<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SOUTHFIRST BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[SOUTHFIRST LETTERHEAD]
February 26, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of SouthFirst Bancshares, Inc., which will be held on Wednesday, March 24, 1999,
at 10:00 a.m., at SouthFirst's main office, 126 North Norton Avenue, Sylacauga,
Alabama 35150.
The formal notice of the meeting and the proxy statement appear on the
following pages and describe the matters to be acted upon. Time will be provided
during the meeting for discussion, and you will have an opportunity to ask about
your Company.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed notice of
the meeting and proxy statement, please complete, sign, date and return the
enclosed proxy at your earliest convenience. Returning the signed proxy card
will not prevent you from voting in person at the meeting, should you later
decide to do so.
Sincerely,
/s/ Donald C. Stroup
Donald C. Stroup
President and Chief Executive Officer
<PAGE> 3
SOUTHFIRST BANCSHARES, INC.
126 NORTH NORTON AVENUE
SYLACAUGA, ALABAMA 35150
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 24, 1999
To the Holders of Common Stock of SOUTHFIRST BANCSHARES, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of
SouthFirst Bancshares, Inc. will be held on Wednesday, March 24, 1999, at 10:00
a.m., at SouthFirst's principal executive offices, 126 North Norton Avenue,
Sylacauga, Alabama 35150, for the following purposes:
(1) To elect two directors to hold office until the 2002 Annual
Meeting of Stockholders and until their successors are elected
and qualified; and
(2) To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed February 16, 1999, as the record date
for the determination of stockholders entitled to vote at the Annual Meeting of
Stockholders. Only stockholders of record at the close of business on that date
will be entitled to notice of, and to vote at, the meeting or any adjournment
thereof.
A Proxy Statement and a proxy solicited by the Board of Directors,
together with a copy of the 1998 Annual Report to Stockholders are enclosed
herewith. Stockholders are cordially invited to attend the Annual Meeting.
Whether or not you expect to attend the meeting in person, you are requested to
complete, sign and date the enclosed proxy and return it as promptly as possible
in the accompanying envelope. If you attend the meeting, you may, if you wish,
withdraw your proxy and vote in person.
By Order of the Board of Directors
/s/ Joe K. McArthur
Joe K. McArthur
Secretary
Sylacauga, Alabama
February 26, 1999
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
YOU ARE URGED TO COMPLETE, SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY IN
THE ACCOMPANYING POSTAGE PAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY
REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 4
SOUTHFIRST BANCSHARES, INC.
126 NORTH NORTON AVENUE
SYLACAUGA, ALABAMA 35150
ANNUAL MEETING OF STOCKHOLDERS
MARCH 24, 1999
--------------------------
PROXY STATEMENT
--------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of SouthFirst Bancshares, Inc. for the
Annual Meeting of Stockholders to be held on Wednesday, March 25, 1998, and any
adjournment thereof, at the time and place and for the purposes set forth in the
accompanying notice of the meeting. The expense of this solicitation, including
the cost of preparing and mailing this Proxy Statement, will be paid by
SouthFirst. In addition to solicitations by mail, officers and other employees
of SouthFirst, without receiving any additional compensation, may assist in
soliciting proxies by telephone. This Proxy Statement and the accompanying proxy
are first being mailed to stockholders on or about February 26, 1999. The
address of the principal executive offices of SouthFirst is 126 North Norton
Avenue, Sylacauga, Alabama 35150, and SouthFirst's telephone number is (205)
245-4365. SouthFirst is the parent of First Federal of the South ("First
Federal"), a wholly-owned subsidiary which is a federally chartered savings
bank.
Any proxy given pursuant to this solicitation may be revoked by any
stockholder who attends the meeting and gives oral notice of his or her decision
to vote in person, without complying with any other formalities. In addition,
any proxy given pursuant to this solicitation may be revoked prior to the
meeting by delivering to SouthFirst's Secretary an instrument revoking it or a
duly executed proxy for the same shares bearing a later date. Proxies which are
returned properly executed and not revoked will be voted in accordance with the
stockholder's directions specified thereon. Where no direction is specified,
proxies will be voted FOR the election of the nominees named herein. The items
enumerated herein constitute the only business which the Board of Directors
intends to present or knows will be presented at the meeting. However, the proxy
confers discretionary authority upon the persons named therein, or their
substitutes, with respect to any other business which may properly come before
the meeting. Abstentions and broker non-votes will not be counted as votes
either in favor of or against the matter with respect to which the abstention or
broker non-vote relates.
The record of stockholders entitled to vote at the Annual Meeting was
taken on February 16, 1999. On that date, SouthFirst had outstanding and
entitled to vote 960,534 shares of common stock, $.01 par value per share (the
"Common Stock"), with each share entitled to one vote. The holders of one-third
(1/3) of the outstanding shares of Common Stock entitled to vote must be
present, in person or by proxy, to constitute a quorum.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 16,
1999 with respect to the beneficial ownership of SouthFirst's common stock by
(i) each person known by SouthFirst to own beneficially more than five percent
(5%) of SouthFirst Common Stock, (ii) each director of SouthFirst, (iii) each of
the Named Executive Officers (as defined at herein) and (iv) all directors and
executive officers of SouthFirst as a group. Unless otherwise indicated, each of
the shareholders has sole voting and investment power with respect to the shares
beneficially owned.
<TABLE>
<CAPTION>
Shares of
Common Stock Percent of
Beneficial Owner Beneficially Owned(1) Outstanding Shares
--------------------------------- --------------------- ------------------
<S> <C> <C>
Donald C. Stroup(2) 47,798 5.2%
Joe K. McArthur(3) 18,557 2.0%
Bobby R. Cook(4) 13,856 1.5%
H. David Foote, Jr.(5) 9,320 1.0%
J. Malcomb Massey(6) 20,623 2.3%
Allen Gray McMillan, III(7) 13,320 1.5%
John T. Robbs(8) 18,320 2.0%
Charles R. Vawter, Jr.(9) 33,020 3.6%
Jimmy C. Maples(10) 13,276 1.3%
Jeffrey L. Gendell, et. al.(11) 83,700 9.3%
Robert J. Salmon and
Mary Anne J. Salmon(12) 47,600 5.3%
Regions Bank, Birmingham,
Alabama(13) 66,400 7.4%
All directors and
executive officers
as a group (9 persons) 188,090 20.1%
</TABLE>
- -------------------
* Represents less than 1%.
(1) "Beneficial Ownership" includes shares for which an individual,
directly or indirectly, has or shares voting or investment power or
both and also includes options which are exercisable within sixty days
of the date hereof. Beneficial ownership as reported in the above table
has been determined in accordance with Rule 13d-3 of the Exchange Act.
The percentages are based upon 902,232 shares outstanding, except for
certain parties who hold presently exercisable options to purchase
shares. The percentages for those parties holding presently exercisable
options are based upon the sum of 902,232 shares plus the number of
shares subject to presently exercisable options held by them, as
indicated in the following notes.
(2) Of the amount shown, 17,100 shares are owned jointly by Mr. Stroup and
his wife, 300 shares are held by one of Mr. Stroup's sons, 9,094 shares
are held in his account under SouthFirst's 401(k) plan, 2,781 shares
are held in his account under First Federal's ESOP, 12,450 shares are
subject to presently exercisable options and 8,300 shares represent
restricted stock granted under SouthFirst's Management Recognition
Plans "A" and "B," 4,980 shares of which are fully vested.
(3) Of the amount shown, 1,500 shares are owned jointly by Mr. McArthur and
his wife, 3,092 shares are held in his account under SouthFirst's
401(k) plan, 3,341 shares are held in his account under First Federal's
ESOP, 7,968 shares are subject to presently exercisable options and
5,312 shares represent restricted stock granted under SouthFirst's
Management Recognition Plans "A" and "B," 3,187 shares of which are
fully vested. (4) Of the amount shown, 1,624 shares are held in an
Individual Retirement Account for the benefit of Mr. Cook's wife.
(5) Of the amount shown, 3,000 shares are owned jointly by Mr. Foote and
his wife, 1,500 shares are held by Mr. Foote as custodian for each of
his two minor children, 2,490 shares are subject to presently
exercisable options and 1,660 shares represent restricted stock granted
under SouthFirst's Management Recognition Plan "A," 996 shares of which
are fully vested.
