 1996.
Note 2. Merger
On October 31, 1996, the Company acquired First Monco Bancshares, Inc.
("FMB") and its wholly-owned subsidiary, the Monroe County Bank (the
"Monroeville Bank"). This transaction was accounted for under the
purchase method of accounting and, accordingly, the 1996 consolidated
statement of income includes the Monroeville Bank's results of
operations subsequent to that date.
The Company issued approximately 1.2 million shares of its common
stock for all the outstanding common shares of FMB. The purchase price
of the outstanding common shares of FMB totaled approximately $16.6
million, which exceeded the fair value of the net tangible assets
acquired by approximately $4.2 million.
Assuming the acquisition of FMB had been consummated at January 1,
1995, the consolidated results of operations on a pro forma basis for
the years ended December 31, 1996 and 1995, would have been as follows:
1996 1995
Net Interest Income $14,527 $13,931
Net Income 4,296 4,215
Earnings Per Share $ 1.02 $ 1.00
Note 3. Restrictions on Cash and Due From Bank Accounts
The Banks are required to maintain average reserve balances with the
Federal Reserve Bank. The average of those reserve balances for the
years ended December 31, 1996 and 1995 was approximately $2,229
and $1,160, respectively.
Note 4. The following summary sets forth the carrying values and the
corresponding market values of investment securities available for
sale at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
1996:
U.S. Treasury securities $ 8,092 $ 79 $ 8,171
Obligations of U.S. Government agencies 41,701 67 $324 41,444
Obligations of states and political
subdivisions 28,201 648 103 28,746
Other investments 22,512 40 1 22,551
Total $100,506 $ 834 $428 $100,912
1995:
U.S. Treasury securities $ 7,616 $ 200 $ 7,816
Obligations of U.S. Government agencies 14,738 106 $ 99 14,745
Obligations of states and political
subdivisions 11,789 643 25 12,407
Other investments 5,711 73 5,784
Total $ 39,854 $1,022 $124 $ 40,752
</TABLE>
The following summary sets forth the carrying values and the corresponding
market values of investment securities held to maturity at December 31, 1996
and 1995:
<TABLE>
<CAPTION>
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Value Gains Losses Value
<S> <C> <C> <C> <C>
1996:
U.S. Treasury securities $ 9,058 $ 94 $ 9,152
Obligations of U.S. Government agencies 4,175 3 $24 4,154
Obligations of states and political
subdivisions 3,380 84 3 3,461
Other investments 248 248
Total $16,861 $181 $27 $17,015
1995:U.S. Treasury securities $11,168 $252 $11,420
Obligations of U.S. Government agencies 6,108 21 $27 6,102
Obligations of states and political
subdivisions 3,917 42 65 3,894
Other investments 248 248
Total $21,441 $315 $92 $21,664
</TABLE>
Securities with a carrying value of approximately $53,684 and $36,321 at
December 31, 1996 and 1995, respectively, were pledged to secure deposits of
public funds and trust deposits. Additionally, investment securities with a
carrying value of approximately $4,460 and $3,598 at December 31, 1996 and
1995, respectively, were pledged to secure repurchase agreements.
Proceeds from the sales of securities available for sale were $9,700 in 1996
and $1,943 in 1995. Gross realized gains on sale of these securities were $165
in 1996 and $56 in 1995, and gross realized losses were $57 in 1996 and $0 in
1995.
<TABLE>
Maturities of investment securities as of December 31, 1996, are as follows:
<CAPTION>
Available for Sale Held to Maturity
---------------------- ----------------------
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in 1 year or less $ 10,398 $ 10,418 $ 5,263 $ 5,285
Due in 1 to 5 years 39,393 39,498 5,317 5,391
Due from 5 years to 10 years 30,492 30,604 4,367 4,421
Due in over 10 years 20,223 20,392 1,914 1,918
Total $100,506 $100,912 $16,861 $17,015
</TABLE>
On December 1, 1995, the Company reassessed the appropriateness of the
classification of securities held at that time and determined that certain
securities classified as held to maturity should be reclassified as available
for sale in accordance with the one time reassessment prescribed by the FASB
Special Report "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities." On the date of transfer,
December 1, 1995, the Company reclassified those securities identified from
held to maturity to available for sale at an estimated market value of $20,423
and unrealized gains and losses of $296 and $136, respectively.
Note 5. Loans
<TABLE>
A summary of loans follows:
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Commercial, financial and agricultural $ 62,152 $ 47,195
Real estate - construction 11,196 8,591
Real estate - mortgage 88,107 65,911
Consumer, installment and single pay 27,705 22,450
Total $189,160 $144,147
</TABLE>
In the normal course of business, the Banks make loans to directors, executive
officers, significant shareholders and their affiliates (related parties).
Related party loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other customers, and in Management's opinion, do not involve
more than the normal risk of collectibility. The aggregate dollar amount of
these loans was $10,700 at December 31, 1996, and $8,762 at December 31, 1995.
During 1996, $12,455 of new loans and advances were made, $1,428 was acquired,
and principal repayments totaled $11,945. Outstanding commitments to extend
credit to related parties totaled $7,627 at December 31, 1996.
At December 31, 1996 and 1995, non-accrual loans totaled $1,098 and $490,
respectively. The amount of interest income that would have been recorded
during 1996 and 1995, if these non-accrual loans had been current in accordance
with their original terms, was $71 and $40, respectively. The amount of interest
income actually recognized on these loans during 1996 and 1995 was $30 and $5,
respectively.
At December 31, 1996 and 1995, the recorded investment in loans that are
considered to be impaired under SFAS 114 was $1,098 and $490, respectively
(all of which were carried on a non-accrual basis). Included in this amount
is $1,170 in 1996 and $461 in 1995 of impaired loans for which the related
allowance for loan losses is $415 in 1996 and $271 in 1995. The amount of
impaired loans that do not have an allowance for loan losses was $28 in 1996
and $29 in 1995. The average recorded investment in impaired loans during the
years ended December 31, 1996 and 1995, was approximately $859 and $544,
respectively. For the years ended December 31, 1996 and 1995, the amount of
interest income recognized on impaired loans was immaterial.
Note 6. Allowance for Loan Losses
<TABLE>
The allowance for loan losses is summarized as follows:
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Balance at the beginning of year $2,222 $2,212 $2,250
Balance acquired 500
Provision charged to operating
expense 298 78 52
Losses charged off (534) (148) (209)
Recoveries 114 80 119
Balance at the end of the year $2,600 $2,222 $2,212
</TABLE>
Activity in the allowance for losses on other real estate owned was not
significant in 1995, 1994 and 1993.
Note 7. Premises and Equipment
<TABLE>
Premises and equipment are summarized as follows:
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Land and land improvements $ 1,659 $1,320
Bank buildings and improvements 3,848 2,022
Furniture, fixtures and equipment 5,403 4,397
Leasehold improvements 2,133 1,289
Total 13,043 9,028
Less accumulated depreciation and amortization 5,892 4,443
Premises and equipment - net $7,151 $4,585
</TABLE>
The provision for depreciation and amortization charged to operating expense
in 1996, 1995 and 1994 amounted to $704, $700 and $613, respectively.
Note 8. Deposits
<TABLE>
The following summary presents the detail of interest bearing deposits:
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Interest bearing checking accounts $ 54,315 $ 32,658
Savings accounts 22,823 12,699
Money market savings accounts 48,070 40,965
Time deposits ($100 thousand or more) 34,980 30,184
Other time deposits 76,903 51,500
Total $237,091 $168,006
</TABLE>
<TABLE>
The following summary details interest expense on deposits:
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Interest bearing checking accounts $ 892 $ 897 $ 891
Savings accounts 475 427 395
Money market savings accounts 1,785 1,663 1,503
Time deposits ($100 thousand or more) 1,448 1,476 923
Other time deposits 3,329 2,720 1,368
Total $7,929 $7,183 $5,080
</TABLE>
At December 31, 1996, related parties had deposits with the Banks consisting
of time deposits ($100 thousand or more) of $547; other time deposits of $947;
demand deposits of $14,078 and savings deposits of $211. At December 31, 1995,
related parties had deposits with the Banks consisting of time deposits ($100
thousand or more) of $367; other time deposits of $825; demand deposits of
$14,273 and savings deposits of $484.
Note 9. Short-Term Borrowings
<TABLE>
Following is a summary of short-term borrowings:
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Securities sold under agreement to repurchase $4,460 $3,599
Other short-term borrowings 702 451
Total $5,162 $4,050
Weighted average interest rate at year-end 4.59% 4.13%
Weighted average interest rate on
amounts outstanding during the year
(based on average of daily balances) 4.80% 4.62%
</TABLE>
<TABLE>
Information concerning securities sold under agreement to repurchase is
summarized as follows:
<CAPTION>
1996 1995
<S> <C> <C>
Average balance during the year $3,422 $2,682
Average interest rate during the year 4.40% 4.24%
Maximum month-end balances during the year $5,858 $3,599
</TABLE>
Federal funds purchased and securities sold under agreements to repurchase
generally represented overnight borrowing transactions. Other short-term
borrowings consist of demand notes owed to the U.S. Treasury.
At December 31, 1996 and 1995, securities sold under agreements to repurchase
had average interest rates of 4.50% and 4.14%, respectively. Included in the
balances of securities sold under agreements to repurchase at December 31, 1996
and 1995, were repurchase agreements to related parties of $3,300 and $1,427,
respectively.
Note 10. Accounting for Income Taxes
<TABLE>
The components of income tax expense are as follows:
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current income tax expense:
Federal $1,466 $1,321 $1,098
State 9 160 131
Total 1,475 1,481 1,229
Deferred income tax expense
(benefit):
Federal 10 (59) 7
State 1 (12) 1
Total 11 (71) 8
Total $1,486 $1,410 $1,237
</TABLE>
Total income tax expense differed from the amount computed using the
applicable statutory Federal income tax rate of 34 percent applied to pretax
earnings for the following reasons:
<TABLE>
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Income tax expense at statutory rate $1,646 $1,502 $1,366
Increase (decrease) resulting from:
Tax exempt interest (312) (235) (281)
Reduction of interest expense on debt
used to carry tax-exempt securities 43 25 19
State income tax, net of federal benefit 7 98 87
Other, net 102 20 46
Total $1,486 $1,410 $1,237
Effective tax rate 30.7% 31.7% 30.8%
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to deferred tax assets
and liabilities at December 31, 1996 and 1995 are presented below:
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses and other
real estate not currently deductible $ 779 $ 677
Accrued pension cost not currently deductible 99 116
Accrued expenses 113 135
Other 27 15
Total deferred tax assets 1,018 943
Deferred tax liabilities:
Unrealized gain on securities available for sale (154) (339)
Differences between book and tax basis of property (498) (48)
Other (296) (94)
Total deferred tax liabilities (948) (481)
Net deferred tax asset $ 70 $ 462
</TABLE>
There was no valuation allowance during either 1996 or 1995.
Note 11. Retirement Plans
The Company sponsors a defined benefit retirement plan which covers all
full-time employees who have met certain age and length of service requirements.
It is the Company's policy to fund the retirement plans in amounts deductible
for federal income tax purposes. Plan assets consist of corporate debt
securities, common stock and U.S. Government securities. Charges to operating
expenses with respect to the retirement plans were $244, $227 and $175 in 1996,
1995 and 1994, respectively, and were comprised of the following:
<TABLE>
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost $248 $214 $182
Interest on projected benefit obligation 196 141 128
Return on plan assets (204) (132) (124)
Net amortization and deferral 4 4 (11)
Total expense $244 $227 $175
</TABLE>
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation, were 7.5% and 5%, respectively, for 1996, 7% and 5%,
respectively, for 1995, and 7% and 5%, respectively, for 1994. The expected
long-term rate of return on plan assets was 8% for all three years.
<TABLE>
The funding status of the plans is as follows:
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit $ 3,354 $ 1,378
Non-vested benefits 118 74
Accumulated benefit obligation 3,472 1,452
Effect of future compensation 1,160 771
Projected benefit obligation 4,632 2,223
Plan assets at fair value 5,697 2,058
Projected benefit obligation
in excess of plan assets (1,065) 165
Unrecognized prior service cost (37) (40)
Unrecognized net gain (loss) from past
experience different from that assumed
and effects of change in assumptions 374 203
Unrecognized net obligation
being recognized over 28 years (30) (31)
Accrued (prepaid) pension costs $ (758) $ 297
</TABLE>
Note 12. Stock Options
Effective January 1, 1996, the Company adopted SFAS No. 123, Accounting for
Stock-Based Compensation. This Statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. Those plans
include all arrangements by which employees receive shares of stock or other
equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of the employer's stock. Examples are
stock purchase plans, stock options, restricted stock and stock appreciation
rights. The accounting requirements of this Statement are effective for
transactions entered into in fiscal years that begin after December 31, 1995.
The Company has two incentive stock option plans, the South Alabama Incentive
Stock Option Plan (the "SAB Plan") and the Mobile National Stock Option Plan
(the "MBNC Plan"). The Company accounts for these plans under APB No. 25,
under which no compensation cost has been recognized.
The MBNC Plan was terminated in 1993 upon the creation of South Alabama
Bancorporation. The remaining granted and outstanding options are convertible
into common shares of the Company. At December 31, 1996, options for 36 shares
were granted and outstanding under the MBNC Plan.