(6) Of the amount shown, 15,512 shares are restricted stock acquired
pursuant to that certain employment agreement between Mr. Massey and
Benefit Financial, vesting in equal increments over a period of 15
years beginning on April 11, 1997, 2,933 shares are held in a profit
sharing account, and 1,995 shares are held in an Individual Retirement
Account.
-2-
<PAGE> 6
(7) Of the amount shown, 10,000 shares are held jointly by Mr. McMillan and
his wife, 2,490 shares are subject to presently exercisable options and
1,660 shares represent restricted stock granted under SouthFirst's
Management Recognition Plan "A," 996 shares of which are fully vested.
(8) Of the amount shown, 2,293 shares are held jointly by Mr. Robbs and his
wife, 3,662 shares are held in an Individual Retirement Account for the
benefit of Mr. Robb's wife, 5,000 shares are held jointly with his
father, 2,490 shares are subject to presently exercisable options and
1,660 shares represent restricted stock granted under SouthFirst's
Management Recognition Plan "A," 996 shares of which are fully vested.
(9) Of the amount shown, 28,500 shares are held jointly by Mr. Vawter and
his wife, 2,490 shares are subject to presently exercisable options and
1,660 shares represent restricted stock granted under SouthFirst's
Management Recognition Plan "A," 996 shares of which are fully vested.
(10) Of the amount shown, 900 shares are held in an Individual Retirement
Account, 6,668 shares are held in his account under SouthFirst's 401(k)
plan, 3,384 shares are held in his account under First Federal's ESOP,
2,490 shares are subject to presently exercisable options and 1,660
shares represent restricted stock granted under SouthFirst's Management
Recognition Plan "B," 996 shares of which are fully vested.
(11) Of the amount shown, Jeffrey L. Gendell has shared voting power with
respect to 83,700 shares, Tontine Management, L.L.C. ("TM") has shared
voting power with respect to 83,700 shares, Tontine Partners, L.P.
("TP") has shared voting power with respect to 10,500 shares and
Tontine Financial Partners, L.P. ("TFP") has shared voting power with
respect to 73,200 shares. TM, the general partner of TP and TFP, has
the power to direct the affairs of TP and TFP. Mr. Gendell is the
Managing Member of Tontine Management, L.L.C. and, in that capacity,
directs its operations. The business address of Mr. Gendell, TP and TFP
is 200 Park Avenue, Suite 3900, New York, New York 10166. The foregoing
information is based on a Schedule 13D/A, Amendment No. 2, dated
October 6, 1997 filed by Mr. Gendell, TP and TFP. SouthFirst makes no
representation as to the accuracy or completeness of the information
reported.
(12) Robert J. Salmon and Mary Anne J. Salmon beneficially own and have
shared voting and dispositive power with respect to 47,600 shares. The
foregoing information is based on a Schedule 13G, dated October 8, 1998
filed by Mr. and Mrs. Salmon.
(13) These shares are held in trust by Regions Bank as trustee of First
Federal's ESOP. See "Employee Stock Ownership Plan" at page 18.
There are no arrangements known to SouthFirst the operation of which
would result in a change in control of SouthFirst.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
SouthFirst's Board of Directors presently consists of eight directors,
elected to staggered three-year terms. The terms of Messrs. McArthur and
McMillan will expire at the Annual Meeting of Stockholders. The Board of
Directors has nominated Messrs. McArthur and McMillan for re-election as
directors of SouthFirst. Unless otherwise directed, the proxies will be voted at
the meeting for the election of the nominees. In the event that either one or
both of the nominees is unable to serve or declines to serve as a director at
the time of the meeting, the persons named as proxies will have discretionary
authority to vote the proxies for the election of such person or persons as may
be nominated in substitution by the present Board of Directors. Management knows
of no current circumstances which would render any nominee named herein unable
to accept nomination or election. The affirmative vote of a plurality of the
votes present in person or by proxy at the meeting is required for the election
of the two nominees standing for election. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE ELECTION OF THE NOMINEES.
The following individuals have been nominated by management for election
to SouthFirst's Board of Directors for a term of three years and until their
successors are elected and qualified:
JOE K. MCARTHUR, age 47, has served as the Executive Vice President,
Chief Financial Officer and Secretary/Treasurer of First Federal and SouthFirst
since 1992 and 1994, respectively. Mr. McArthur has served as a director of
First Federal and SouthFirst since February 1996. Mr. McArthur has over 23 years
of experience in the banking industry and received a B.S. in Accounting from the
University of Alabama-Birmingham and a Masters of Business Administration
equivalent from
-3-
<PAGE> 7
the National School of Finance and Management. He has also completed all courses
with the Institute of Financial Education. Prior to joining First Federal, Mr.
McArthur was Assistant Executive Director of Finance of Humana, a hospital, from
1990 to 1992, and Senior Vice president of First Federal of Alabama from 1983 to
1990. Mr. McArthur is a Board member of the Southern Community. He has also
served as a manager of various Little League and Babe Ruth Baseball teams, as
well as Boys' Club basketball teams. Mr. McArthur is a member of the First
United Methodist Church of Sylacauga.
ALLEN GRAY MCMILLAN, III, age 42, has served as a director of First
Federal since 1993 and of SouthFirst since 1994. Mr. McMillan is President of
Brecon Knitting Mill, where he has been employed since 1979. Mr. McMillan has
been active in the Kiwanis Club, United Way, and Boy Scouts of America. He is a
member of the First United Methodist Church.
Each of the following individuals is a member of SouthFirst's Board of
Directors who is not standing for election to the Board this year and whose term
will continue after the Annual Meeting of Stockholders:
DONALD C. STROUP, age 49, has served as the President and Chief
Executive Officer of First Federal since 1988 and of SouthFirst since 1994. Mr.
Stroup has also been a member of the First Federal Board of Directors since 1988
and of the SouthFirst Board of Directors since 1994. Mr. Stroup has over 25
years of experience in the banking industry and received a B.S. in Business
Administration from Samford University, and a Certificate of Achievement and
Diploma of Merit from the Institute of Financial Education, Chicago, Illinois.
He is a director of the Boys' Club, a member of the Red Cross, Hospice Care,
Talladega County Economic Development Authority and Boy Scouts Advisory, a
former Chairman of the Southern Community Bankers and a former member of the
Sylacauga School Board and the Sylacauga Industrial Development Board. Mr.
Stroup is also a current member and former President of the Sylacauga Rotary
Club and a former director of the Sylacauga Chamber of Commerce and Coosa Valley
Country Club. Mr. Stroup is a member of the First Baptist Church of Sylacauga.
J. MALCOMB MASSEY, age 49, has served as a director of SouthFirst and
First Federal since May, 1997. Mr. Massey is President and Chief Executive
Officer of First Federal's wholly owned subsidiary, Pension & Benefit Financial
Services, Inc. ("Pension & Benefit"), a position he has held since he joined
Pension & Benefit in 1997 after Pension & Benefit acquired substantially all of
the assets of Lambert, Massey, Roper & Taylor, Inc., an employee benefits
consulting firm based in Montgomery in which Mr. Massey served as President
since 1980. Mr. Massey is a Qualifying and Life Member of the Million Dollar
Round Table with over 25 years experience in the financial services industry and
serves as the insurance consultant to the Southern Community Bankers, an
industry trade group comprised of 20 savings institutions and community banks
located in the Southeastern United States.
BOBBY R. COOK, age 59, was named President of the Western Division of
First Federal on October 31, 1997 in connection with the purchase by SouthFirst
of First Federal Savings and Loan Association of Chilton County ("Chilton
County"). Prior to joining SouthFirst and First Federal, Mr. Cook served as
President and Chief Executive Officer of Chilton County since 1973. Mr. Cook is
past president of the Clanton, Alabama Kiwanis Club, past treasurer of the
Clanton, Alabama Jaycees and serves as a Deacon of The First Baptist Church of
Clanton, Alabama.
H. DAVID FOOTE, JR., age 49, has served as a director of First Federal
since 1988 and of SouthFirst since 1994. Mr. Foote has been President and owner
of Foote Bros. Furniture since 1973. Mr. Foote has been a member of the Board of
Directors of the Sylacauga Chamber of Commerce, the Coosa Valley Country Club
and Talladega County E-911. He has served as President of Wesley Chapel
Methodist Men's Club and head of the Wesley Chapel Methodist Administrative
Board.
-4-
<PAGE> 8
JOHN T. ROBBS, age 44, has served as a director of First Federal since
1988 and of SouthFirst since 1994. Mr. Robbs is President of Michael Supply Co.,
Inc., where he has been employed since 1980.
CHARLES R. VAWTER, JR., age 37, has served as a director of First
Federal since 1992 and of SouthFirst since 1994. Mr. Vawter is Chief Financial
Officer of Automatic Gas and Appliance Co., Inc., where he has been employed
since 1987. Mr. Vawter is a member of the Board of Directors of B.B. Comer
Library Foundation and the Coosa Valley Country Club. He is a past Board member
of the Sylacauga Chamber of Commerce. He is currently a member of the Planning
Commission of the City of Sylacauga Chamber of Commerce and has served on the
Planning Committee of Alabama LP Gas Association. Mr. Vawter is a member of the
First Baptist Church.
In addition to the executive officers and directors listed above, the
following individual is an executive officer of First Federal:
JIMMY C. MAPLES, age 49, has served as First Vice President of First
Federal and is largely responsible for First Federal's residential construction
lending since March, 1994. Prior to serving in this capacity with First Federal,
Mr. Maples was Senior Vice President of Lending at Pinnacle Bank (formerly known
as First Federal of Alabama) in Jasper, Alabama.
There are no family relationships between any director or executive
officer and any other director or executive officer of SouthFirst.
COMMITTEES OF THE BOARD
SouthFirst's Board of Directors has established the following standing
committees:
(A) The Audit Committee, currently comprised of Messrs. McMillan,
Foote, Vawter and Robbs. The Audit Committee, which held one meeting in fiscal
1998, is authorized to review and make recommendations to the Board of Directors
with respect to SouthFirst's audit procedures and independent auditor's report
to management and to recommend to the Board of Directors the appointment of
independent auditors for SouthFirst, to review with the independent auditors the
scope and results of audits, to monitor SouthFirst's financial policies and
control procedures, to monitor the non-audit services provided by SouthFirst's
auditors and to review all potential conflicts of interests.
(B) The Stock Option Committee, currently comprised of Messrs. Foote,
Robbs, McMillan and Vawter. The Stock Option Committee, which did not hold any
meetings in fiscal 1998, is responsible for administering SouthFirst's Stock
Option and Incentive Plan adopted in 1995. The entire Board of Directors of
SouthFirst administers SouthFirst's 1998 Stock Option and Incentive Plan.
(C) The Management Recognition Plan Committee, currently comprised of
Messrs. Foote, Robbs, McMillan and Vawter. The Management Recognition Plan
Committee, which did not hold any meetings in fiscal 1998, is responsible for
administering SouthFirst's two Management Recognition Plans.
SouthFirst does not have a Directors Nominating Committee, that
function being reserved to the entire Board of Directors.
SouthFirst presently does not have a compensation committee because no
officers of SouthFirst receive any compensation for services to SouthFirst. All
officers of SouthFirst are compensated by SouthFirst's wholly-owned subsidiary,
First Federal, solely for their services to First Federal. In
-5-
<PAGE> 9
addition, directors are paid for attendance at First Federal committee meetings,
but employee members of committees are not paid.
In addition to SouthFirst's committees, First Federal has established
various committees including the Executive Committee, the Wage and Compensation
Committee, the Loan Committee, the Asset/Liability Committee and the Audit
Committee.
The Executive Committee of First Federal consists of Messrs. Stroup
(Chairman), Foote, Robbs, McArthur, McMillan and Vawter. The Committee meets
only as needed and is charged with the responsibility of overseeing the business
of First Federal. The Committee has the power to exercise most powers of the
Board of Directors in the intervals between meetings of the Board, and any
activity is reported to the Board monthly. First Federal's Loan Committee is
comprised of Messrs. Robbs (Chairman) and Vawter. Mr. Stroup serves as an
alternate. The committee meets weekly to consider loan applications. Approval of
a loan application requires approval by at least two members (other than the
person signing the application) of the Loan Committee. The Audit Committee of
First Federal consists of Messrs. McMillan, Foote, Vawter and Robbs. This
committee meets at least annually and more frequently if necessary to review the
results of the audit program. Recommendations and observations are reported to
the Board of Directors. The Asset/Liability Committee consists of Messrs.
Stroup, McArthur, Foote and Vawter (Chairman). This Committee meets quarterly to
establish and monitor policies to control interest rate sensitivity. First
Federal's Wage and Compensation Committee consists of Messrs. Stroup, McArthur,
Robbs and Vawter. This Committee, which held one meeting in fiscal 1997, is
responsible for reviewing salaries and benefits of directors, officers, and
employees.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of SouthFirst held twelve meetings during the
fiscal year ended September 30, 1998. During fiscal 1998, each director attended
at least 75% of the aggregate number of meetings held by the Board of Directors
and Committee(s) on which he served.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
SouthFirst's directors, certain officers and persons who own more than 10% of
the outstanding Common Stock of SouthFirst to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of
SouthFirst held by such persons. Officers, directors and greater than 10%
stockholders are also required to furnish SouthFirst with copies of all forms
they file under this regulation. SouthFirst first became subject to this
regulation on February 13, 1995. To SouthFirst's knowledge, based solely on a
review of copies of such reports, and any amendments thereto, furnished to
SouthFirst and representations that no other reports were required, during the
fiscal year ended September 30, 1998, all Section 16(a) filing requirements
applicable to its officers, directors and 10% holders were satisfied.
Although it is not SouthFirst's obligation to make filings pursuant to
Section 16 of the Securities and Exchange Act of 1934, SouthFirst has adopted a
policy requiring all Section 16 reporting persons to report monthly to a
designated employee of SouthFirst as to whether any transactions in SouthFirst's
Common Stock occurred during the previous month.
-6-
<PAGE> 10
EXECUTIVE COMPENSATION
The following table provides certain summary information for fiscal
1998, 1997 and 1996 concerning compensation paid or accrued by SouthFirst and
First Federal to or on behalf of SouthFirst's Chief Executive Officer and the
other executive officers of SouthFirst whose total annual salary and bonus
exceeded $100,000 during fiscal 1998 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation(1) Long Term Compensation
--------------------------------------------- ------------------------------
Name and Principal Restricted Securities
------------------ Fiscal Other Annual Stock Underlying All Other
Position Year Salary Bonus Compensation(2) Award(s) Options/SARs Compensation
-------- ---- ------ ----- --------------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald C. Stroup 1998 $140,000 $35,812(3) $12,250 -- 34,930 $2,886(5)
President, Chief 1997 100,308 27,093 12,000 -- 20,750 2,272
Executive Officer 1996 95,568 163,093 10,250 $116,200(4) 20,750 2,255
and Chairman
Joe K. McArthur 1998 $105,000 $24,104(6) $12,250 -- 20,708 $1,309(8)
Executive Vice 1997 73,380 18,870 12,000 -- 13,280 1,402
President, Chief 1996 69,900 100,316 9,750 $74,368(7) 13,280 1,400
Financial Officer
and Director
Bobby R. Cook 1998(9) $78,500 $13,377(10) $10,000 -- 4,726 $2,561(11)
Director and
President Western
Division of First
Federal
J. Malcomb Massey 1998 $130,000 $1,677 $12,250 -- 3,726 $1,795(13)
Director and 1997(12) 65,000 -- 5,000 -- -- --
President of
Pension
& Benefit
Jimmy C. Maples 1998 $75,600 $32,709(14) -- -- 8,201 $1,737(16)
First Vice President 1997 71,988 28,575 -- -- 3,970 1,325
of First Federal 1996 69,228 73,054 -- $23,240(15) 3,970 1,325
</TABLE>
- --------------------
(1) All compensation received by the Named Executive Officers was paid by
First Federal, with the exception of Mr. Massey's salary, which was
paid by Pension & Benefit.