The Company may grant options for up to 150 shares under the SAB Plan and has
granted options outstanding of 114 shares through December 31, 1996. Under
both the SAB and MBNC Plans, the option exercise price equals the stock's
market price at the date of grant. The options vest upon issuance and expire
after ten years.
Had compensation costs for these plans been determined consistent with FASB
Statement No. 123, the Company's net income and earnings per share would have
been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1995
<S> <S> <C> <C>
Net Income: As reported $3,354 $3,007
Pro forma 3,242 2,831
Earnings per share: As reported $ 1.05 $ 1.00
Pro forma 1.01 .94
</TABLE>
Because the Statement 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation costs
may not be representative of that to be expected in future years.
A summary of the status of the Company's two stock option plans at December 31,
1996 and 1995 and the changes during the years then ended is as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------- ----------------------------------------
Weighted Avg. Option Price Weighted Avg. Option Price
Shares Exercise price Per Share Shares Exercise Price Per Share
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 124 $11.71 $5.125 to $13.25 89 $11.09 $5.125 to $13.25
Granted 26 $13.50 $13.50 38 $13.00 $13.00
Exercised 3 $10.00 $10.00
Outstanding at end of year 150 $12.02 $5.125 to $13.5 124 $11.71 $5.125 to $13.25
Exercisable at end of year 124 $11.71 86 $11.13
Weighted average fair value of
the options granted $4.27 $4.56
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: risk-free interest
rates of 5.73% and 7.03%; expected dividend yields of 2.4% and 2.5%; expected
lives of 10 years; and expected volatility of .22 for both years.
Note 13. Regulatory Matters
The Company's principal source of funds for dividend payments is dividends
from the Banks. Dividends payable by a bank in any year, without prior approval
of the appropriate regulatory body, are limited to the bank's net profits (as
defined) for that year combined with its net profits for the two preceding
years. The dividends, as of January 1, 1997, that the Banks could declare,
without the approval of regulators, amounted to $3,562.
The Banks are subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the
Banks' financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Banks must meet specific
capital guidelines that involve quantitative measures of the Banks' assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Banks' capital amounts and classifications are also
subject to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Banks to maintain minimum amounts and ratios (set forth in the
tables below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of December 31, 1996 and
1995, that the Banks meet all capital adequacy requirements to which they are
subject.
As of December 31, 1996 and 1995, the most recent notification from the
regulatory authorities categorized the Banks as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Banks must maintain minimum total risk-based, Tier I risk-
based, Tier I leverage ratios as set forth in the tables below.
Actual capital amounts and ratios are presented in the table below for the
Banks and the consolidated company.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
December 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets)
Consolidated $45,275 20.5% $17,668 8.0%
Bank of Mobile 15,591 14.1 8,855 8.0 $11,069 10.0%
First National Bank 15,739 22.9 5,488 8.0 6,861 10.0
Monroe County Bank 13,054 27.5 3,798 8.0 4,747 10.0
Tier I Capital (to Risk Weighted Assets)
Consolidated $42,675 19.3% $8,834 4.0
Bank of Mobile 14,206 12.8 4,427 4.0 $6,641 6.0%
First National Bank 15,014 21.9 2,744 4.0 4,116 6.0
Monroe County Bank 12,564 26.5 1,899 4.0 2,848 6.0
Tier I Capital (to Average Assets)
Consolidated $42,675 13.9% $12,304 4.0%
Bank of Mobile 14,206 9.9 5,740 4.0 $8,610 6.0%
First National Bank 15,014 14.2 4,242 4.0 6,364 6.0
Monroe County Bank 12,564 21.7 2,348 4.0 3,523 6.0
</TABLE>
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
December 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets)
Consolidated $30,461 12.3% $19,836 8.0%
Bank of Mobile 14,870 10.3 11,574 8.0 14,467 10.0%
First National Bank 14,615 14.2 8,226 8.0 10,282 10.0
Tier I Capital (to Risk Weighted Assets)
Consolidated $28,239 11.4% $9,918 4.0%
Bank of Mobile 13,348 9.2 5,787 4.0 8,680 8.0%
First National Bank 13,915 13.5 4,113 4.0 6,169 6.0
Tier I Capital (to Average Assets)
Consolidated $28,239 11.8% $9,579 4.0%
Bank of Mobile 13,348 10.0 5,355 4.0 8,032 6.0%
First National Bank 13,915 13.3 4,196 4.0 6,294 6.0
</TABLE>
Note 14. Fair Value of Financial Instruments
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
disclosure of fair value information about financial instruments, whether or
not recognized in the statement of condition, for which it is practicable to
estimate that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to Management as of December 31,1996. Such
amounts have not been comprehensively revalued for purposes of these financial
statements since those dates and, therefore, current estimates of fair value
may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating
its fair values disclosures for financial instruments:
Investment Securities - Fair values for investment securities are primarily
based on quoted market prices. If a quoted market price is not available, fair
value is estimated using market prices for similar securities.
Loans - For equity lines and other loans with short-term or variable rate
characteristics, the carrying value reduced by an estimate for credit losses
inherent in the portfolio is a reasonable estimate of fair value. The fair value
of all other loans is estimated by discounting their future cash flows using
interest rates currently being offered for loans with similar terms, reduced
by an estimate of credit losses inherent in the portfolio. The discount rates
used are commensurate with the interest rate and prepayment risks involved for
the various types of loans.
Deposits - The fair value disclosed for demand deposits (i.e., interest and
non-interest bearing demand, savings and money market savings) is, as required
by SFAS No. 107, equal to the amounts payable on demand at the reporting date
(i.e., their carrying amounts). Fair values for certificates of deposits are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated monthly
maturities.
Commitments to extend credit and standby letters of credit - The value of
these unrecognized financial instruments is estimated based on the fee income
associated with the commitments which, in the absence of credit exposure, is
considered to approximate their settlement value. As no significant credit
exposure exists and because such fee income is not material to the Company's
financial statements at December 31, 1996, the fair value of these commitments
is not presented.
Many of the Company's assets and liabilities are short-term financial
instruments whose carrying amounts reported in the statement of condition
approximate fair value. These items include cash and due from banks, interest-
bearing bank balances, federal funds sold and other short-term borrowing.
The estimated fair values of the Company's remaining on-balance sheet financial
instruments as of December 31, 1996 and 1995, are summarized below.
<TABLE>
<CAPTION>
1996 1995
--------------------- ----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Financial assets:
Investment securities available for sale $100,912 $100,912 $ 40,752 $ 40,752
Investment securities held to maturity 16,861 17,015 21,441 21,664
Loans, net of allowance for loan losses 186,430 185,624 141,803 140,612
Financial liabilities:
Deposits $295,287 $295,379 $210,092 $210,357
</TABLE>
SFAS No. 107 excludes certain financial instruments and all non-financial
instruments from its disclosure requirements. The disclosures also do not
include certain intangible assets, such as customer relationships, deposit
base intangibles and goodwill. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
Note 15. Commitments and Contingencies
In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit, letters of credit
and others, which are not included in the consolidated financial statements.
The financial instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of amounts recognized in the financial statements.
A summary of these commitments and contingent liabilities is presented below.
<TABLE>
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Standby letters of credit $ 1,412 $ 1,503
Commitments to extend credit 48,060 38,345
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by the Company upon extension of credit, is based on
Management's credit evaluation of the counter-party. Collateral held varies
but may include accounts receivable, inventory, property, plant, and equipment,
and income-producing commercial properties.
At December 31, 1996, the Company was under contract to lease certain bank
premises and equipment. The terms of these contracts vary and are subject to
certain changes at renewal. Future minimum rental payments required under
operating leases having initial or remaining noncancelable terms in excess of
one year as of December 31, 1996 were not significant.
Rental expense under all operating leases amounted to $195, $276, and $239 in
1996, 1995, and 1994, respectively.
The Company and its Banks are the subject of claims and disputes arising in
the normal course of business. Management, through consultation with their
legal counsel, is of the opinion that these matters will not have a material
impact on results of operations.
Note 16. Non-Interest Expense
<TABLE>
Components of other non-interest expense are as follows:
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Advertising $ 130 $ 222 $ 247
FDIC assessment 7 215 407
Professional services 290 236 274
Stationery and supplies 286 231 218
Other 1,866 1,611 1,650Total $2,579 $2,515 $2,796
</TABLE>
Note 17. Subsequent Event
On March 25, 1997, the Company's Board of Directors declared a special
dividend of $1.25 per share. The dividend, payable May 1, 1997, to shareholders
of record as of April 7, 1997, totaled approximately $5.3 million.
Note 18. Condensed Parent Company Financial Statements
<TABLE>
Condensed Statements of Condition
December 31,
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
Cash and short-term investments $ 26 $ 200
Investments
Investment in subsidiaries - eliminated
upon consolidation 46,196 27,817
Land 691 691
Other assets 179 95
Total $47,092 $28,803
LIABILITIES
Other liabilities $ 4 $ 6
SHAREHOLDERS' EQUITY
Preferred stock - no par value
Shares authorized - 500
Share outstanding - none
Common stock - $.01 par value
Shares authorized - 5,500
Shares outstanding - 4,227 in 1996 and 3,002 in 1995 42 30
Capital surplus 33,092 16,538
Net unrealized gain on securities
available for sale 253 558
Retained earnings 13,701 11,671
Total shareholders' equity 47,088 28,797
Total $47,092 $28,803
</TABLE>
<TABLE>
Condensed Statements of Operations
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash dividends from subsidiaries $1,442 $1,460 $ 780
Interest income 2
Securities gain 46
Other income 1 8
Total income 1,442 1,507 790
Expenses - other 207 100 73
Income before undistributed income of
subsidiaries 1,235 1,407 717
Equity in undistributed earnings of
subsidiaries 2,119 1,600 2,065
Net Income $3,354 $3,007 $2,782
</TABLE>
<TABLE>
Condensed Statements of Cash Flows
Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,354 $ 3,007 $ 2,782
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in undistributed earnings of
subsidiaries (2,119) (1,600) (2,065)
Gain on sale of securities (46)
Other (85) (58) (428)
Net cash provided by operating activities 1,150 1,303 289
INVESTING ACTIVITIES
Sale of investment securities available
for sale 50 200
Purchase of land (691)
Net cash provided by (used in)
investing activities (641) 200
FINANCING ACTIVITIES
Cash dividends (1,324) (960) (780)
Proceeds from issuance of stock 31
Net cash used in financing activities (1,324) (929) (780)
NET DECREASE IN CASH AND CASH EQUIVALENTS (174) (267) (291)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 200 467 758
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 26 $ 200 $ 467
</TABLE>
Exhibit (21).1
SUBSIDIARIES OF SOUTH ALABAMA BANCORPORATION, INC.
(1) The Bank of Mobile, organized under the laws of the State of Alabama.
(2) First National Bank, organized under the laws of the United States of
America.
(3) Monroe County Bank, organized under the laws of the State of Alabama.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 20,230
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 9,683
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 100,912
<INVESTMENTS-CARRYING> 16,861
<INVESTMENTS-MARKET> 17,015
<LOANS> 189,030
<ALLOWANCE> (2,600)
<TOTAL-ASSETS> 350,077
<DEPOSITS> 295,287
<SHORT-TERM> 5,162
<LIABILITIES-OTHER> 2,540
<LONG-TERM> 0
0
0
<COMMON> 46,835
<OTHER-SE> 253
<TOTAL-LIABILITIES-AND-EQUITY> 350,077
<INTEREST-LOAN> 14,632
<INTEREST-INVEST> 4,745
<INTEREST-OTHER> 460
<INTEREST-TOTAL> 19,837
<INTEREST-DEPOSIT> 7,929
<INTEREST-EXPENSE> 8,132
<INTEREST-INCOME-NET> 11,705
<LOAN-LOSSES> 298
<SECURITIES-GAINS> 108
<EXPENSE-OTHER> 9,156
<INCOME-PRETAX> 4,840
<INCOME-PRE-EXTRAORDINARY> 3,354
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,354
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
<YIELD-ACTUAL> 4.87
<LOANS-NON> 1,098
<LOANS-PAST> 190
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,180
<ALLOWANCE-OPEN> 2,222
<CHARGE-OFFS> 534
<RECOVERIES> 114
<ALLOWANCE-CLOSE> 2,600
<ALLOWANCE-DOMESTIC> 2092
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 508
</TABLE>
South Alabama Bancorporation, Inc.
Post Office Box 3067
Mobile, Alabama 36652
Telephone 334/431-7800
To the Stockholders of South Alabama Bancorporation, Inc.
F. MICHAEL JOHNSON CHIEF FINANCIAL OFFICER AND SECRETARY
NOTICE IS HEREBY GIVEN that, pursuant to call of its Directors, the Annual
Meeting of the Stockholders of South Alabama Bancorporation, Inc. will be
held at 100 St. Joseph Street, Mobile, Alabama, on May 8, 1997, at 10:00
a.m., C.D.T., for the purpose of considering and voting upon the following
matters:
Statement.
1. Election of Directors. Election as directors of the fourteen nominees
named in the enclosed Proxy
2. Amendment of the 1993 Incentive Compensation Plan. Amendment of the
company's 1993 Incentive Compensation Plan to increase the number of shares
of Common Stock reserved for issuance under the plan from 150,000 shares to
200,000 shares.
3. Other Business. Transaction of such other business as may be brought
before the meeting or any adjournment thereof. Management currently knows
of no other business to be presented.