(2) Fees received as member of the Board of Directors of SouthFirst and of
First Federal.
(3) Consists of a regular bonus of $17,500 as well as $18,312 of
compensation consisting of dividends paid under SouthFirst's Dividend
Investment Plan on unexercised stock options and a bonus paid to assist
in the payment of applicable federal taxes due in connection with such
dividend payments. See "-- Compensation of Directors."
(4) Represents 8,300 shares which are subject to certain vesting
requirements as more fully described in "-- Management Recognition
Plans." As of September 30, 1998, the aggregate market value of the
shares was $135,913.
(5) Represents a $2,016 automobile allowance and income of $870 recognized
on employer provided group term life insurance in excess of $50,000.
(6) Consists of a regular bonus of $13,125 as well as $10,979 of
compensation consisting of dividends paid under SouthFirst's Dividend
Investment Plan on unexercised stock options and a bonus paid to assist
in the payment of applicable federal taxes due in connection with such
dividend payments. See "-- Compensation of Directors."
(7) Represents 5,312 shares which are subject to certain vesting
requirements as more fully described in "-- Management Recognition
Plans." As of September 30, 1998, the aggregate market value of the
shares was $86,984.
-7-
<PAGE> 11
(8) Represents a $439 automobile allowance and income of $870 recognized on
employer provided group term life insurance in excess of $50,000.
(9) The 1998 data for Mr. Cook reflect the partial-year period from October
31, 1997, the date SouthFirst acquired Chilton County, through
September 30, 1998.
(10) Consists of a regular bonus of $11,250 as well as $2,127 of
compensation consisting of dividends paid under SouthFirst's Dividend
Investment Plan on unexercised stock options. See "-- Compensation of
Directors."
(11) Represents a $581 automobile allowance and income of $1,980 recognized
on employer provided group term life insurance in excess of $50,000.
(12) The 1997 data for Mr. Massey reflect the partial-year period from April
11, 1997, the date SouthFirst acquired Pension & Benefit, through
September 30, 1997.
(13) Represents a $1,099 automobile allowance and income of $696 recognized
on employer provided group term life insurance in excess of $50,000.
(14) Consists of a regular bonus of $28,500 as well as $4,209 of
compensation recognized on dividends paid under SouthFirst's Dividend
Investment Plan on unexercised stock options. See "-- Compensation of
Directors."
(15) Represents 1,660 shares which are subject to certain vesting
requirements as more fully described in "-- Management Recognition
Plans." As of September 30, 1998, the aggregate market value of the
shares was $27,183.
(16) Represents a $1,121 automobile allowance and income of $616 recognized
on employer provided group term life insurance in excess of $50,000.
EMPLOYMENT AGREEMENTS
SouthFirst and First Federal have entered into employment agreements
with each of the Named Executive Officers. The terms and conditions of these
employment contracts are described below.
Donald C. Stroup, Chairman, President and Chief Executive Officer.
The employment agreement with Mr. Stroup was effective as of October 1,
1997 and is for a term of three years. On each anniversary date from the
expiration of the initial three year term of the employment agreement, the term
of Mr. Stroup's employment will be extended for an additional one-year period
beyond the then effective expiration date, upon a determination by the Boards of
Directors of SouthFirst and First Federal that the performance of Mr. Stroup has
met the required performance standards and that such employment agreement should
be extended.
Pursuant to Mr. Stroup's employment agreement, First Federal pays Mr.
Stroup an annual base salary of $140,000, for which SouthFirst is jointly and
severally liable. Mr. Stroup's employment agreement entitles him to participate
with all other senior management employees of SouthFirst or First Federal in any
discretionary bonuses that the SouthFirst or First Federal Boards of Directors
may award. In addition, Mr. Stroup participates in standard retirement and
medical plans, and is entitled to customary fringe benefits, vacation and sick
leave.
Mr. Stroup's employment agreement terminates upon his death or
disability, and is terminable for "cause" as defined in the employment
agreement. In the event of termination for cause, no severance benefits are
payable to Mr. Stroup. If SouthFirst or First Federal terminates Mr. Stroup
without cause, he will be entitled to a continuation of his salary and benefits
from the date of termination through the remaining term of the employment
agreement plus an additional twelve-month period. Mr. Stroup may voluntarily
terminate his employment agreement by providing sixty days written notice to the
Boards of Directors of SouthFirst and First Federal, in which case he is
entitled to receive only his compensation, vested rights and benefits up to the
date of termination.
Mr. Stroup's employment agreement further provides that, in the event
of Mr. Stroup's involuntary termination in connection with, or within one year
after, any change in control of First Federal or SouthFirst, other than for
"cause," or death or disability, Mr. Stroup will be paid, within 10 days of such
termination, an amount equal to the difference between: (i) 2.99 times his "base
amount," as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986,
as amended (the "Internal
-8-
<PAGE> 12
Revenue Code"); and (ii) the sum of any other parachute payments, as defined
under Section 280G(b)(2) of the Internal Revenue Code, that Mr. Stroup receives
on account of the change in control. Such payment would be reduced to the extent
it would cause First Federal to fail to meet any of its regulatory capital
requirements. Under Mr. Stroup's employment agreement, a "change in control"
generally refers to a change in ownership, holding or power to vote more than
25% of SouthFirst's or First Federal's voting stock, a change in the ownership
or possession of the ability to control the election of a majority of First
Federal's or SouthFirst's directors or the exercise of a controlling influence
over the management or policies of SouthFirst or First Federal. In addition,
under Mr. Stroup's employment agreement, a change in control occurs when, during
any consecutive two-year period, the directors of SouthFirst or First Federal,
at the beginning of such period, cease to constitute two-thirds of the Boards of
Directors of SouthFirst or First Federal, unless the election of replacement
directors was approved by a two-thirds (66 2/3%) vote of the initial directors
then in office. Mr. Stroup's employment agreement also provides for a similar
lump sum payment to be made in the event of the Mr. Stroup's voluntary
termination of employment within one year following a change in control of First
Federal or SouthFirst.
Joe K. McArthur, Executive Vice President and Chief Financial Officer.
The employment agreement with Mr. McArthur was effective as of October
1, 1997 and is for a term of three years. On each anniversary date from the
expiration of the initial three year term of the employment agreement, the term
of Mr. McArthur's employment will be extended for an additional one-year period
beyond the then effective expiration date, upon a determination by the Boards of
Directors of SouthFirst and First Federal that the performance of Mr. McArthur
has met the required performance standards and that such employment agreement
should be extended.
Pursuant to Mr. McArthur's employment agreement, First Federal pays Mr.
McArthur an annual base salary of $105,000, for which SouthFirst will be jointly
and severally liable. Mr. McArthur's employment agreement entitles him to
participate with all other senior management employees of SouthFirst or First
Federal in any discretionary bonuses that the SouthFirst or First Federal Boards
of Directors may award. In addition, Mr. McArthur participates in standard
retirement and medical plans, and is entitled to customary fringe benefits,
vacation and sick leave.
Mr. McArthur's employment agreement terminates upon his death or
disability, and is terminable for "cause" as defined in the employment
agreement. In the event of termination for cause, no severance benefits are
payable to Mr. McArthur. If SouthFirst or First Federal terminates Mr. McArthur
without cause, he will be entitled to a continuation of his salary and benefits
from the date of termination through the remaining term of the employment
agreement plus an additional twelve-month period. Mr. McArthur may voluntarily
terminate his employment agreement by providing sixty days written notice to the
Boards of Directors of SouthFirst and First Federal, in which case he is
entitled to receive only his compensation, vested rights and benefits up to the
date of termination.
Mr. McArthur's employment agreement further provides that, in the event
of Mr. McArthur's involuntary termination in connection with, or within one year
after, any change in control of First Federal or SouthFirst, other than for
"cause," or death or disability, Mr. McArthur will be paid, within 10 days of
such termination, an amount equal to the difference between: (i) 2.99 times his
"base amount," as defined in Section 280G(b)(3) of the Internal Revenue Code;
and (ii) the sum of any other parachute payments, as defined under Section
280G(b)(2) of the Internal Revenue Code, that Mr. McArthur receives on account
of the change in control. Such payment would be reduced to the extent it would
cause First Federal to fail to meet any of its regulatory capital requirements.