Only those stockholders of record at the close of business on March 21,
1997, shall be entitled to notice of and to vote at the meeting.
We hope very much that you will attend the meeting, but, whether you plan
to attend or not, we would appreciate your signing and returning the
enclosed Proxy. Should you attend the meeting in person, the Proxy can be
revoked at your request.
Management sincerely appreciates your support and cooperation, and we
earnestly solicit your continued help during 1997.
By Order of the Board of Directors,
/s/ F. Michael Johnson
F. Michael Johnson
Chief Financial Officer and Secretary
NOTICE: YOUR PROXY FORM AND RETURN ENVELOPE ARE INSIDE THIS ENVELOPE.
SOUTH ALABAMA BANCORPORATION,INC.
100 St. Joseph Street, Mobile, Alabama 36602
PROXY STATEMENT
Annual Meeting, May 8, 1997, 10:00 a.m., C.D.T.
This Proxy Statement and the enclosed Proxy are being mailed on April 7,
1997, to stockholders of South Alabama Bancorporation, Inc. ("South
Alabama") in connection with the solicitation of proxies by the Board of
Directors of South Alabama for use at the Meeting of Stockholders on May 8,
1997, and any adjournment thereof.
South Alabama is the parent company and owner of 100% of the stock of The
Bank of Mobile ("BOM"), headquartered in Mobile, Alabama, First National
Bank, Brewton ("FNBB"), located in Brewton, Alabama, and Monroe County Bank
("MCB"), Monroeville, Alabama. Prior to mergers in 1993 and 1996, FNBB and
MCB were owned by separate bank holding companies.
VOTING SECURITIES
South Alabama's only class of stock outstanding is its Common Stock, $.01
par. All stockholders of record at the close of business March 21, 1997,
will be entitled to vote their shares on any matter brought before the
meeting. The number of shares of South Alabama Common Stock outstanding on
March 21, 1997, was 4,227,136. Each share is entitled to one vote.
Cumulative voting is not permitted in the election of directors.
Security Ownership of Directom,
Nominees, 5% Stockholders and Officers
The only person known to beneficially own more than 5% of South Alabama's
outstanding Common Stock is Thomas E. McMillan, Jr. The tabulation below
reflects the number of shares beneficially owned by (i) Thomas E. McMillan,
Jr.; (ii) each director and nominee of South Alabama; (iii) the executive
officers named in the Summary Compensation Table; and (iv) the directors
and officers of South Alabama, as a group.
<TABLE>
Number of Shares and Nature of Beneficial
Ownership as of March 21,1997(l)
<CAPTION>
Voting/lnvestment Power
Name of Beneficial Owner or Group
(and Address of Percentage
5% Stockholders) Sole Shared Aggregate of Total
Outstanding(2)
<S> <C> <C> <C> <C>
Thomas E. McMillan, Jr 72,870(3) 206,306(4) 279,176 6.60%
John B. Bamett, Jr. (5) 72,501 112,407(6) 184,908 4.37
John B. Barnett, III (5) 88,503 35,720(7) 124,223 2.93
Stephen G. Crawford 52,000 19,700(8) 71,700 1.69
Haniel F. Croft 2,162 2,162 .05
David C. De Laney 13,000 18,700(9) 31,700 .74
Lowed J. Friedman 73,533 2,000(10) 75,533 1.78
Broox G. Garrett, Jr. (11) 4,361 54,020(12) 58,381 1.38
W. Dwight Harrigan 125,500 20,000(13) 145,500 3.44
James P. Hayes, Jr 3,410 25,079(14) 28,489 .67
Clifton C. Inge 25,300 25,300 .59
W. Bibb Lamar, Jr 40,305(15) 895(16) 41,200 .95
J. Richard Miller, III (17) 111,942(18) 2,500(19) 114,442 2.70
J. Stephen Nelson 19,281(20) 395(21) 19,676 .45
Earl H. Weaver (11) (17) 39,614 36,607(22) 76,221 1.80
All directors and officers of
of South Alabama as a group
(17 persons) 774,443 534,329 1,308,772(23) 30.39%
</TABLE>
(1) The number of shares reflected are shares that, under applicable
regulations, are deemed to be beneficially owned. Shares deemed to be
beneficially owned, under those regulations, include shares as to which,
through any contract, relationship, arrangement, understanding, or
otherwise, either voting power or investment power is held or shared
directly or indirectly. Shares deemed to be beneficially owned also include
shares which may be acquired within sixty days. The total number of shares
beneficially owned is broken down, when applicable, into the following two
categories: (i) shares as to which voting power/investment power is held
solely; and (ii) shares as to which voting power/investment power is
shared. The percentage calculation is based on the aggregate number of
shares beneficially owned.
(2) The percentage calculations for Mr. Lamar and Mr. Nelson assume that
all 56,192 shares subject to their exercisable outstanding options at March
21, 1997, were outstanding. The percentage calculation for all directors
and officers of South Alabama, as a group, assumes that all 78,192 shares
subject to exercisable outstanding options at March 21, 1997, were
outstanding.
(3) Includes 29,600 shares owned by Thomas, Ltd., a limited partnership.
Mr. McMillan is managing general partner of the partnership.
(4) Includes 114,956 shares owned by McMillan, Ltd., a limited partnership
of which Mr. McMillan is a managing partner, and 72,036 shares and 19,314
shares owned by Mr. McMillan as co-trustee under the wills of his
grandmother and grandfather, respectively.
(5) Mr. Barnett, Jr. is the father of Mr. Barnett, III.
(6) Includes 70,947 shares owned by Mr. Barnett, Jr.'s wife and 41,460
shares owned as co-trustee under the will of J. B. Barnett, deceased. Mr.
Barnett, Jr. disclaims beneficial ownership of these shares.
(7) Includes 5,195 shares owned by Mr. Barnett, III's wife and 30,525
shares held by Mr. Barnett as co-trustee of three separate irrevocable
trusts for his three children. Mr. Barnett, III disclaims beneficial
ownership of these shares.
(8) Includes 16,000 shares owned by the trustee of Mr. Crawford's
self-directed subaccount of his law firm's retirement plan. The figure also
includes the following shares as to which Mr. Crawford disclaims any actual
beneficial ownership: 3,000 shares owned by Mr. Crawford as trustee for his
two children; 500 shares owned by his wife; and 200 shares owned by his
wife as custodian for two children under the Uniform Transfers to Minors
Act.
(9) All such shares are owned by the trustee of Mr. De Laney's employer's
retirement plan. Mr. De Laney may be deemed to share voting and investment
power with respect to those shares.
(10) Includes 2,000 shares owned by Mr. Friedman's wife, as to which
shares he may be deemed to share voting and investment power.
(11) Mr. Garrett and Mr. Weaver are first cousins.
(12) Includes 2,714 shares owned by Mr. Garrett as custodian for two
children under the Uniform Transfers to Minors Act, 44,822 shares as
trustee of the Broox G. Garrett Family Trust and 6,484 shares owned jointly
with his wife as joint tenants.
(13) All such shares are owned by Mr. Harrigan's wife as trustee of two
separate trusts of which Mr. Harrigan's children are the beneficiaries. Mr.
Harrigan may be deemed to share voting and investment power with respect to
those shares.
(14) All such shares are owned by Mr. Hayes as co-trustee for the
Elizabeth Brannon Hayes Marital Trust.
(15) Includes 38,500 shares subject to purchase within 60 days pursuant to
options granted to Mr. Lamar, as to which he would have sole voting and
investment power.
(16) Includes 650 shares owned by Mr. Lamar as custodian under the Uniform
Transfers to Minors Act and 145 shares owned by his wife through her
self-directed IRA account.
(17) Mr. Miller is Mr. Weaver's wife's first cousin.
(18) Includes 111,452 shares owned by Miller Investments, a general
partnership. Mr. Miller is Managing Partner of the partnership.
(19) All such shares are owned by Mr. Miller as trustee of two separate
trusts of which Mr. Miller's children are the beneficiaries.
(20) Includes 17,692 shares subject to purchase within 60 days pursuant to
options granted to Mr. Nelson, as to which he would have sole voting and
investment power.
(21) All such shares are owned by Mr. Nelson's wife.
(22) Includes 27,698 shares owned by Mr. Weaver's wife as to which Mr.
Weaver disclaims any actual beneficial ownership and 8,909 shares owned
jointly with his wife as tenants in common.
(23) Includes 78,192 shares subject to purchase within 60 days pursuant to
options granted to officers of South Alabama, as to which they would have
sole voting and investment power.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that South
Alabama's directors and executive officers, and persons who own more than
ten percent of South Alabama's common stock, file with the Securities and
Exchange Commission reports relating to their ownership and changes in
ownership of common stock and other equity securities of South Alabama.
Management believes, based solely upon information furnished to South
Alabama and written representations that no other reports were required,
that all persons subject to the reporting requirements of Section 16(a)
during 1996 filed the reports on a timely basis, except that Earl H. Weaver
filed late a report of the gift in March to his two daughters of 1,441
shares each.
ELECTION OF DIRECTORS
Number and Term
The Bylaws of South Alabama provide that the number of directors to be
elected at the Annual Meeting will be fixed by resolution of the Board of
Directors. The Board has adopted a resolution fixing at fourteen the number
of directors to be elected at the 1997 Annual Meeting. The directors so
elected will serve a term of one year.
Nominees
The persons named below are the Board's nominees for election as
directors, and each has agreed to serve if elected. All nominees are
members of the present South Alabama Board of Directors.
John B. Barnett, III
A South Alabama director since 1996
Mr. Barnett, III, age 44, has been Executive Vice President since 1996 of
South Alabama and Chairman, since 1994, and director, since 1983, of MCB.
Mr. Barnett is a partner in the law firm of Barnett, Bugg ~ Lee, Attorneys,
Monroeville, Alabama, and has practiced law since 1983. Prior to 1994 Mr.
Barnett was Vice Chairman (1989 - 1994), MCB. From 1983 until its merger
with South Alabama, Mr. Barnett served as Vice President and a director of
MCB's holding company.
Stephen G. Crawford
A South Alabama director since 1985
Mr. Crawford, age 57, a member of the law firm Hand Arendall, L.L.C.,
Mobile, Alabama, has practiced law since 1964. Mr. Crawford has been a
director of BOM since 1986.
Haniel F. Croft
A South Alabama director since 1996
Mr. Croft, age 56, has been President since 1979, Chief Executive Officer
since 1988, and a director since 1972, of MCB. From 1982 until its merger
with South Alabama, Mr. Croft served as Vice President and a director of
MCB's holding company.
David C. De Laney
A South Alabama director since 1985
Mr. De Laney, age 49, is President of First Small Business Investment
Company of Alabama, Mobile, Alabama, a position he has held since 1978. Mr.
De Laney has been a director of BOM since 1986.
Lowell J. Friedman
A South Alabama director since 1986
Mr. Friedman, age 67, has been President of Creola Investment Corporation,
Mobile, Alabama, a land and timber holding company, since 1975. Mr.
Friedman also directs personal investments in real estate and oil and gas
properties. Mr. Friedman has been a director of BOM since 1986.
Broox G. Garrett, Jr.
A South Alabama director since 1993
Mr. Garrett, age 48, is an attorney and partner in the law firm of
Thompson, Garrett and Hines, Brewton, Alabama, where he has been employed
since 1973. Mr. Garrett has been a director of FNBB since 1983 and was a
director of FNBB's holding company from 1986 until its merger with South
Alabama.
W. Dwight Harrigan
A South Alabama director since 1997
Mr. Harrigan, age 59, has alternated annually, since 1983, as President
and Executive Vice President of Scotch Lumber Company, Fulton, Alabama. Mr.
Harrigan has also served, since 1987, as Chairman of Harrigan Lumber
Company, Monroeville, Alabama. Mr. Harrigan has been a director of BOM
since 1986.
James P. Hayes, Jr.
A South Alabama director since 1993
Mr. Hayes, age 49, is a financial consultant and has served as President
of J. P. Hayes & Company, Inc. since 1985. Mr. Hayes has served since 1985
as a director of FNBB and was a director of FNBB's holding company from
1986 until its merger with South Alabama.
Clifton C. Inge
A South Alabama director since 1985
Mr. Inge, age 60, has been Chairman of the Board since 1991 of Willis
Corroon Corporation of Mobile, Mobile, Alabama (formerly W.K.P. Wilson &
Son, Inc.), a subsidiary of Willis Corroon Group PLC, insurance brokers.
Mr. Inge has been a director of BOM since 1986.
W. Bibb Lamar, Jr. A South Alabama director since 1989 Mr. Lamar, age 53,
has been President, Chief Executive Officer and director of South Alabama
and BOM since 1989.
Thomas E. McMillan, Jr.
A South Alabama director since 1985
Mr. McMillan, age 48, has been President of the general partner of
Smackco, Ltd., Brewton, Alabama, a limited partnership engaged in oil and
gas development, since 1974. Mr. McMillan has been a director of FNBB since
1977, a director of BOM since 1986 and was a director of FNBB's holding
company from 1986 until its merger with South Alabama.
J. Richard Miller, III
A South Alabama director since 1991
Mr. Miller, age 50, has been managing partner since 1992 of Miller
Investments, and from 1989 through 1991 was managing partner of its
predecessor entities, Miller, Ltd. and Jern, Ltd., all of which are
Brewton, Alabama partnerships engaged in private investments. Mr. Miller
has been a director of FNBB since 1990, a director of BOM since 1991, and
was a director of FNBB's holding company from 1990 until its merger with
South Alabama.