Under Mr. McArthur's employment agreement, a "change in control" generally
refers to a change in ownership, holding or power to vote more than 25% of
SouthFirst's or First Federal's voting stock, a change in the ownership or
possession of the ability to control the election of a majority of First
Federal's or SouthFirst's
-9-
<PAGE> 13
directors or the exercise of a controlling influence over the management or
policies of SouthFirst or First Federal. In addition, under Mr. McArthur's
employment agreement, a change in control occurs when, during any consecutive
two-year period, directors of SouthFirst or First Federal, at the beginning of
such period, cease to constitute two-thirds of the Boards of Directors of
SouthFirst or First Federal, unless the election of replacement directors was
approved by a two-thirds (66 2/3%) vote of the initial directors then in office.
Mr. McArthur's employment agreement also provides for a similar lump sum payment
to be made in the event of the Mr. McArthur's voluntary termination of
employment within one year following a change in control of First Federal or
SouthFirst.
Bobby R. Cook, President of the Western Division of First Federal.
The employment agreement with Mr. Cook was effective as of January 1,
1998 and is for a term of three years. On each anniversary date from the
expiration of the initial three year term of the employment agreement, the term
of Mr. Cook's employment will be extended for an additional one-year period
beyond the then effective expiration date, upon a determination by the Board of
Directors of First Federal that the performance of Mr. Cook has met the required
performance standards and that such employment agreement should be extended.
Pursuant to the employment agreement, First Federal pays Mr. Cook an annual base
salary of $90,000. Mr. Cook's employment agreement entitles him to participate
with all other senior management employees of First Federal in any discretionary
bonuses that the Board of Directors of First Federal may award. In addition, Mr.
Cook participates in standard retirement and medical plans, and is entitled to
customary fringe benefits, vacation and sick leave.
Mr. Cook's employment agreement terminates upon his death or
disability, and is terminable for "cause" as defined in the employment
agreement. In the event of termination for cause, no severance benefits are
payable to Mr. Cook. If First Federal terminates Mr. Cook without cause, he will
be entitled to a continuation of his salary and benefits from the date of
termination through the remaining term of the employment agreement plus an
additional twelve-month period. Mr. Cook may voluntarily terminate his
employment agreement by providing sixty days written notice to the Board of
Directors of First Federal, in which case he is entitled to receive only his
compensation, vested rights and benefits up to the date of termination. In
addition, Mr. Cook's employment agreement contains a provision which permits him
to voluntarily terminate his employment with First Federal and receive a
continuation of his salary and benefits from the date of termination through the
remaining term of the employment agreement plus an additional twelve-month
period in the event a constructive discharge occurs. A constructive discharge
will occur if (i) Mr. Cook is required to move his personal residence or perform
his principal executive functions more than 35 miles from his primary office in
Clanton, Alabama, except for any trips to the principal executive offices of
First Federal in Sylacauga, Alabama in connection with Mr. Cook's duties
pursuant to his employment agreement; (ii) there is a material reduction without
reasonable cause in Mr. Cook's base compensation; (iii) First Federal fails to
continue to provide Mr. Cook with compensation and benefits substantially
similar to those provided to him under any of the employee benefit plans in
which Mr. Cook currently or in the future becomes a participant; (iv) Mr. Cook
is assigned duties and responsibilities materially different from those normally
associated with his position as President of First Federal's Western Division;
(v) there is a material diminution or reduction in Mr. Cook's responsibilities
or authority; or (vi) there is a material diminution or reduction in the
secretarial or administrative support provided to Mr. Cook by First Federal.
Mr. Cook's employment agreement further provides that, in the event of
Mr. Cook's involuntary termination in connection with, or within one year after,
any change in control of First Federal or, SouthFirst, other than for "cause,"
or death or disability, Mr. Cook will be paid, within 10 days of such
termination, an amount equal to the difference between: (i) 2.99 times his "base
amount," as defined in
-10-
<PAGE> 14
Section 280G(b)(3) of the Internal Revenue Code; and (ii) the sum of any other
parachute payments, as defined under Section 280G(b)(2) of the Internal Revenue
Code, that Mr. Cook receives on account of the change in control. Such payment
would be reduced to the extent it would cause First Federal to fail to meet any
of its regulatory capital requirements. Under Mr. Cook's employment agreement,
"change in control" generally refers to a change in ownership, holding or power
to vote more than 25% of SouthFirst's or First Federal's voting stock, a change
in the ownership or possession of the ability to control the election of a
majority of First Federal's or SouthFirst's directors or the exercise of a
controlling influence over the management or policies of SouthFirst or First
Federal. In addition, under Mr. Cook's employment agreement, a change in control
occurs when, during any consecutive two-year period, directors of SouthFirst or
First Federal, at the beginning of such period, cease to constitute two-thirds
of the Boards of Directors of SouthFirst or First Federal, unless the election
of replacement directors was approved by a two-thirds (66 2/3%) vote of the
initial directors then in office. Mr. Cook's employment agreement also provides
for a similar lump sum payment to be made in the event of the Mr. Cook's
voluntary termination of employment within one year following a change in
control of First Federal or SouthFirst.
J. Malcomb Massey, President of Pension & Benefit.
The employment agreement with Mr. Massey was effective as of April 11,
1997 and provides for a term of three years. On each anniversary date from the
expiration of the initial three year term of the employment agreement, the term
of Mr. Massey's employment will be extended for an additional one-year period
beyond the then effective expiration date, upon a determination by the Board of
Directors of First Federal that the performance of Mr. Massey has met the
required performance standards and that such employment agreement should be
extended.
The employment agreement with Mr. Massey provides for an annual base
salary of $130,000. In addition, Mr. Massey received 15,512 shares of restricted
SouthFirst Common Stock which, one-fifteenth of which vest on each of the first
fifteen anniversaries of the date of the employment agreement. Should Mr.
Massey's employment be terminated due to his death or disability, all unvested
shares will vest on the last day of Mr. Massey's service with Pension & Benefit.
All unvested shares will also vest upon a "change in control" of Pension &
Benefit. Under Mr. Massey's employment agreement, "change in control" generally
refers to a change in ownership, holding or power to vote more than 25% of
Pension & Benefit's voting stock, a change in the ownership or possession of the
ability to control the election of a majority of Pension & Benefit's directors
or the exercise of a controlling influence over the management or policies of
Pension & Benefit. In addition, under Mr. Massey's employment agreement, a
change in control occurs when, during any consecutive two-year period, directors
of SouthFirst or Pension & Benefit, at the beginning of such period, cease to
constitute two-thirds of the Boards of Directors of SouthFirst or First Federal,
unless the election of replacement directors was approved by a two-thirds (66
2/3%) vote of the initial directors then in office.
Mr. Massey's employment agreement entitles him to participate with all
other senior management employees of First Federal in any discretionary bonuses
that the Board of Directors of First Federal may award. Mr. Massey may also
participate in standard retirement and medical plans, and is entitled to
customary fringe benefits, vacation and sick leave.
Mr. Massey's employment agreement terminates upon his death or
disability, and is terminable for "cause" as defined in the employment
agreement. In the event of termination for cause, no severance benefits are
payable to Mr. Massey. If First Federal terminates Mr. Massey without cause, he
will be entitled to severance pay equal to the amount of his salary and benefits
from the date of termination through the remaining term of the employment
agreement plus an additional twelve-month period. Mr. Massey has the option to
receive this payment either (i) in periodic payments, as if the termination had
-11-
<PAGE> 15
not occurred, or (ii) in one lump sum payment within ten days of the termination
of his employment. In either case, however, the severance pay is limited to
three times the average total annual compensation received by Mr. Massey under
the employment agreement over the five full fiscal years preceding the
termination, or, if Mr. Massey has been employed less than five full fiscal
years, over each full fiscal year preceding the termination. Mr. Massey may
voluntarily terminate his employment agreement by providing sixty days written
notice to the Board of Directors of First Federal, in which case he is entitled
to receive only his compensation, vested rights and benefits up to the date of
termination.