J. Stephen Nelson
A South Alabama director since 1993
Mr. Nelson, age 59, has been Chairman since 1993 of South Alabama and
Chairman, since 1993, Chief Executive Officer, since 1984, and director,
since 1979, of FNBB. From 1986 until its merger with South Alabama, Mr.
Nelson was also President and a director of FNBB's holding company.
Earl H. Weaver
A South Alabama director since 1993
Mr. Weaver, age 58, has been the sole proprietor of Earl H. Weaver
Management Services, a timber, oil, gas and general management concern,
since 1979. Mr. Weaver has served since 1981 as a director of FNBB and was
a director of FNBB's holding company from 1986 until its merger with South
Alabama.
Although the Board of Directors does not contemplate that any nominee
named on pages 4 or 5 will be unavailable for election, if vacancies occur
unexpectedly, the shares covered by the Proxy will be voted for the Board's
substitute nominees, if any, or in such other manner as the Board of
Directors deems advisable.
The Bylaws of South Alabama permit the Board of Directors, between annual
meetings of stockholders, to increase the membership of the Board and to
fill any position so created and any vacancy otherwise occurring. Any new
director so elected holds office until the next annual stockholders'
meeting.
DIRECTOR COMMITTEES AND ATTENDANCE
The South Alabama Board of Directors held seven meetings during 1996. The
Board has the following standing committees: Executive, Audit,
Personnel/Compensation and Trust. The Executive Committee (whose members
presently are Messrs. Crawford, Friedman, Lamar, McMillan, Miller, Nelson
and Weaver) between meetings of the Board may exercise all powers of the
Board except as limited by the Bylaws.
Actions taken by the Executive Committee are subject to ratification by
the Board at its next regular meeting. The committee had one meeting in
1996. The Audit Committee (whose members presently are Messrs. De Laney,
Friedman and Garrett) reviews the scope and plan of internal and external
audits, audit results and the adequacy of internal accounting controls and
makes recommendations to the Board on the appointment of outside
accountants. The committee held one meeting in 1996. The
Personnel/Compensation Committee (whose members presently are Messrs.
Crawford, Hayes, Inge and McMillan) sets compensation for each of the
Chairman and the Chief Executive Officer of South Alabama and reviews
guidelines within which the subsidiary bank boards of directors fix
compensation. The committee held two meetings in 1996. The Trust Committee
(whose members presently are Messrs. Crawford, Garrett, Inge and McMillan)
reviews and makes recommendations to the Board on various benefit plans.
The committee had one meeting in 1996. During 1996, director Friedman
attended fewer than 75~o of the total number of meetings of the Board of
Directors of South Alabama and meetings of committees of which he was a
member.
Each subsidiary bank has standing committees composed of directors from
their respective Boards. BOM, FNBB and MCB all have a Finance (or Loan),
Audit and Personnel (or Salary) Committee. In addition, BOM and FNBB have
Trust and Directors Nominating Committees.
EXECUTIVE COMPENSATION
Five Year Total Stockholder Return Comparison
The following indexed graph compares South Alabama's five-year commutative
total stockholder return with the NASDAQ Market Index and with a published
peer group industry index, prepared by Media General Financial Services,
comprised of bank holding companies in the east south central section of
the United States. The comparison assumes the investment of $100 on
December 31, 1991, with dividends reinvested quarterly through December 31,
1996. Returns of each component issuer have been weighted according to that
issuer's market capitalization.
GRAPH
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
SOUTH ALABAMA BANCORPORATION $1O0 $163.64 $225.84 $239.69 $269.52 $267.88
MGFS EAST SOUTH CENTRAL BANKS 100 103.72 109.63 110.09 147.93 191.11
NASDAQ MARKET INDEX 100 100.98 121.13 127.17 164.96 204.98
</TABLE>
Report of Personnel/Compensation Committee of the Board Of Directors
General Policies
The Personnel/Compensation Committee of the Board of Directors of South
Alabama (the "Committee") has responsibility for recommending to the Board
the compensation of the Chairman and the Chief Executive Officer of South
Alabama. Additionally, the Committee has oversight responsibility with
respect to the compensation of all other officers of the South Alabama
subsidiaries whose salaries exceed $50,000 annually or who are executive
officers of the subsidiaries. Other than the Chairman and the Chief
Executive Officer, other salaries are set at the subsidiary level.
The overall objectives of South Alabama's compensation program are to
attract and retain the best possible banking talent, to motivate its
officers to achieve the goals established in the business strategy, to
recognize both individual contributions and overall business results and to
link shareholder and executive interests through long term equity-based
plans.
Base Salary. Executive officer salaries are reviewed annually. Individual
salaries are set only after consideration by the subsidiary personnel
committees of the off~cer's level of responsibility, experience and
individual performance, and review of external competitive practices. In
order to determine external competitive practices, the personnel committees
review, and expect to continue to review, salary surveys conducted by
independent compensation consulting firms. In establishing the base
salaries for South Alabama's executive officers, the personnel committees
consider the results of such surveys, but may establish the base salary for
executives above or below the averages indicated in those surveys. The
amounts paid to the Chairman and the Chief Executive Officer of South
Alabama and to the President and Chief Executive Officer of MCB in 1996 are
shown in the Summary Compensation Table under the heading "Annual
Compensation-Salary."
BOM Incentive Plan. The BOM Incentive Plan for 1996 was designed to reward
officers for achieving and exceeding current year net income goals of BOM
and goals established for certain officers. Upon completion of the business
plan for 1996, the BOM Chief Executive Officer presented to BOM's personnel
committee the net income goal of BOM for its approval. The incentive
opportunity for each individual officer was dependent upon that officer's
level of responsibility and the judgment of the BOM personnel committee of
that officer's potential contribution to BOM's ability to achieve its net
income goal. The net income goal of BOM was exceeded, and awards were made
by the personnel committee after consideration of individual performance
within the parameters of the Incentive Plan. The amount awarded to the
Chief Executive Officer of South Alabama under the BOM Incentive Plan for
1996 is set forth in the "Annual Compensation-Bonus" column of the Summary
Compensation Table.
FNBB Incentive Compensation Plan. Each year FNBB establishes a pool of
funds equal to 15% of total officers' salaries. Based upon the performance
of FNBB, the department and the individual, an officer can earn up to 15 /o
of his or her base salary, payable in a lump sum after the close of the
year. For each officer other than the top three executives of FNBB, the
formula is based 40% on FNBB's achieving required levels of return on
assets, 40% on achievement of individual and departmental goals as
established at the beginning of the year, and 20% on the results of the
officers' annual review as conducted by his or her supervisor. Each of the
three most highly ranked officers automatically receives the same
percentage of his total available amount as the average for all other
officers.. In 1996 approximately 95% of the pool was distributed. The
amount awarded to the Chairman of South Alabama under the FNBB Incentive
Compensation Plan for 1996 is set forth in the "Annual Compensation-Bonus"
column of the Summary Compensation Table.
MCB Performance Compensation Plan. The MCB Performance Compensation Plan
was designed to maximize long-term shareholder value by maximizing and
balancing long-term profit and growth. After the budget is completed,
senior management meets and sets goals for increases over the previous year
for loan volume, deposit volume, net interest margin, non-interest income,
loan losses and productivity. Each category is weighted depending on where
management feels the need to place the most emphasis for that year. At the
end of the year, if goals are exceeded compensation is paid to the officers
and employees based on the weighted categories and the amount by which the
goals are exceeded. All officers and employees receive the same percent of
their gross annual salary.
Stock Options. Stock options are South Alabama's and its subsidiaries'
principal long-term incentive vehicle. The committee believes that stock
options not only motivate and reward executives for exceptional
performance, but also join their goals more closely with those of the South
Alabama stockholders, by affording the recipients the possibility of equity
interests in South Alabama. The stock option plan is designed to encourage
a long-term perspective by providing a ten-year term, which includes a
nine-year exercise period and a one-year period after the date of grant
during which the option cannot be exercised.
The number of options awarded to each officer is tied to the officer's
level of responsibility, with the result that senior executive officers
typically receive greater awards than other officers. The Committee takes
into consideration previous grants to an individual officer as well as all
other factors.
The shares of the Common Stock covered by options awarded during 1996 to
the Chairman and the Chief Executive Officer of South Alabama and to the
President and Chief Executive Officer of MCB are shown in the table
entitled "Option Grants in Last Fiscal Year," and the options previously
granted and outstanding at year-end are shown in the table entitled
"Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values."
Other Compensation. Additionally, BOM, FNBB and MCB maintain broad-based
employee benefit plans, including pension plans and, in the case of FNBB
and MCB, profit sharing plans, as described below. Officers of South
Alabama participate in such plans on the same basis as other employees.
Chief Executive Compensation
The Committee meets in executive sessions to review the Chief Executive
Officer's salary and from time to time, but not necessarily annually,
consults with salary administration firms and/or uses compensation surveys
with respect to competitors' practices. Compensation of the Chief Executive
Officer is determined in accordance with the same basic factors as
described above for other executive of ricers.
The 1996 base salary increase for the Chief Executive Officer was
established after a review of market data from independent compensation
surveys, including the salary analysis provided by its consultant. The
Committee is empowered to recommend to the Board the Chief Executive
Officer's base salary in its discretion and without regard to particular
factors. The Committee considered, however, that 1995 corporate earnings
objectives had been exceeded. The Committee also considered the achievement
of certain other strategic objectives, both financial and otherwise, under
his leadership, including improved asset quality, capital ratios, liquidity
ratios, interest rate margins and other financial goals under the business
plan for 1995.
The 1996 bonus for the Chief Executive Officer for achieving the net
income goal of BOM was $30,000, an amount equal to approximately 24% of his
1996 salary. In setting the amount of the bonus, the Committee considered
the continued improvement in the financial performance of South Alabama
during the year and the successful completion of non-financial goals such
as the completion of the merger with MCB's holding company.
The Committee also granted to the Chief Executive Officer options to
purchase 5,000 shares of South Alabama Common Stock, as described in the
table entitled "Option Grants in Last Fiscal Year."
The members of the Personnel/Compensation Committee are as follows:
Stephen G. Crawford, James P. Hayes, Jr., Clifton C. Inge and Thomas E.
McMillan, Jr.
Compensation
The table below reflects annual compensation for J. Stephen Nelson, W.
Bibb Lamar, Jr. and Haniel F. Croft for services rendered in 1996, 1995 and
1994 to South Alabama, BOM, FNBB and MCB.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Awards
Annual Compensation Shares Underlying All Other
Name and Principal Position Year Salary($)2 Bonus($)3 Options/SARs(#) Compensation($)4
<S> <C> <C> <C> <C> <C>
J. Stephen Nelson 1996 $118,000 $22,000 5,000 $6,742
Chairman and Director, 1995 $ 99,126 $13,799 5,000 $7,032
South Alabama and Chairman, 1994 $ 92,283 $12,519 7,692 $6,806
CEO and Director, FNBB
W. Bibb Lamar, Jr. 1996 $125,000 $30,000 5,000
President, CEO and Director, 1995 $115,000 $27,500 5,000
South Alabama and BOM 1994 $105,000 $25,000 6,000
Haniel F. Croft 1996 $121,600(5) $6,068 $7,466
Director, South Alabama and 1995 $116,000 $2,542 $7,376
President, CEO and Director, MCB 1994 $109,850 $7,364
</TABLE>
(1) Although Mr. Nelson, Mr. Lamar and Mr. Croft received perquisites and
other personal benefits in the years shown, the value of
these benefits did not exceed in the aggregate the lesser of $50,000 or
10% of their salary and bonus in any year.
(2) Includes for Mr. Nelson both salary and $3,600 in director s fees paid by
FNBB for each year shown.
(3) Represents amounts paid under the FNBB Incentive Compensation Plan for
Mr. Nelson, the BOM Incentive Plan for Mr.
Lamar and the MCB Performance Compensation Plan for Mr. Croft.
(4) Represents employer contributions to the FNBB Profit Sharing Plan for Mr.
Nelson and the MCB Profit Sharing Plan for Mr. Croft.
(5)Includes $20,400 paid with respect to services to South Alabama from the
date of the merger of MCB's holding company with South Alabama.
Stock Options
The following table sets forth the grant of stock options during 1996 to
Mr. Nelson, Mr. Lamar and Mr. Croft:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential
Number of % of Total Realizable Value
Shares Options/SARs Assuming Rates of
Underlying Granted to Exercise Stock Price
OptionsSARs Employees or Base Expiration Appreciation'
Name Granted (#) in Fiscal Year Price ($/Sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
J. Stephen Nelson 5,000 (2) 19.23% $13.50 01/23/06 $47,943 $121,869
W. Bibb Lamar, Jr. 5,000 (2) 19.23% $13.50 01/23/06 $47,943 $121,869
Haniel F. Croft 0
</TABLE>
(1) Calculated by comparing the exercise price of such options and the market
value of the shares of common stock subject to such options, assuming the
market price of such shares increases by 5% and 10%, respectively, over the
term of the options.
(2) Incentive Stock Options which became exercisable on January 23, 1997.