Mr. Massey's employment agreement also contains a non-competition
provision pursuant to which Mr. Massey agrees that if his employment by Pension
& Benefit terminates during the initial three year period of employment, he will
not, for two years following such termination, directly or indirectly engage in
activities related to the planning, designing, implementation or administration
of employee benefit plans in the same county as Pension & Benefit is located or
in any contiguous county. The employment contract also provides that during the
term of Mr. Massey's employment, and for three years thereafter, he shall
refrain from recruiting or hiring, or attempting to recruit or hire, directly or
by assisting others, any other employee of Pension & Benefit or any successor or
affiliate of Pension & Benefit.
Jimmy C. Maples, First Vice President of First Federal.
The employment agreement with Mr. Maples was effective as of January 1,
1998 and is for a term of three years. On each anniversary date from the
expiration of the initial three year term of the employment agreement, the term
of Mr. Maples' employment will be extended for an additional one-year period
beyond the then effective expiration date, upon a determination by the Board of
Directors of First Federal that the performance of Mr. Maples has met the
required performance standards and that such employment agreement should be
extended.
The employment agreement provides that First Federal will pay Mr.
Maples an annual base salary of $76,500. Mr. Maples' employment agreement
entitles him to participate with all other senior management employees of First
Federal in any discretionary bonuses that the Board of Directors of First
Federal may award. In addition, Mr. Maples participates in standard retirement
and medical plans, and is entitled to customary fringe benefits, vacation and
sick leave.
Mr. Maples' employment agreement terminates upon his death or
disability, and is terminable for "cause" as defined in the employment
agreement. In the event of termination for cause, no severance benefits are
payable to Mr. Maples. If First Federal terminates Mr. Maples without cause, he
will be entitled to a continuation of his salary and benefits from the date of
termination through the remaining term of the employment agreement plus an
additional twelve-month period. Mr. Maples may voluntarily terminate his
employment agreement by providing sixty days written notice to the Board of
Directors of First Federal, in which case he is entitled to receive only his
compensation, vested rights and benefits up to the date of termination. In
addition, Mr. Maples' employment agreement contains a provision which permits
him to voluntarily terminate his employment with First Federal and receive a
continuation of his salary and benefits from the date of termination through the
remaining term of the employment agreement plus an additional twelve-month
period in the event a constructive discharge occurs. A constructive discharge
will occur if (i) Mr. Maples is required to move his personal residence or
perform his principal executive functions more than 35 miles from his primary
office in Hoover, Alabama, except for any trips to the principal executive
offices of First Federal in Sylacauga, Alabama in connection with Mr. Maples'
duties pursuant to his employment agreement; (ii) there is a material reduction
without reasonable cause in Mr. Maples' base compensation; (iii) First Federal
fails to continue to provide Mr. Maples with compensation and benefits
substantially similar to those provided to him under any of the employee benefit
plans in which Mr. Maples currently or in the future becomes a participant; (iv)
there is
-12-
<PAGE> 16
a material diminution or reduction in Mr. Maples' responsibilities or authority;
or (v) there is a material diminution or reduction in the secretarial or
administrative support provided to Mr. Maples by First Federal.
Mr. Maples' employment agreement further provides that, in the event of
Mr. Maples' involuntary termination in connection with, or within one year
after, any change in control of First Federal or SouthFirst, other than for
"cause," or death or disability, Mr. Maples will be paid, within 10 days of such
termination, an amount equal to the difference between: (i) 2.99 times his "base
amount," as defined in Section 280G(b)(3) of the Internal Revenue Code; and (ii)
the sum of any other parachute payments, as defined under Section 280G(b)(2) of
the Internal Revenue Code, that Mr. Maples receives on account of the change in
control. Such payment would be reduced to the extent it would cause First
Federal to fail to meet any of its regulatory capital requirements. Under Mr.
Maples' employment agreement, "change in control" generally refers to a change
in ownership, holding or power to vote more than 25% of SouthFirst's or First
Federal's voting stock, a change in the ownership or possession of the ability
to control the election of a majority of First Federal's or SouthFirst's
directors or the exercise of a controlling influence over the management or
policies of SouthFirst or First Federal. In addition, under Mr. Maples'
employment agreement, a change in control occurs when, during any consecutive
two-year period, directors of SouthFirst or First Federal, at the beginning of
such period, cease to constitute two-thirds of the Boards of Directors of
SouthFirst or First Federal, unless the election of replacement directors was
approved by a two-thirds (66 2/3%) vote of the initial directors then in office.
Mr. Maples' employment agreement also provides for a similar lump sum payment to
be made in the event of the Mr. Maples' voluntary termination of employment
within one year following a change in control of First Federal or SouthFirst.
DEFERRED COMPENSATION AGREEMENTS
First Federal has entered into deferred compensation agreements
(collectively, the "Deferred Compensation Agreements") with Mr. Stroup and Mr.
McArthur, pursuant to which each will receive certain retirement benefits at age
65. Under the Deferred Compensation Agreements, benefits are payable for fifteen
years. A portion of the retirement benefits accrue each year until age 65 or, if
sooner, until termination of employment. If Mr. Stroup remains in the employment
of First Federal until age 65, his annual benefit will be $65,000. If Mr.
McArthur remains in the employment of First Federal until age 65, his annual
benefit will be $45,000. If either of these officers dies prior to age 65, while
in the employment of First Federal, the full retirement benefits available under
the deferred compensation agreements will accrue and will, thereupon, be payable
to their respective beneficiaries. The retirement benefits available under the
Deferred Compensation Agreements are unfunded. However, First Federal has
purchased life insurance policies on the lives of these officers that will be
available to SouthFirst and First Federal to provide, both, for retirement
benefits and for key man insurance. The costs of these arrangements was $57,075
in each of fiscal 1998, 1997 and 1996.
MANAGEMENT RECOGNITION PLANS
The SouthFirst Board of Directors has adopted two management
recognition plans ("MRPs"), denominated SouthFirst Bancshares, Inc. Management
Recognition Plan "A" ("Plan A") and SouthFirst Bancshares, Inc. Management
Recognition Plan "B" ("Plan B") (collectively, the "Plans"). The objective of
the Plans is to enable SouthFirst and First Federal to reward and retain
personnel of experience and ability in key positions of responsibility by
providing such personnel with a proprietary interest in SouthFirst and by
recognizing their past contributions to SouthFirst and First Federal, and to act
as an incentive to make such contributions in the future.
-13-
<PAGE> 17
Plan A and Plan B are identical except that while Plan B provides for
awards only to employees of SouthFirst and First Federal, Plan A provides for
awards to employees, as well as to non-employee directors. The Plans are
administered by a committee (the "Committee") of the SouthFirst Board of
Directors. Awards under the Plans are in the form of restricted stock grants
("MRP grants"). Each Plan has reserved a total of 16,600 shares of SouthFirst
Common Stock for issuance pursuant to awards made by the Committee. Such shares,
with respect to each Plan, are held in trust until awards are made by the
Committee, at which time the shares are distributed from the trust to the award
recipient. Such shares will bear restrictive legends until vested, as described
below. The Committee may make awards to eligible participants under the Plans in
its discretion, from time to time. Under Plan A, on November 15, 1995 each
non-employee director serving in such capacity on February 13, 1995 (the
effective date of the conversion of SouthFirst from a mutual to a stock form of
ownership) automatically received an award of 1,660 shares. In selecting the
employees to whom awards are granted under the Plans, the Committee considers
the position, duties and responsibilities of the employees, the value of their
services to SouthFirst and First Federal and any other factors the Committee may
deem relevant. As of September 30, 1996, a total of 33,200 shares had been
awarded under the Plans and, as of that date, no further shares were available
for future issuance.
Awards under the Plans vest at the rate of 20% per year, commencing on
the first anniversary of the date of the award. The Committee may, however, from
time to time and in its sole discretion, accelerate the vesting with respect to
any participant, if the Committee determines that such acceleration is in the
best interest of SouthFirst. If a participant terminates employment for reasons
other than death or disability, the participant forfeits all rights to any
shares which have not vested. If the participant's termination is caused by
death or disability, all shares become vested. Participants will recognize
compensation income on the date their interests vest, or at such earlier date
pursuant to a participant's election to accelerate recognition pursuant to
Section 83(b) of the Internal Revenue Code.