The following table includes information with respect to unexercised
options held by Mr. Nelson, Mr. Lamar and Mr. Croft.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<CAPTION>
Number of Shares Underlying Value of Unexercised
Unexercised Options/SARs Held At In-the-Money Options/SARs At
December 31, 1996 (#) December 31 1996 ($) '
Exercisable Unexercisable Exercisable Unexercisable
Name
<S> <C> <C> <C> <C>
J. Stephen Nelson 7,692 5,000 $ 3,846 0
5,000 $ 2,500
W. Bibb Lamar, Jr. 5,000 5,000 $ 2,500 0
10,000 $83,750
6,000 $ 3,000
7,500 $ 4,688
5,000 $25,000
Haniel F. Croft 0 0 $ 0 0
</TABLE>
(1) Based on the average of the closing bid and ask prices quoted in the
NASDAQ inter-dealer system on December 31, 1996, minus the exercise price.
Pension Plans
South Alabama maintains a pension plan and certain other long-term
compensation plans, as described
below:
The following table reflects estimated annual benefits payable under the
Retirement Plan for Employees of South Alabama (The "SAB Plan") in effect
as of December 31, 1996 at various salary and years of service levels,
assuming retirement at age 65.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Compensation Years of Credited Service
10 15 20 25 30 35
<C> <C> <C> <C> <C> <C> <C>
25,000 $2,500 $3,750 $5,000 $6,250 $7,500 $8,750
50,000 5,000 7,500 10,000 12,500 15,000 17,500
75,000 7,500 11,250 15,000 18,750 22,500 26,250
100,000 10,000 15,000 20,000 25,000 30,000 35,000
125,000 12,500 18,750 25,000 31,250 37,500 43,750
150,000 15,000 22,500 30,000 37,500 45,000 52,500
175,000* 15,000 22,500 30,000 37,500 45,000 52,500
*Maximum Compensation for 1996 under IRC 401(a)(17) is $150,000.
</TABLE>
The amounts reflected are single life benefits computed under the SAB
Plan's basic formula. The SAB Plan provides generally for a monthly benefit
commencing at age 65 equal to 1% of the employee's average monthly base
compensation during the highest 5 consecutive calendar years out of the 10
calendar years preceding retirement, multiplied by years of credited
service, not to exceed 40 years. Alternative plan formulas which may apply
to certain participants who participated in predecessor pension plans,
might produce a greater benefit in some situations. Joint and survivor
benefits would be less. Social Security benefits do not affect payments
made under the SAB Plan. As of December 31, 1996, Mr. Lamar was credited
with eight years of service, and Mr. Nelson was credited with seventeen
years of service.
BOM. BOM maintains an unfunded and unsecured Supplemental Retirement Plan
(the "Supplemental Plan") designed to supplement the benefits payable under
the SAB Plan for certain key employees selected by BOM's Board of
Directors. Each participant was a participant in a pension plan of another
bank prior to his employment by BOM and the Supplemental Plan is designed
to afford the participant the same pension he would receive under the SAB
Plan if he were given years-of-service credit as if he were employed by BOM
his entire banking career, reduced by benefits actually payable to him
under the SAB Plan and any retirement benefit payable to him under any such
plan of another bank. Benefits for total and permanent disability are
supplemented in the same manner.
Because the Supplemental Plan is intended to complement benefits otherwise
available to the participants, the exact amounts to be paid, if any, to any
participant, including Mr. Lamar, cannot be determined until retirement or
disability. BOM management does not believe any current expense and any
liabilities associated with the Supplemental Plan are material.
MCB. MCB maintains a noncontributory, tax-qualified benefit pension plan
(the "MCB Pension Plan") covering eligible employees of MCB. Those
employees who have completed (or are expected to complete) 1,000 hours of
service in their first year of employment, or in any later calendar year,
are eligible to participate in the plan.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Remuneration Years of Service
15 20 25 30 35
<C> <C> <C> <C> <C> <C>
$10,000 $2,175 $2,800 $3,625 $4,360 $5,075
20,000 4,350 5,800 7,250 8,700 10,150
30,000 8,525 8,700 10,875 13,050 15,225
40,000 8,700 11,600 14,500 17,400 20,300
50,000 8,875 14,500 18,125 21,750 25,375
60,000 13,050 17,400 21,750 26,100 30,450
70,000 15,226 20,300 25,375 30,450 35,525
80,000 17,400 23,200 29,000 34,800 40,600
90,000 19,575 26,100 32,625 39,150 45,875
100,000 21,750 29,000 38,250 43,500 50,750
110,000 23,925 31,900 39,875 47,850 55,825
120,000 26,100 34,800 43,500 52,200 60,900
130,000 28,275 37,700 47,125 58,550 65,975
140,000 30,450 40,600 50,750 60,900 71,050
</TABLE>
During 1996, annual benefits under the MCB Pension Plan were based upon
the employee's years of service and final average earnings. "Final average
earnings" for this purpose means the average of the five consecutive
calendar years out of the last ten years of employment in which a
participant had the highest earnings. For the purposes of the MCB Pension
Plan, "earnings" means basic pay excluding any bonuses, commissions,
overtime, or other special compensation, plus pre-taxed salary reductions.
The table sets forth, in straight life annuity amounts, the estimated
annual benefits payable upon retirement to persons in the specified
compensation and years of service classifications under the present
provisions of the Pension Plan. As of December 31, 1996, Mr. Croft was
credited with 27 years of service.
MCB also maintains the Monroe County Bank Profit Sharing Plan (the "MCB
Profit Sharing Plan"). Subject to certain employment and vesting
requirements, all MCB personnel are permitted to participate in the MCB
Profit Sharing Plan. At the end of each plan year, the profit sharing
contribution, determined by MCB's Board of Directors, is allocated to the
profit sharing account of each active participant. All contributions to the
plan are made by MCB. Employee contributions are not required or allowed.
Each participant's contribution is based on "units" for the current
calendar year in proportion to the total "units" of all plan participants
for that period. The number of units for the year are based on annual pay
and service.
FNBB. FNBB maintains the First National Bank Employees' Profit Sharing
Plan (the "FNBB Profit Sharing Plan"). Subject to certain employment and
vesting requirements, all FNBB employees are permitted to participate in
the FNBB Profit Sharing Plan, which provides for employee contributions up
to a maximum of $ 1,800 (limited in the case of certain "highly compensated
employees" to the extent required by law), matched by an employer
contribution, up to the lowest of (i) 10% of FNBB's net operating earnings,
(ii) four times the amount of all employee contributions for the year, or
(iii) the maximum amount deductible by FNBB for federal income tax
purposes. The FNBB contribution, which is discretionary within limits set
forth above, is divided among the employees' accounts in proportion to the
employees' own contributions.
Change in Control Compensation Agreements
FNBB entered into a Change in Control Compensation Agreement with Mr.
Nelson on November 20, 1995. BOM entered into a Change in Control
Compensation Agreement with Mr. Lamar on November 14, 1995. These Change in
Control Compensation Agreements (the "Agreements") provide that if Mr.
Nelson or Mr. Lamar, respectively, is terminated other than for "cause" (as
defined), following a change in control, or if his assigned duties or
responsibilities are diminished such that they are inconsistent with his
present position, he shall be entitled to receive a cash payment equal to
three times his annual average earnings (as defined). Certain other
existing employee benefits may also be available to Mr. Nelson and Mr.
Lamar under terms of these Agreements for a period of one year. The
Agreements automatically renew each calendar year unless terminated by FNBB
or BOM at least 90 days prior to any December 31.
Compensation of Directors
South Alabama directors who are not officers are paid a $1,500 annual
retainer, $400 for each Board meeting attended and $200 for each committee
meeting attended.
CERTAIN TRANSACTIONS AND MATTERS
Some of the directors, executive officers, and nominees for election as
directors of South Alabama, as well as firms and companies with which they
are associated, are and have been customers of its subsidiary banks and as
such have had banking transactions, including loans and commitments to
loan, with the subsidiary banks during 1996. These loans and commitments to
loan, including loans and commitments outstanding at any time during the
period, were made in the ordinary course of business on substantially the
same terms, including rates and collateral, as those prevailing at the time
for comparable transactions with other persons and, in the opinion of
subsidiary bank management, did not involve more than the normal risk of
collectibility or present other unfavorable factors.
Stephen G. Crawford, a director and nominee, is a member of the law firm
of Hand Arendall, L.L.C., which serves as counsel for South Alabama and
BOM. Broox G. Garrett, Jr., a director and nominee, is a partner in the law
firm of Thompson, Garrett & Hines, which serves as counsel for FNBB. John
B. Barnett, III, a director, executive officer and nominee, is a partner in
the law firm of Barnett, Bugg & Lee, which serves as counsel for MCB.
PROPOSAL TO AMEND 1993 INCENTIVE COMPENSATION PLAN
The Board of Directors is seeking stockholder approval of an amendment to
the South Alabama Bancorporation 1993 Incentive Compensation Plan (the
"1993 Plan"). Certain information concerning this matter is set forth
below. A copy of the 1993 Plan and the proposed amendment thereto are
reproduced as Appendix A and Appendix B. respectively, to this Proxy
Statement. The descriptions of the 1993 Plan and its proposed amendment are
qualified in their entirety by reference to Appendices A and B.
respectively.
The Board of Directors recommends a vote FOR approval of the amendment to
the 1993 Plan under Item 2 on the proxy card. The affirmative vote of the
holders of a majority of the outstanding shares of South Alabama present at
the meeting, assuming a quorum is present, is required for approval of the
amendment to the 1993 Plan. Proxies solicited by the Board of Directors
will be voted FOR the approval of the proposed amendment to the 1993 Plan
unless stockholders specify in their proxies a contrary choice.
Amendment to 1993 Plan
The Board of Directors has adopted an amendment to the 1993 Plan, subject
to approval of the stockholders. The amendment increases from 150,000 to
200,000 the total number of shares of South Alabama Common Stock which are
subject to, reserved for and available for distribution under the 1993
Plan. In the absence of stockholder approval, the proposed amendment will
not take effect.
Description of 1993 Plan
The 1993 Plan provides for grants of stock options, stock appreciation
rights and restricted stock awards. It was approved by the stockholders and
put into operation in 1994. Currently, 150,000 shares of South Alabama
Common Stock are subject to, reserved for and available for distribution
under the 1993 Plan. The purpose of the 1993 Plan is to provide financial
incentives to key employees who are in positions to make significant
contributions for the long-term success of South Alabama and its
subsidiaries. It is designed to attract individuals of outstanding ability
and to encourage key employees to acquire a proprietary interest in South
Alabama, to continue employment with South Alabama and its subsidiaries and
to render superior performance during their employment. The 1993 Plan
replaced the Stock Option Plan of Mobile National Corporation, pursuant to
which no further options were issued once the 1993 Plan was approved by
shareholders. In the event any right or grant under the 1993 Plan expires,
terminates or is forfeited, the number of shares made subject to the
expired or terminated option, grant or award shall again become available.
As of March 21, 1997, the closing bid price per share of South Alabama
Common Stock, as reported on NASDAQ, was $13.75.
The 1993 Plan is administered by the Committee, none of the members of
which are employees of South Alabama or any subsidiary and none of whom
receive or have received within one year prior to service, any options,
stock appreciation rights or restricted stock awards pursuant to the 1993
Plan or any other similar plan of South Alabama or its subsidiaries. The
Committee is authorized to determine those key employees of South Alabama
or its subsidiaries to whom any options or rights will be granted and the
number of shares of South Alabama Common Stock to be subject to each such
option or right, based upon the nature of the services rendered by the
employee, the employee's potential contribution to the long-term success of
South Alabama and/or one or more of its subsidiaries, and such other
factors as the Committee in its discretion shall deem relevant. While the
determination of key employees is within the discretion of the Committee,
18 persons qualify as key employees at December 31, 1996.
The 1993 Plan authorizes the Committee to grant (i) Incentive Stock
Options ("ISO's") which are qualified to receive special federal tax
treatment under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) Supplemental Stock Options ("SSO's") which are
not so qualified, (iii) Stock Appreciation Rights ("SAR's") in tandem with
the grant of an SSO, and (iv) Restrictive Stock Awards ("RSA's") providing
for a grant of stock under various restrictions, all as further described
below. As of the date of the Proxy Statement, the Committee has granted
ISO's covering 114,692 shares of South Alabama Common Stock, the only
grants or awards under the 1993 Plan to date.
The Board of Directors of South Alabama may, without further approval of
stockholders, suspend, terminate or amend the 1993 Plan. However, no such
amendment shall change: (i) the maximum aggregate number of shares of
common stock available under the 1993 Plan, (ii) the option exercise price,
(iii) the maximum period during which Options or SAR's may be exercised,
(iv) the maximum amount which may be paid upon exercise of an SAR, (v) the
termination date of the 1993 Plan to a later date, or (vi) the eligibility
requirements for participation in the 1993 Plan in a material way.
Notwithstanding the foregoing, the Committee may make adjustments in the
number of shares of common stock available for issuance under the 1993 Plan
and in the purchase price per share for the exercise of an Option
thereunder to take into account the effect of any stock dividend,
recapitalization, split-up, consolidation, share exchange, merger, other
reorganization or sale of assets undertaken by South Alabama.
Stock Options
Grants of all options, including both ISO's and SSO's, under the 1993 Plan
are subject to a number of requirements, including the following: (i) each
option shall be evidenced by an agreement containing terms and conditions
consistent with the 1993 Plan, as the Committee shall determine; (ii) no
option shall be granted under the 1993 Plan on or after the tenth
anniversary of the date of adoption of the plan by the Board of Directors;
(iii) no option shall be exercised prior to the expiration of one year
after its grant date; (iv) no option shall be transferable other than by
will or the laws of descent and distribution; and (v) any such option shall
terminate as provided in the agreement, but not later than the earlier of
(a) three months after the grantee's retirement, (b) one year after the
grantee ceases to be employed as a result of permanent disability or death,
or (c) the date on which the grantee ceases to be employed for any other
reason.
In addition, options which are ISO's must meet the following requirements:
(i) the option price must be equal to the fair market value of a share of
South Alabama Common Stock on the date of grant (or 110%o of such fair
market value with respect to any individual owning 10% or more of the
combined voting power of all classes of stock of South Alabama); and (ii)
the aggregate fair market value of the Common Stock, as determined on the
date of grant, with respect to which ISO's are exercisable for the first
time by any grantee during any calendar year shall not exceed $100,000.
Stock Appreciation Rights
SAR's may be granted in conjunction with any SSO with respect to each
share of South Alabama Common Stock which may be purchased by the exercise
of such SSO. Upon exercise of an SAR, South Alabama shall pay the amount by
which the fair market value of a share of Common Stock on the date of
exercise exceeds the fair market value of a share of Common Stock on the
date of grant, up to an amount equal to 200~c of the fair market value of a
share of Common Stock on the date of grant. An SAR may be paid in cash, in
shares of Common Stock valued at fair market value on the date of exercise,
or partly in cash and partly in such shares. SAR's are exercisable when and
to the extent the accompanying SSO is exercisable, expire simultaneously
with the expiration or termination of such SSO, and may be transferred only
when and under the same conditions as the accompanying SSO is
transferrable. The number of SAR's is reduced upon each exercise of the
related SSO by the number of SAR's which corresponds to the number of
shares of Common Stock purchased pursuant to such exercise; conversely,
exercise of an SAR results in a simultaneous corresponding reduction in the
number of shares of Common Stock available for purchase under the related
SSO.
Restricted Stock Awards
RSA's may be granted by the Committee pursuant to a restricted stock
agreement specifying the number of shares covered by the RSA and including
(i) such restrictions, conditions and terms as the Committee may determine,
including a requirement of continued employment for a specified period;
(ii) a provision that shares awarded and the rights thereunder shall not be
transferrable during the period of restriction as established by the
Committee; (iii) a provision that the Common Stock so awarded shall bear an
appropriate legend noting the restrictions upon transfer and may, in the
discretion of the Committee, be deposited with South Alabama; and (iv) the
terms and conditions upon which any restrictions placed upon the shares
shall lapse. If a grantee of an RSA ceases to be employed by South Alabama
or its subsidiaries by reason of death, disability or retirement, the
Committee will determine the extent to which the restrictions shall be
deemed to have lapsed by multiplying the number of shares subject to the
award by a fraction, the numerator of which is the number of calendar
months the grantee was employed during the restriction period and the
denominator of which is the number of calendar months in the restriction
period. If a grantee ceases to be employed by South Alabama for any other
reason, the grantee shall be deemed not to have satisfied the restrictions
imposed under the RSA unless the Committee determines otherwise in its sole
discretion, in which event the extent to which the restrictions shall be
deemed to have lapsed shall not exceed the amount determined in accordance
with the preceding sentence.
Federal Tax Consequences of Options
Under the provisions of Section 422 of the Code, an employee is not
subject to federal income tax consequences either upon the grant or upon
the exercise of an ISO. Gain or loss is recognized only upon the
disposition of the stock acquired pursuant to the exercise of an ISO, and
such gain or loss generally will constitute long-term capital gain. If the
stock so acquired is disposed of within two years of the date the ISO is
granted, or within one year of the exercise of the ISO, however, such
disposition will constitute a "disqualifying disposition." In the event of
a disqualifying disposition, the difference between the fair market value
of the stock at the time of exercise and the exercise price will be
included in ordinary income for the year in which such disposition takes
place. In addition, upon exercise of an ISO the difference between the fair
market value of the stock at the time of exercise and the exercise price is
an item of tax preference for purposes of the alternative minimum tax
applicable to individuals.
South Alabama is not allowed any deduction with respect to an ISO, unless
there is a disqualifying disposition.
The grant of SSO's,or of the accompanying SAR's, does not result in any
federal income tax consequences for either the employee or South Alabama.
Upon exercise of an SSO, however, the optionee will realize ordinary income
equal to the difference between the fair market value of the shares
purchased determined as of the date of exercise and the price which the
optionee pays for the shares. Upon exercise of an SAR, the optionee will
realize ordinary income equal to the amount paid by South Alabama upon such
exercise. South Alabama will be entitled to a deduction for federal income
tax purposes equal to the amount which the optionee is required to include
in income, subject to two conditions: (i) the amount taken into income by
the employee must constitute "reasonable compensation" for federal income
tax purposes; and (ii) South Alabama must withhold from the employee's
income in accordance with applicable treasury regulations. Any sale or
exchange of shares acquired pursuant to the exercise of an SSO will result
in long-term or short-term capital gain or loss to the optionee, depending
upon whether the shares were held for less than one year or for one year or
longer.
Plan Benefits
The following table sets forth certain information for the calendar year
1996 concerning the benefits received by or allocated to the three
executive officers named in the summary compensation table above, the
executive officers of South Alabama as a group, directors who are not
executive officers as a group and other employees as a group, under the
1993 Plan:
<TABLE>
NEW PLAN BENEFITS
SOUTH ALABAMA BANCORPORATION 1993 INCENTIVE COMPENSATION PLAN
<CAPTION>
Name and Position Dollar Value ($)1 Number of Units
5% 10%
<S> <C> <C> <C>
J. Stephen Nelson $47,943 $121,869 5,000
Chairman and Director, South Alabama
and Chairman, CEO and Director, FNBB
W. Bibb Lamar, Jr. $47,943 $121,869 5,000
President, CEO and Director,
South Alabama and BOM
Haniel F. Croft 0 0 0
Director, South Alabama and
President, CEO and Director, MCB
Current Executive Officers as a Group $134,244 $341,232 14,000
Current Directors who are not
Executive Officers as a Group 0 0 0
Employees, including all current
Officers who are not Executive
Officers as a Group $115,069 $292,477 12,000
(1)Calculated by comparing the exercise price of such options and the market value of the
shares of common stock subject to such options, assuming the market price of such shares
increases by 5% and 10%, respectively, over the term of the options.
</TABLE>
APPOINTMENT OF AUDITORS
The Board of Directors of South Alabama, on recommendation of the Audit
committee, engaged Arthur Andersen L.L.P. as South Alabama's independent
accountant and auditor for the three year period beginning in 1995. The
engagement was entered into on September 27, 1995. Deloitte & Touche served
as South Alabama's independent accountant and auditor for the years ending
December 31, 1990 through 1994. Arthur Andersen will have representatives
present at the annual meeting to respond to appropriate questions and to
make a statement if they so desire.
OTHER MATTERS
Management currently does not know of any other matters to be presented at
the meeting.
If a Proxy in the form enclosed is executed properly and is returned, the
shares represented thereby will be voted in accordance with the directions
given in that Proxy. If no specific directions are given, the shares will
be voted, subject to and in accordance with the provisions herein
contained, "For" the Board of Directors' nominees in the election of
directors and "For" the amendment of the 1993 Incentive Compensation Plan.
If any other matter is presented at the meeting, the shares will be voted
in accordance with the recommendations of the Board of Directors. At any
time prior to its exercise, a Proxy may be revoked by written notice or a
subsequently dated Proxy delivered to the Secretary of South Alabama.
Solicitation of proxies will be made initially by mail. In addition,
proxies may be solicited in person, by telephone, and by telegraph by
directors, officers, and other employees of South Alabama and its
subsidiary banks. The cost of printing, assembling, and mailing this Proxy
Statement and related material furnished to stockholders and all other
expenses of solicitation, including the expenses of brokers, custodians,
nominees, and other fiduciaries who, at the request of South Alabama, mail
material to or otherwise communicate with beneficial owners of shares held
by them, will be borne by South Alabama.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum of the
stockholders to take action at the meeting. Once a quorum is established,
(i) directors must be elected by a plurality of the shares of Common Stock
present, in person or by proxy, and (ii) any other action to be taken must
be approved by a majority of the shares of Common Stock present, in person
or by proxy. For voting purposes, abstentions and broker non-votes will in
effect count as "no" votes.
Stockholder proposals intended to be submitted for consideration at the
1998 Annual Meeting of the Stockholders of South Alabama must be submitted
in writing to and received by the Secretary of South Alabama not later than
December 8, 1997, to be included in South Alabama's Proxy Statement and
form of Proxy relating to that meeting.
Enclosures
April 7, 1997
F. Michael Johnson Chief Financial Officer and Secretary
APPENDIX B
AMENDMENT NUMBER ONE
TO SOUTH ALABAMA BANCORPORATION
1993 INCENTIVE COMPENSATION PLAN
The South Alabama Bancorporation 1993 Incentive Compensation Plan (the
"Plan") is hereby amended and modified as follows:
1. Section 1.3(a) is deleted in its entirety, and the following is
substituted in lieu thereof:
"The aggregate number of shares of Common Stock with respect to which
Options, Stock Appreciation Rights, and Restricted Stock Awards may be
granted shall not exceed 200,000 shares of Common Stock, subject to
adjustment in accordance with Section 5.1."
Except to the extent modified by the foregoing, the Plan shall remain in
full force and effect as originally adopted.
IN WITNESS WHEREOF, the undersigned has caused this Amendment to be
executed by its duly authorized officer this day of , 1997.
South Alabama Bancorporation, Inc.
By: W. Bibb Lamar, Jr.
President and Chief Executive Officer
APPENDIX A
SOUTH ALABAMA BANCORPORATION
1993 INCENTIVE COMPENSATION PLAN
Article I
Purpose, Scope and Administration of the Plan
Section 1.1 Purpose.
The purpose of the 1993 Incentive Compensation Plan (the "Plan") is to
promote the long-term success of South Alabama Bancorporation and its
Subsidiary Corporations by providing financial incentives to key employees
who are in positions to make significant contributions toward such success.
The Plan is designed to attract individuals of outstanding ability to
employment with the Company and its Subsidiary Corporations and to
encourage key employees to acquire a proprietary interest in the Company,
to continue employment with the Company or its Subsidiary Corporations, and
to render superior performance during such employment.
Section 1.2 Definitions.
Unless the context clearly indicates otherwise, for purposes of this Plan,
the following terms have the respective meanings as set forth below:
(a) "Board of Directors" means the Board of Directors of South Alabama
Bancorporation or any successor corporation.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Board of Directors
(or any successor committee thereto), which Committee shall be composed of
not less than three members of the Board of Directors who are not employees
of the Company or of any Subsidiary Corporation of the Company and who, at
the time exercising of discretion in administering the Plan, do not
receive, and have not received at any time within one year prior thereto,
any Options, Stock Appreciation Rights, or Restricted Stock Awards pursuant
to the Plan or any other plan of the Company or of any Subsidiary
Corporation of the Company entitling the participants therein to acquire
stock, restricted stock, stock options, or stock appreciation rights of the
Company or of any Subsidiary Corporation of the Company, except for and
excluding formula plans meeting the conditions of Rule 16b-3(c)(2)(ii)
promulgated under the Securities Exchange Act of 1934.
(d) "Common Stock" means the common stock of South Alabama Bancorporation,
or such other class of shares or other securities to which the provisions
of the Plan may be applicable by reason of the operation of Section 5.1
hereof.
(e) "Company" means South Alabama Bancorporation or any successor
corporation.
(f) "Fair Market Value" of a share of Common Stock on any particular date
means the average between the closing bid and asked prices on the
over-the-counter market, as determined by the Committee, for the business
day next preceding the date of grant; or if no such prices shall have been
reported for such preceding business day, the fair market value shall be
determined in good faith by the Committee to comply with the provisions of
Code Section 422(b)(4)
(g) "Grant Date", as used with respect to a particular Option, Stock
Appreciation Right, or Restricted Stock Award, means the date as of which
such Option, Right, or Award is granted by the Committee pursuant to the
Plan.
(h) "Grantee" means the employee to whom an Option, Stock Appreciation
Right, or Restricted Stock Award is granted by the Committee pursuant to
the Plan.
(i) "Incentive Stock Option" means an Option that qualifies as an
incentive stock option as described in Section 422 of the Code.
(j) "Option" means an option granted by the Committee pursuant to Article
II to purchase shares of Common Stock, which shall be designated at the
time of grant as either an Incentive Stock Option or a Supplemental Stock
Option, as provided in Section 2.1 hereof.
(k) "Option Agreement" means the agreement between the Company and a
Grantee under which the Grantee is granted an Option or an Option and Stock
Appreciation Right pursuant to the Plan.
(1) "Option Period" means, (i) with respect to any Incentive Stock Option
granted hereunder, the period beginning on the Grant Date and ending at
such time not later than the tenth annual anniversary of the Grant Date, as
the Committee, in its sole discretion, shall determine, and (ii) with
respect to any Supplemental Stock Option or Stock Appreciation Right
granted hereunder, the period beginning on the Grant Date and ending at
such time not later than the tenth annual anniversary of the date on which
the Supplemental Stock Option or Stock Appreciation Right may first be
exercised, as the Committee, in its sole discretion, shall determine.