STOCK OPTION PLANS
The SouthFirst Board of Directors has adopted two Stock Option Plans.
The first was adopted November 15, 1995 and is denominated the SouthFirst
Bancshares, Inc. Stock Option and Incentive Plan (the "1995 Stock Option Plan"),
and the second was adopted on January 28, 1998 and is denominated the 1998 Stock
Option and Incentive Plan ("the 1998 Stock Option Plan"). The objective of each
of the Stock Option Plans is to attract, retain, and motivate the best possible
personnel for positions of substantial responsibility with SouthFirst and First
Federal. In order to attract and retain members of the Board of Directors of
SouthFirst who contribute to SouthFirst's success, each of the Stock Option
Plans also provides for the award of nonqualified stock options to non-employee
directors of SouthFirst.
The 1995 Stock Option Plan authorizes the grant of options for up to
83,000 shares of Common Stock to select officers and employees in the form of
(i) incentive and nonqualified stock options ("Options") or (ii) Stock
Appreciation Rights ("SARs") (Options and SARs are referred to herein
collectively as "Awards"), as determined by the committee administering the 1995
Stock Option Plan. As of September 30, 1998, options to purchase 83,000 shares
had been issued under the 1995 Stock Option Plan and, as of that date, no
further options were available for issuance.
The 1998 Stock Option Plan authorizes the grant of options for up to
63,361 shares of Common Stock to select officers and employees in the form of
Options or SARs. As of September 30, 1998, options to purchase 63,361 shares had
been issued under the 1998 Stock Option Plan and, as of that date, no further
options were available for issuance
The terms and conditions of the two Stock Option Plans are
substantially the same. The exercise price for Options and SARs granted under
the Stock Option Plans may not be less than the fair market
-14-
<PAGE> 18
value of the shares on the day of the grant, and no Awards shall be exercisable
after the expiration of ten years from the date of this grant. Each Stock Option
Plan has a term of 10 years unless earlier terminated by the SouthFirst Board of
Directors. The Stock Option Plans are administered by a committee of the
directors of SouthFirst (the "Option Plan Committee"). Except as discussed below
with respect to non-employee directors, the Option Plan Committee has complete
discretion to make Awards to persons eligible to participate in the Stock Option
Plans, and determines the number of shares to be subject to such Awards, and the
terms and conditions of such Awards. In selecting the persons to whom Awards are
granted under the Stock Option Plan, the Option Plan Committee considers the
position, duties, and responsibilities of the employees, the value of their
services to SouthFirst and First Federal, and any other factor the Option Plan
Committee may deem relevant to achieving the stated purpose of the Stock Option
Plan.
Options granted under the Stock Option Plans become exercisable at a
rate of 20% per year commencing one year from the date of grant, with the
exception that all options will become immediately exercisable in the event the
optionee's employment is terminated due to the optionee's death, disability or
retirement, or in the event of a change in control of First Federal or
SouthFirst.
Under the 1995 Stock Option Plan, all directors who were not employees
of SouthFirst as of November 15, 1995 (the date of the approval of the Stock
Option Plan by the shareholders of SouthFirst and the OTS), received
non-qualified stock options for the purchase of 4,150 shares with an exercise
price equal to $14.00 per share, the fair market value of SouthFirst Common
Stock on the date of grant. Likewise, under the 1998 Stock Option Plan, all
directors who were not employees of SouthFirst as of January 28, 1998 (the date
of the approval of the Stock Option Plan by the Board of Directors of
SouthFirst) received non-qualified stock options for the purchase of 2,700
shares with an exercise price equal to $21.25 per share, the fair market value
of SouthFirst Common Stock on the date of grant.
-15-
<PAGE> 19
The following table presents information regarding fiscal 1998 grants
to the Named Executive Officers of options to purchase shares of SouthFirst's
Common Stock.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1998
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted(1) Fiscal Year Price Date
---- ---------- ----------- ----- ----
<S> <C> <C> <C> <C>
Donald C. Stroup 10,030 22.6% $21.25 1/28/08
Joe K. McArthur 7,428 16.7% 21.25 1/28/08
Bobby R. Cook 4,726 10.6% 21.25 1/28/08
J. Malcomb Massey 3,726 8.4% 21.25 1/28/08
Jimmy C. Maples 4,051 9.1% 21.25 1/28/08
</TABLE>
- --------------
(1) Options with respect to 20% of the underlying shares vest on each of
January 28, 1999, 2000, 2001, 2002 and 2003.
The following table provides certain information concerning the exercise
of stock options under SouthFirst's Stock Option Plan during the fiscal year
ended September 30, 1998, by the Named Executive Officers and the fiscal year
end value of unexercised options held by those individuals:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at Options at Fiscal
Fiscal Year End Year End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable(1)
---- ------------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Donald C. Stroup 0 $0 8,300 / 26,630 $19,713 / $29,569
Joe K. McArthur 0 $0 5,312 / 15,396 $12,616 / $18,924
Bobby R. Cook 0 $0 0 / 4,726 $0 / $0
J. Malcomb Massey 0 $0 0 / 3,726 $0 / $0
Jimmy C. Maples 0 $0 1,588 / 6,613 $3,772 / $5,657
- --------------
</TABLE>
(1) Represents the value of unexercised, in-the-money stock options on
September 30, 1998, using the $16.375 closing price of SouthFirst
Common Stock on that date.
EMPLOYEE RETIREMENT SAVINGS PLAN
First Federal has established a savings and profit-sharing plan that
qualifies as a tax-deferred savings plan under Section 401(k) of the Internal
Revenue Code (the "401(k) Plan") for its salaried employees who are at least 21
years old and who have completed one year of service with First Federal. Under
the 401(k) Plan, eligible employees may contribute up to 10% of their gross
salary to the 401(k)
-16-
<PAGE> 20
Plan or $9,500, whichever is less. Currently, all contributions are fully vested
under 401(k) Plan at the time of the contribution. Prior to First Federal's
adoption of an Employee Stock Ownership Plan (see "--Employee Stock Ownership
Plan"), the first 1% to 3% of employee compensation was matched by a First
Federal contribution of $0.50 for each $1.00 of employee contribution and
contributions from 4% to 6% were 100% matched. During this period, contributions
were 100% vested following the completion of five years of service and were
invested in one or more investment accounts administered by an independent plan
administrator.
EMPLOYEE STOCK OWNERSHIP PLAN
First Federal has adopted an Employee Stock Ownership Plan (the "ESOP")
for the exclusive benefit of participating employees. All employees of First
Federal who are at least 21 years old and who have completed a year of service
with First Federal are eligible to participate in the ESOP. SouthFirst has
loaned the ESOP $664,000, which the ESOP used to purchase 66,400 shares of
SouthFirst Common Stock. This loan is secured by the shares purchased with the
proceeds of the loan. Shares purchased with the loan proceeds are held in a
suspense account for allocation among participants as the loan is repaid.
Contributions to the ESOP are expected to be used to repay the ESOP
loan. Shares released from the suspense account as the ESOP loan is repaid, any
contributions to the ESOP that are not used to repay the ESOP loan, and
forfeitures will be allocated among participants on the basis of their relative
compensation. With the exception of terminations due to death, disability or
retirement, a participant must be employed by First Federal on the last day of
the plan year and have completed 1,000 hours of service during the plan year in
order to share in the allocation for the plan year. Any dividends paid on
unallocated shares of SouthFirst Common Stock are to be used to repay the ESOP
loan; any dividends paid on shares of SouthFirst Common Stock allocated to
participant accounts will be credited to said accounts.
Benefits under the ESOP vest at a rate of 20% per year of service, with
the first 20% vesting after the Participant has served for two years.
Participant's benefits also become fully vested upon the Participant's death,
disability, attainment of normal retirement age, or the termination of the ESOP.
For vesting purposes, a year of service means any plan year in which an employee
completes at least 1,000 hours of service with First Federal. An employee's
years of service prior to the ESOP's effective date will be considered for
purposes of determining vesting under the ESOP.