(m) "Permanent Disability", as applied to a Grantee, means that the
Grantee (1) has established to the satisfaction of the Committee that the
Grantee is unable to engage in substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be
expected to last for a continuous period of not less than 12 months (all
within the meaning of Section 422(c)(6) and Section 22(e)(3) of the Code),
and (2) has satisfied any requirement imposed by the Committee in regard to
evidence of such disability.
(n) "Plan" means the South Alabama Bancorporation 1993 Incentive
Compensation Plan as set forth herein and as amended from time to time.
(o) "Restricted Stock Agreement" means the agreement between the Company
and a Grantee under which the Grantee is granted a Restricted Stock Award
pursuant to the Plan.
(p) "Restricted Stock Award" means an award of Common Stock which is
granted by the Committee pursuant to Article IV and which is restricted
against sale or other transfer in a manner and for a specific period of
time determined by the Committee.
(q) "Restriction Period" means, with respect to any Restricted Stock Award
granted hereunder, the period beginning on the Grant Date and ending at
such time, but not sooner than the first annual anniversary of the Grant
Date, as the Committee, in its sole discretion, shall determine.
(r) "Retirement", as applied to a Grantee, means normal or early
retirement as provided for in the applicable qualified pension plan of the
Company and/or one or more of its Subsidiary Corporations; provided that a
Grantee shall not be deemed to have retired if his employment is terminated
by the Company because of negligence or malfeasance.
(s) "Subsidiary Corporation" of the Company means any corporation (other
than the Company) in an unbroken chain of corporations beginning with the
Company if, 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 percent or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain, within
the meaning of Section 424(f) of the Code.
(t) "Stock Appreciation Right" means a right granted pursuant to Article
III hereof by the Committee, in conjunction with a Supplemental Stock
Option, to receive payment equal to any increase in the Fair Market Value
of a share of Common Stock from the Grant Date to the date of exercise of
such right, in lieu of exercise of the Supplemental Stock Option for such
share.
(u) "Supplemental Stock Option" means any Option granted under this Plan,
other than an Incentive Stock Option.
Section 1.3 Aggregate Limitation.
(a) The aggregate number of shares of Common Stock with respect to which
Options, Stock Appreciation Rights, and Restricted Stock Awards may be
granted shall not exceed 150,000 shares of Common Stock, subject to
adjustment in accordance with Section 5.1.
(b) Any shares of Common Stock to be delivered by the Company upon the
grant of Restricted Stock Awards or the exercise of Options or Stock
Appreciation Rights shall, at the discretion of the Board of Directors, be
issued from the Company's authorized but unissued shares of Common Stock or
be transferred from any available treasury stock.
(c) In the event that any Option or Stock Appreciation Right expires or
otherwise terminates prior to being fully exercised, or any Restricted
Stock Award as to which the Grantee received no benefits of ownership of
the underlying Common Stock is forfeited, the Committee may grant new
Options, Stock Appreciation Rights, and Restricted Stock Awards hereunder
to any eligible Grantee for the shares with respect to which the expired or
terminated Option or Stock Appreciation Right was not exercised or which
were forfeited when the terms and conditions of the Restricted Stock Award
were not satisfied.
Section 1.4 Administration of the Plan
(a) The Plan shall be administered by the Committee, which shall have the
authority:
(1) To determine those key employees of the Company and/or its Subsidiary
Corporations to whom, and the times at which, Options, Stock Appreciation
Rights, and/or Restricted Stock Awards shall be granted and the number of
shares of Common Stock to be subject to each such Option, Right, and/or
Award, taking into consideration the nature of the services rendered by the
particular employee, the employee's potential contribution to the long-term
success of the Company and/or one or more of its Subsidiary Corporations
and such other factors as the Committee in its discretion shall deem
relevant;
(2) To interpret and construe the provisions of the Plan and to establish
rules and regulations relating to it;
(3) To prescribe the terms and conditions of the Option Agreements for the
grant of Options and Stock Appreciation Rights (which need not be
identical) in accordance and consistent with the requirements of the Plan;
(4) To prescribe the terms and conditions of the Restricted Stock
Agreements (which need not be identical to the terms and conditions of any
Option Agreements) in accordance and consistent with the requirements of
the Plan; and
(5) To make all other determinations necessary or advisable to administer
the Plan in a proper and effective manner.
(b) All decisions and determinations of the Committee in the
administration of the Plan and in response to questions or other matters
concerning the Plan or any Option, Stock Appreciation Right, or Restricted
Stock Award shall be final, conclusive, and binding on all persons,
including, without limitation, the Company, its Subsidiary Corporations,
the shareholders and directors of the Company, and any persons having any
interest in any Options, Stock Appreciation Rights, or Restricted Stock
Awards which may be granted under the Plan.
(c) The authority and power of the Committee hereunder is purely
discretionary and shall not be deemed to be mandatory. No employee or class
or group of employees shall have any right or privilege to demand or
require the granting of any Option, Stock Appreciation Right, or Restricted
Stock Award or the consideration thereof, at any time. All Options, Stock
Appreciation Rights, and Restricted Stock Awards hereunder (if any) shall
be granted in the absolute and unrestricted discretion of the Committee.
Section 1.5 Eligibility for Award.
The Committee shall designate from time to time the key employees of the
Company and/or one or more of its Subsidiary Corporations who are to be
granted Options, Stock Appreciation Rights, and/or Restricted Stock Awards.
In no event may a member of the Committee or any director who is not an
employee of the Company or one of its Subsidiary Corporations be granted an
Option, Stock Appreciation Right, or Restricted Stock Award under this
Plan.
Section 1.6 Effective Date and Duration of Plan.
This Plan shall become effective upon its adoption by the Board of
Directors; provided, that any grant of Options, Stock Appreciation Rights,
or Restricted Stock Awards under the Plan prior to approval of the Plan by
the stockholders of the Company is subject to such stockholder approval
within twelve months of adoption of the Plan by the Board of Directors.
Unless previously terminated by the Board of Directors, the Plan (but not
any then outstanding Options, Stock Appreciation Rights, or Restricted
Stock Awards which have not yet expired or otherwise terminated) shall
terminate on the tenth annual anniversary of its adoption by the Board of
Directors.
Article II
Stock Options
Section 2.1 Grant of Options.
(a) The Committee may from time to time, subject to the provisions of the
Plan, grant Options to key employees under appropriate Option Agreements to
purchase shares of Common Stock up to the aggregate number of shares of
Common Stock set forth in Section 1.3(a).
(b) The Committee may designate any Option which satisfies the
requirements of Sections 2.2 and 2.3 hereof as an Incentive Stock Option
and may designate any Option granted hereunder as a Supplemental Stock
Option, or the Committee may designate a portion of an Option as an
Incentive Stock Option (so long as the portion satisfies the requirements
of Sections 2.2 and 2.3 hereof) and the remaining portion as a Supplemental
Stock Option. Any portion of an Option that is not designated as an
Incentive Stock Option shall be a Supplemental Stock Option. A Supplemental
Stock Option must satisfy the requirements of Section 2.2 hereof, but shall
not be subject to the requirements of Section 2.3.
Section 2.2 Option Requirements.
(a) An Option shall be evidenced by an Option Agreement specifying the
number of shares of Common Stock that may be purchased by its exercise and
containing such other terms and conditions consistent with the Plan as the
Committee shall determine to be applicable to that particular Option.
(b) No Options shall be granted under the Plan on or after the tenth
annual anniversary of the date upon which the Plan was adopted by the Board
of Directors.
(c) No Option may be exercised prior to the expiration of one year after
its Grant Date.
(d) An Option shall expire by its terms at the expiration of the Option
Period and shall not be exercisable
thereafter.
(e) The Committee may provide in the Option Agreement for the expiration
or termination of the Option prior to the expiration of the Option Period,
upon the occurrence of any event specified by the Committee.
(f) An Option shall not be transferable other than by will or the laws of
descent and distribution and, during the Grantee's lifetime, an Option
shall be exercisable only by the Grantee.
(g) Each individual Grantee shall agree in writing at the time of the
grant of any Option to continue in the employment of the Company (and/or
one or more of its Subsidiary Corporations) for one (1) year after the date
on which he was granted an Option (but neither the Company nor any of its
Subsidiary Corporations shall have any obligation to retain any Grantee in
its employment for any period).
(h) A person electing to exercise an Option shall give written notice of
such election to the Company, in such form as the Committee may require,
accompanied by payment in the manner determined by the Committee, of the
full purchase price of the shares of the Common Stock for which the
election is made. Payment of the purchase price shall be made in cash or in
such other form as the Committee may approve, including shares of Common
Stock valued at their Fair Market Value on the date of exercise of the
Option.
(i) Notwithstanding the Option Period applicable to a Supplemental Stock
Option granted hereunder, such Supplemental Stock Option, to the extent
that it has not previously been exercised, shall terminate upon the
earliest to occur of (1) the expiration of the applicable Option Period as
set forth in the Option Agreement granting such Supplemental Stock, (2) the
expiration of the three months after the Grantee's Retirement, (3) the
expiration of one year after the Grantee ceases to be employed by the
Company or any of its Subsidiary Corporations due to Permanent Disability,
(4) the expiration of one year after the Grantee ceases to be employed by
the Company or any of its Subsidiary Corporations due to the death of the
Grantee, or (5) the date the Grantee ceases to be employed by the Company
or any of its Subsidiary Corporations for any reason other than Retirement,
Permanent Disability, or death.
(I) The exercise of any number of Stock Appreciation Rights granted under
an Option Agreement shall result in a simultaneous corresponding reduction
in the number of shares of Common Stock then available for purchase by
exercise of the related Supplemental Stock Option.
Section 2.3 Incentive Stock Option Requirements
(a) An Option designated by the Committee as an Incentive Stock Option is
intended to qualify as an "incentive stock option" within the meaning of
subsection (b) of Section 422 of the Code and shall satisfy, in addition to
the conditions of Section 2.2 above, the conditions set forth in this
Section 2.3.
(b) The option price per share of Common Stock shall be equal to the Fair
Market Value of a share of Common Stock on the Grant Date, except as
provided in paragraph (c) immediately below.
(c) An Incentive Stock Option shall not be granted to an individual who,
on the Grant Date, owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or any of its
Subsidiary Corporations, unless the Committee provides in the Option
Agreement with any such individual that the option price per share of
Common Stock will not be less than 110% of the Fair Market Value of a share
of Common Stock on the Grant Date and the Option Period will not extend
beyond five years from the Grant Date.
(d) The aggregate Fair Market Value, determined on the Grant Date, of the
shares of the Common Stock with respect to which incentive stock options
are exercisable for the first time by any Grantee during any calendar year
under the Plan or under any other plan of the Company shall not exceed
$100,000.
(e) Notwithstanding the Option Period applicable to an Incentive Stock
Option granted hereunder, such Incentive Stock Option, to the extent that
it has not been previously exercised, shall terminate upon the earliest
to occur of (1) the expiration of the applicable Option Period as set
forth in the Option Agreement granting such Incentive Stock Option, (2) the
expiration of three months after the Grantee's Retirement, (3) the
expiration of one year after the Grantee ceases to be employed by the
Company or any of its Subsidiary Corporations due to Permanent Disability,
(4) the expiration of one year after the Grantee ceases to be employed by
the Company or any of its Subsidiary Corporations due to the death of the
Grantee, or (5) the date the Grantee ceases to be employed by the Company
or any of its Subsidiary Corporations for any reason other than Retirement,
Permanent Disability or death.
ARTICLE III
Stock Appreciation Rights
Section 3.1 Grant of Rights.
(a) In conjunction with any Supplemental Stock Option granted hereunder,
the Committee may, in its discretion, grant a Stock Appreciation Right with
respect to each share of Common Stock which may be purchased by the
exercise of such Supplemental Stock Option.
(b) Upon exercise of a Stock Appreciation Right the Company shall pay the
amount by which the Fair Market Value of a share of Common Stock on the
date of exercise exceeds the Fair Market Value of a share of Common Stock
on the Grant Date, but only to the extent that such amount does not exceed
200% of the Fair Market Value of a share of Common Stock on the Grant Date.
A Stock Appreciation Right may not be exercised unless the Fair Market
Value of a share of Common Stock on the date of exercise exceeds the Fair
Market Value of a share of Common Stock on the Grant Date.
(c) Payment upon exercise of a Stock Appreciation Right may be made, in
the discretion of the Committee, in (1) cash, (2) in shares of Common Stock
valued at Fair Market Value on the date of exercise, or (3) partly in cash
and partly in shares of Common Stock.
Section 3.2 Rights Requirements.
(a) Stock Appreciation Rights shall be granted under and evidenced by the
Option Agreement under which the related Supplemental Stock Option is
granted, containing such terms and conditions consistent with the Plan as
the Committee shall determine, and shall be exercisable to the extent
allowed under such terms and conditions.
(b) Stock Appreciation Rights granted in relation to a Supplemental Stock
Option (1) shall be exercisable only to the extent and only when the Option
is exercisable, (2) shall expire or otherwise terminate simultaneously with
the expiration or termination of the related Supplemental Stock Option, (3)
shall be transferable only when the related Supplemental Stock Option is
transferable and under the same conditions, (4) shall be exercised by the
Grantee giving written notice of such exercise to the Company, in such form
as the Committee may require, and (5) shall be reduced upon each exercise
of the related Supplemental Stock Option by the number of Stock
Appreciation Rights which corresponds to the number of shares of Common
Stock purchased pursuant to such exercise.
ARTICLE IV
Restricted Stock Award
Section 4.1 Grant of Awards
The Committee may, from time to time, subject to the provisions of the
Plan, grant Restricted Stock Awards to key employees under appropriate
Restricted Stock Agreements.
Section 4.2 Award Requirements.
(a) An award shall be evidenced by a Restricted Stock Agreement specifying
the number of shares of Common Stock that are awarded and containing such
terms and conditions consistent with the Plan as the Committee shall
determine to be applicable to that particular award, which agreement shall
contain in substance the following terms and conditions:
(1) Shares awarded pursuant to Restricted Stock Awards shall be subject to
such conditions, terms, and restrictions (including, for example,
continuation of employment by the Company or any of its Subsidiary
Corporations in the same or in a higher level position) and for such
Restriction Period or Periods as may be determined by the Committee.
(2) Shares awarded, and the right to vote such shares and to receive
dividends thereon, may not be sold, assigned, transferred, exchanged,
pledged, hypothecated, or otherwise encumbered, except as herein provided,
during the Restriction Period applicable to such shares; provided, that the
Grantee awarded Restricted Stock shall have the right to execute a proxy to
vote the Restricted Stock. Notwithstanding the foregoing, and except as
otherwise provided in the Plan, a Grantee awarded Restricted Stock shall
have all the other rights of a stockholder, including the right to receive
dividends and the right to vote such shares.
(3) Each certificate issued in respect of Common Stock awarded to a
Grantee shall be deposited with the Company, or its designee, or in the
Committee's discretion delivered to the Grantee, and shall bear an
appropriate legend noting the existence of restrictions upon the transfer
of such Common Stock.
(4) Each Restricted Stock Agreement shall specify the terms and conditions
upon which any restrictions upon shares awarded under the Plan shall lapse,
as determined by the Committee (including, for example, employment by the
Company or any of its Subsidiary Corporations in the same or a higher level
position at the end of the Restriction Period or occurrence of change in
control, as defined by the Committee from time to time, during the
Restriction Period). Upon lapse of such restrictions, shares of Common
Stock free of any restrictive legend, other than as may be required under
Article V hereof, shall be issued and delivered to the Grantee or his legal
representative.
(b) If a Grantee ceases to be employed by the Company or any of its
Subsidiary Corporations during a Restriction Period as a result of
Retirement, Permanent Disability, or death, the extent to which
restrictions shall be deemed to have lapsed shall be determined by the
Committee by multiplying the amount of the Restricted Stock Award by a
fraction, the numerator of which is the full number of calendar months such
Grantee was employed during the Restriction Period and the denominator of
which is the total number of full calendar months in the Restriction
Period. If a Grantee ceases to be employed by the Company or any of its
Subsidiary Corporations for any reason other than as described in the
preceding sentence, the Grantee shall be deemed not to have satisfied the
restrictions associated with the Restricted Stock Award unless the
Committee determines otherwise in its sole discretion (in which event the
extent to which restrictions will be deemed to have lapsed shall not exceed
the amount determined pursuant to the preceding sentence).
ARTICLE V
General Provisions
Section 5.1 Adjustment Provisions
(a) Subject to paragraph (b) below, in the event of (1) any dividend
payable in shares of Common Stock; (2) any recapitalization,
reclassification, split-up, or consolidation of, or other change in, the
Common Stock; or (3) any exchange of the outstanding shares of Common
Stock, in connection with a merger, consolidation, or other Reorganization
of or involving South Alabama Bancorporation or a sale by South Alabama
Bancorporation of all or a portion of its assets, for a different number
or class of shares of stock or other securities of South Alabama
Bancorporation or shares of the stock or other securities of any other
corporation; then the Committee shad, in such manner as it shall determine
in its sole discretion, appropriately adjust the number and class of shares
or other securities which shall be subject to Options, Stock Appreciation
Rights, and Restricted Stock Awards and/or the purchase price per share
which must be paid thereafter upon exercise of any Option and which will be
used to determine the amount which any Grantee would receive upon exercise
thereafter of Stock Appreciation Rights. Any such adjustment made by the
Committee shall be final, conclusive, and binding upon ad persons,
including, without limitation, the Company, its Subsidiary Corporations,
the shareholders and directors of the Company, and any persons having any
interest in any Options, Stock Appreciation Rights, or Restricted Stock
Awards which may be granted under the Plan.
(b) Subject to any required action by the shareholders, if the Company
shall be the surviving or resulting corporation in any merger,
consolidation, or other Reorganization, any Option, Stock Appreciation
Right, or Restricted Stock Award granted hereunder shall pertain to and
apply to the securities to which a holder of the number of shares of common
stock subject to the Option, Stock Appreciation Right, or Restricted Stock
Award would be entitled on the effective date of such merger or
consolidation; but a dissolution or complete liquidation of the Company or
a merger, consolidation or other Reorganization in which the Company is not
the surviving or resulting corporation, shall cause every Option, Stock
Appreciation Right, and Restricted Stock Award outstanding hereunder to
terminate on the effective date of such dissolution, complete liquidation,
merger, consolidation, or other Reorganization; provided, however, that the
Company shall give not less than thirty (30) days' written notice prior to
the effective date of the said transaction to each Grantee, who shall have
the right to exercise his Option, Stock Appreciation Right, and/or
Restricted Stock Award during the thirty (30) day period immediately
preceding such effective date, as to all or any part of the shares covered
thereby, including, without limitation, shares as to which such Option,
Stock Appreciation Right, and/or Restricted Stock Award would not otherwise
be exercisable by reason of an insufficient lapse of time or that the
measuring year for the performance requirement had not then elapsed
(anything contained hereinabove to the contrary notwithstanding); and
except that the surviving or resulting bank, banking association, bank
holding company, or corporation may assume such Option, Stock Appreciation
Right, and/or Restricted Stock Award or tender an option or options to
purchase its shares on its terms and conditions, both as to the number of
shares and otherwise, and/or may tender such stock appreciation rights
and/or restricted stock awards as it deems appropriate, an in its absolute
and uncontrolled discretion.
(c) The term "Reorganization" as used in this Section means and refers to
any statutory merger, statutory consolidation, sale of all or substantially
all of the assets of the Company or its Corporate Subsidiaries, or sale of
securities of the Company or its Corporate Subsidiaries pursuant to which
the Company or its Corporate Subsidiaries becomes a subsidiary of and
controlled by, another corporation or is not the surviving or resulting
corporation, all after the effective date of the Reorganization.
(d) Except as provided in paragraph (a) immediately above, issuance by the
Company of shares of stock of any class of securities convertible into
shares of stock of any class shall not affect the Options, Stock
Appreciation Rights, or Restricted Stock Awards.
Section 5.2 Additional Conditions.
Any shares of Common Stock issued or transferred under any provision of
the Plan may be issued or transferred subject to such conditions, in
addition to those specifically provided in the Plan, as the Committee or
the Company may impose.
Section 5.3 No Rights as Shareholder or to Employment.
No Grantee or any other person authorized to purchase Common Stock upon
exercise of an Option shall have any interest in or shareholder rights with
respect to any shares of the Common Stock which are subject to
any Option or Stock Appreciation Rights until such shares have been issued
and delivered to the Grantee or any such person pursuant to the exercise of
such Option. Furthermore, the Plan shall not confer upon any Grantee any
rights of employment with the Company or one of its Subsidiary
Corporations, including without limitation any right to continue in the
employ of the Company or one of its Subsidiary Corporations, or affect the
right of the Company or one of its Subsidiary Corporations to terminate the
employment of a Grantee at any time, with or without cause.
Section 5.4 General Restrictions.
Each award under the Plan shall be subject to the requirement that, if at
any time the Committee shall determine that (a) the listing, registration
or qualification of the shares of Common Stock subject or related thereto
upon any securities exchange or under any state or federal law, or (b)the
consent or approval of any government regulatory body, or agreement by the
recipient of any award with respect to the disposition of shares of Common
Stock, is necessary or desirable as a condition of, or in connection with,
the granting of such award or the issue or purchase of shares of Common
Stock thereunder, such award may not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval, or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee. A participant shall agree, as a condition of
receiving any award under the Plan, to execute any documents, make any
representations, agree to restrictions on stock transferability, and take
any actions which in the opinion of legal counsel to the Company are
required by any applicable law, ruling, or regulation. The Company is in no
event obligated to register any such shares, to comply with any exemption
from registration requirements or to take any other action which may be
required to order to permit, or to remedy or remove any prohibition or
limitation on, the issuance or sale of such shares to any Grantee or other
authorized person.
Section 5.5 Conflict with Applicable Law.
With respect to persons subject to Section 16 of the Securities Exchange
Act of 1934 (the "1934 Act"), transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
Section 5.6 Rights Unaffected.
The existence of the Options, Stock Appreciation Rights, and Restricted
Stock Awards shall not affect: (1) the right or power of the Company or its
shareholders to make adjustments, recapitalizations, reorganizations, or
other changes in the Company's capital structure or its business; (2) any
issue of bonds, debentures, preferred or prior preference stocks affecting
the Common Stock or the rights thereof; (3) the dissolution or liquidation
of the Company or any of its Subsidiary Corporations, or the sale or
transfer of any part of all of the assets or business of the Company or any
of its Subsidiary Corporations; or (4) any other corporate act, whether of
a similar character or otherwise.
Section 5.7 Withholding Taxes
As a condition of exercise of an Option or Stock Appreciation Right or
grant of a Restricted Stock Award, the Company may, in its sole discretion,
withhold or require the Grantee to pay or reimburse the Company for any
taxes which the Company determines are required to be withheld in
connection with the grant of a Restricted Stock Award or any exercise of an
Option or Stock Appreciation Right.
Section 5.8 Choice of Law.
The validity, interpretation, and administration of the Plan and of any
rules, regulations, determinations, or decisions made thereunder, and the
rights of any and all persons having or claiming to have any interest
therein or thereunder, shall be determined exclusively in accordance with
the laws of the State of Alabama.
Without limiting the generality of the foregoing, the period within which
any action in connection with the Plan must be commenced shall be governed
by the laws of the State of Alabama, without regard to the place where the
act or omissions complained of took place, the residence of any party to
such action or the place where the action may be brought or maintained.
Section 5.9 Amendment, Suspension and Termination of Plan.
The Plan may, from time to time, be terminated, suspended, or amended by
the Board of Directors in such respects as it shall deem advisable
including, without limitation, in order that the Incentive Stock Options
granted hereunder shall be "incentive stock options" as such term is
defined in Section 422 of the Code, or to conform to any change in any law
or regulation governing same or in any other respect; provided, however,
that no such amendment shall change the following:
(a) The maximum aggregate number of shares for which Options, Stock
Appreciation Rights, and Restricted Stock Awards may be granted under the
Plan, except as required under any adjustment pursuant to Section 5.1
hereof;
(b) The Option exercise price, with the exception of any change in such
price required as a result of any adjustment pursuant to Section 5.1 hereof
and with the further exception of changes in determining the Fair Market
Value of shares of Common Stock to conform with any then applicable
provision of the Code or regulations promulgated thereunder;
(c) The maximum period during which Options or Stock Appreciation Rights
may be exercised;
(d) The maximum amount which may be paid upon exercise of a Stock
Appreciation Right;
(e) The termination date of the Plan in any manner which would extend such
date; or
(f) The requirements as to eligibility for participation in the Plan in
any material respect.
Notwithstanding any other provision herein contained, the Plan shall
terminate and all Options, Stock Appreciation Rights, and Restricted Stock
Awards previously granted shall terminate, in the event and on the date of
liquidation or dissolution of the Company unless such dissolution or
liquidation occurs in connection with a merger, consolidation or
reorganization of the Company to which Section 5.1 hereof applies.
Without limiting the generality of the foregoing, the period within which
any action in connection with the Plan must be commenced shall be governed
by the laws of the State of Alabama, without regard to the place where the
act or omissions complained of took place, the residence of any party to
such action or the place where the action may be brought or maintained
Section 5.9 Amendment, Suspension and Termination of Plan.
The Plan may, from time to time, be terminated, suspended, or amended by
the Board of Directors in such respects as it shall deem advisable
including, without limitation, in order that the Incentive Stock Options
granted hereunder shall be "incentive stock options" as such term is
defined in Section 422 of the Code, or to conform to any change in any law
or regulation governing same or in any other respect; provided, however,
that no such amendment shall change the following:
(a) The maximum aggregate number of shares for which Options, Stock
Appreciation Rights, and Restricted Stock Awards may be granted under the
Plan, except as required under any adjustment pursuant to Section 5.1
hereof;
(b) The Option exercise price, with the exception of any change in such
price required as a result of any adjustment pursuant to Section 5.1 hereof
and with the further exception of changes in determining the Fair Market
Value of shares of Common Stock to conform with any then applicable
provision of the Code or regulations promulgated thereunder;
(c) The maximum period during which Options or Stock Appreciation Rights
may be exercised;
(d) The maximum amount which may be paid upon exercise of a Stock
Appreciation Right;
(e) The termination date of the Plan in any manner which would extend such
date; or
(f) The requirements as to eligibility for participation in the Plan in
any material respect.
Notwithstanding any other provision herein contained, the Plan shall
terminate and all Options, Stock Appreciation Rights, and Restricted Stock
Awards previously granted shall terminate, in the event and on the date of
liquidation or dissolution of the Company unless such dissolution or
liquidation occurs in connection with a merger, consolidation or
or reorganization of the Company to which Section 5.1 hereof applies.