A participant who separates from service because of death, disability
or retirement will be entitled to receive an immediate distribution of his or
her benefits. A participant who separates from service for any other reason will
be eligible to begin receiving benefits once he or she has completed his or her
fifth one year break in service. Distributions will generally be made in whole
shares of SouthFirst Common Stock, with the value of fractional shares being
paid in cash. Although accounts will generally be distributed in a lump sum,
accounts valued in excess of $500,000 may be distributed in installments over a
five-year period.
SouthFirst is the plan administrator of the ESOP and Regions Bank,
Birmingham, Alabama serves as the trustee of the ESOP (the "ESOP Trustee").
Participants may vote the shares of SouthFirst Common Stock that are allocated
to their account. Any unallocated shares of SouthFirst Common Stock and
allocated shares of SouthFirst Common Stock for which no timely direction is
received are voted by the ESOP Trustee in accordance with its fiduciary
obligations.
-17-
<PAGE> 21
COMPENSATION OF DIRECTORS
Each member of the First Federal Board of Directors, (other than the
Chairman), receives a fee of $750 for each board meeting attended (with one
excused absence), and each non-employee director of First Federal, if a member
of a committee, receives $500 for each committee meeting attended. The Chairman
of the First Federal Board of Directors receives a fee of $850 for each board
meeting attended. Each member of the SouthFirst Board of Directors receives a
fee of $250 for each board meeting attended.
SouthFirst has adopted, by resolution of the Board of Directors of
SouthFirst, a dividend incentive plan pursuant to which holders of options to
purchase SouthFirst Common Stock and holders of MRP grants are paid an amount
equal to the number of shares underlying stock options or MRP grants held by
them, as the case may be, multiplied by the amount of dividends SouthFirst pays
to the holders of its Common Stock. Accordingly, during fiscal 1998, each
non-employee director was paid a total of $3,601 with respect to the shares of
Common Stock underlying options held by him and a total of $996 with respect to
the MRPs held by him as provided under the dividend incentive plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No directors, executive officers, or immediate family members of such
individuals were engaged in transactions with SouthFirst or First Federal, other
than loans, involving more than $60,000 during the period from the year ended
September 30, 1997 through February 16, 1998. First Federal, like many other
financial institutions, has followed a policy of granting various types of loans
to officers, directors and employees. The loans have been made in the ordinary
course of business and on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
First Federal's other customers, and do not involve more than the normal risk of
collectibility, nor present other unfavorable features. All loans by First
Federal to its officers and executive officers are subject to OTS regulations
restricting loans and other transactions with affiliated persons of First
Federal. In addition, all future credit transactions with such directors,
officers and related interests of SouthFirst and First Federal will be on
substantially the same terms as, and following credit underwriting procedures
that are not less stringent than, those prevailing at the time for comparable
transactions with unaffiliated persons and must be approved by a majority of the
directors of SouthFirst, including a majority of the disinterested directors. At
September 30, 1998, the aggregate of all loans by First Federal to its officers,
directors, and related interests was $1,021,000.
AUDITORS
On August 20, 1998, SouthFirst dismissed its independent auditors, KPMG
Peat Marwick LLP ("KPMG"), and on the same date engaged the firm of Jones &
Kirkpatrick, P.C. ("Jones & Kirkpatrick") as its independent auditors for the
fiscal year ending September 30, 1998. Each of these actions was approved by the
audit committee of the Board of Directors of SouthFirst.
The report of KPMG on the financial statements of SouthFirst for the
fiscal years ended September 30, 1997 and 1996 did not contain any adverse
opinion or a disclaimer of opinion, nor was it qualified or modified as to audit
scope or accounting principles.
In connection with the audit of the fiscal years ended September 30,
1997 and 1996 and for the unaudited interim period through August 20, 1998,
there were no disagreements with KPMG on any matter of accounting principle or
practice, financial statement disclosure, or audit procedure or scope
-18-
<PAGE> 22
which disagreement, if not resolved to the satisfaction of KPMG, would have
caused it to make reference to the subject matter of the disagreement in its
report.
KPMG has furnished SouthFirst with a letter addressed to the Securities
and Exchange Commission stating that it does not disagree with any of the above
statements, a copy of which has been filed as an exhibit to the Current Report
on Form 8-K filed with the Securities and Exchange Commission dated August 20,
1998.
Jones & Kirkpatrick audited the financial statements of SouthFirst for
the fiscal year ended September 30, 1998. The Board of Directors has selected
this same firm to audit the accounts and records of SouthFirst for the current
fiscal year. Neither such firm nor any of its members or associates has, or has
had during the past year, any financial interest in SouthFirst, direct or
indirect, or any relationship with SouthFirst, other than in connection with
their duties as auditors and income tax preparers. Representatives of Jones &
Kirkpatrick are expected to be present at the Annual Meeting to respond to
stockholders' questions and will have an opportunity to make any statements they
consider appropriate.
STOCKHOLDERS' PROPOSALS FOR 2000 ANNUAL MEETING
Stockholders may submit proposals appropriate for stockholder action at
SouthFirst's 2000 Annual Meeting, consistent with the regulations of the
Securities and Exchange Commission. Proposals by stockholders intended to be
presented at the 2000 Annual Meeting must be received by SouthFirst no later
than October 29, 1999, in order to be included in SouthFirst's proxy materials
for that meeting. With respect to any such proposals received by SouthFirst
after January 12, 2000, the persons named in the form of Proxy solicited by
management will vote the Proxy in accordance with their judgment of what is in
the best interests of SouthFirst. Such proposals should be directed to
SouthFirst Bancshares, Inc., Attention: Corporate Secretary, 126 North Norton
Avenue, Sylacauga, Alabama 35150.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
the Annual Meeting. However, if other matters should come before the Annual
Meeting, it is the intention of the persons named in the enclosed form of Proxy
to vote the Proxy in accordance with their judgment of what is in the best
interest of SouthFirst.
By Order of The Board of Directors
/s/ Joe K. McArthur
Joe K. McArthur
Secretary
Sylacauga, Alabama
February 26, 1999
-19-
<PAGE> 23
<TABLE>
<S> <C> <C>
[X] PLEASE MARK VOTES REVOCABLE PROXY APPENDIX A
AS IN THIS EXAMPLE SOUTHFIRST BANCSHARES, INC. ----------
THIS PROXY IS SOLICITED ON BEHALF With- For All
OF THE BOARD OF DIRECTORS FOR 1. To elect JOE K. MCARTHUR For hold Except
THE 1999 ANNUAL MEETING OF and ALLEN G. MCMILLAN, III [ ] [ ] [ ]
STOCKHOLDERS. for a term of three years and until
their successors are elected
and have qualified.
The undersigned hereby appoints Donald C. INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE
Stroup and Joe K. McArthur, or either of them, with INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THAT
power of substitution to each, the proxies of the NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
undersigned to vote the Common Stock of the
undersigned at the Annual Meeting of Stockholders
of SOUTHFIRST BANCSHARES, INC., to be held ---------------------------------------------------------------
on Wednesday, March 24, 1999, at 10:00 a.m., at
the main office of SouthFirst Bancshares, Inc., 2. To vote in accordance with their best judgment with respect
located at 126 North Norton Avenue, Sylacauga, to any other matters that may properly come before the
Alabama 35150, and at any adjournments or meeting.
postponements thereof, as indicated on this revocable
proxy: THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH
OF THE PROPOSALS AND UNLESS INSTRUCTIONS TO
THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED,
THIS PROXY WILL BE SO VOTED.
---------------------
Please be sure to sign and date Date Please date and sign exactly as your name(s) appear(s)
this Proxy in the box below. on this card.
- ---------------------------------------------------------
NOTE: When signing as an attorney, trustee, executor,
administrator or guardian, please give your title as such. If a
corporation or partnership, give full name of authorizing
officer. In the case of joint tenants, each joint owner must sign.
Stockholder sign above -- Co-holder (if any) sign above
- --------------------------------------------------------
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
SOUTHFIRST BANCSHARES, INC.
126 NORTH NORTON AVENUE
SYLACAUGA, ALABAMA 35150
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
