<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------
FORM 10-KSB/A
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Amendment No. 1 to
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended September 30, 1998
--------------------------------------------
Commission File No. 1-13640
SOUTHFIRST BANCSHARES, INC.
A Delaware Corporation
I.R.S. Employer Identification No. 63-1121255
126 North Norton Ave.
Sylacauga, Alabama 35150
(205) 245-4365
Securities Registered Pursuant to Section 12(b)
of the Exchange Act:
<TABLE>
<CAPTION>
Name of Each Exchange
Title of Each Class on Which Registered
------------------------------------ ------------------------------
<S> <C>
Common Stock, $ .01 par value American Stock Exchange, Inc.
</TABLE>
Securities Registered Pursuant to Section 12(g)
of the Exchange Act: None
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-B is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB, or any
amendment to this Form 10-KSB. [X]
Issuer's Revenues for the fiscal year ended September 30, 1998:
$13,088,065
The aggregate market value of the common equity held by nonaffiliates
of the Registrant (674,210 shares), computed using the closing price as reported
on the American Stock Exchange for the Registrant's Common Stock on December 24,
1998, was $10,955,912. For the purposes of this response, officers, directors
and holders of 5% or more of the Registrant's Common Stock are considered the
affiliates of the Registrant.
The number of shares outstanding of the Registrant's Common Stock as of
December 24, 1998: 999,244 shares of $.01 par value common stock.
The following items are amended:
Part III:
Item 9. Directors and Executive Officers of the Registrant.
Item 10. Executive Compensation.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Exhibits and Reports on Form 8-K
<PAGE> 2
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT OF SOUTHFIRST
The SouthFirst Board of Directors currently consists of eight persons
and is divided into three classes, each of which contains approximately
one-third of the SouthFirst Board of Directors. The directors of SouthFirst are
elected by the shareholders of SouthFirst for staggered, three year terms, such
that approximately one-third of the directors will be elected at each annual
meeting of shareholders to hold office until their successors are elected and
qualified. The executive officers of SouthFirst are elected annually by the
Board of Directors of SouthFirst and hold office until their successors are
elected and qualified.
The direction and control of First Federal is vested in the First
Federal Board of Directors. Directors of First Federal serve three-year terms.
The terms of the directors of First Federal are staggered (as in the case of
SouthFirst) so that approximately one-third of the directors will be elected at
each annual meeting of shareholders. Since SouthFirst owns all of the issued and
outstanding shares of common stock of First Federal, SouthFirst will elect the
directors of First Federal, in accordance with applicable law.
There are no arrangements or understandings pursuant to which the
directors or executive officers of SouthFirst or First Federal were elected and
there are no family relationships between any of such persons.
The following table sets forth certain information regarding the
executive officers and directors of SouthFirst and First Federal.
<TABLE>
<CAPTION>
POSITION HELD YEAR FIRST YEAR
WITH SOUTHFIRST AND/OR ELECTED AS TERM
NAME AGE(1) FIRST FEDERAL DIRECTOR EXPIRES
---- ----- ------------------------ ---------- -------
<S> <C> <C> <C> <C>
Donald C. Stroup 49 President, Chief Executive 1994 1999
Officer and Chairman
Joe K. McArthur 47 Executive Vice President, 1995 1998
Chief Financial Officer,
Secretary/Treasurer and
Director
Bobby R. Cook 58 Director and President of the 1997 2000
Western Division of First Federal
H. David Foote, Jr. 49 Director 1994 2000
J. Malcomb Massey(2) 49 Director 1997 1999
Allen Gray McMillan, III 41 Director 1995 1998
John T. Robbs 43 Director 1994 2000
Charles R. Vawter, Jr. 37 Director 1994 1999
Jimmy C. Maples 49 First Vice President of N/A N/A
First Federal
</TABLE>
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(1) At September 30, 1998.
(2) Mr. Massey is also President of Pension & Benefit, a wholly owned
subsidiary of First Federal.
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Set forth below is certain information with respect to the directors
and executive officers of SouthFirst and First Federal. Unless otherwise
indicated, the principal occupation listed for each person below has been his
principal occupation for the past five years.
DONALD C. STROUP 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.
JOE K. MCARTHUR 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 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. 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.
BOBBY R. COOK 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 had 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. 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 director 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.
J. MALCOMB MASSEY has served as a director of First Federal and
SouthFirst since May, 1997. Mr. Massey is President and Chief Executive Officer
of Pension & Benefit, First Federal's wholly owned subsidiary, a position he has
held since he joined Pension & Benefit in 1997 after it acquired substantially
all of the assets of Lambert, Massey, Roper & Taylor, Inc., an employee benefits
consulting firm based in Montgomery for which Mr. Massey had served as President
since 1980. Mr. Massey is a member of the American Society of Pension Actuaries
and serves as the insurance consultant to Southern Community Bankers, an
industry trade group comprised of twenty savings institutions and community
banks located in the southeastern United States.
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ALLEN GRAY MCMILLAN, III 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.
JOHN T. ROBBS 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. 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 First Baptist Church. He is a director of B.B.
Comer Library Foundation and the Coosa Valley Country Club. He is a past
director 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.
JIMMY C. MAPLES has served as First Vice President of First Federal and
has been largely responsible for First Federal's residential construction
lending since March, 1994. Prior to serving in this capacity with the First
Federal, Mr. Maples was Senior Vice President of Lending at Pinnacle Bank
(formerly known as First Federal of Alabama) in Jasper, Alabama.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires SouthFirst's directors,
certain of SouthFirst's 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% shareholders are
also required to furnish SouthFirst with copies of all forms they file under
this regulation. SouthFirst has been subject to this regulation from February
13, 1995 through the end of fiscal 1998. To SouthFirst's knowledge, based solely
on a review of copies of such reports furnished to SouthFirst and
representations that no other reports were required, all Section 16(a) filing
requirements applicable to its officers, directors and 10% holders were complied
with during fiscal 1998.
Although SouthFirst has no obligation to make filings pursuant to
Section 16 of the Exchange Act, 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.
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ITEM 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 such periods (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1) Long Term Compensation
---------------------------------- --------------------------
Restricted Securities
Name and Principal 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) -- $23,240(15) 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 -- -- 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."
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(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.
(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.
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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 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
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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
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
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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 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
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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
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
9
<PAGE> 11
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)
Mr. Maples 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. Maples'
responsibilities or authority; or (vi) 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 15
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
10
<PAGE> 12
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 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.
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
11
<PAGE> 13
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 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, a total of 83,000 shares had been issued under the 1995
Stock Option Plan and, as of that date, no further shares were available for
future issuance. The 1998 Stock Option Plan authorizes the grant of up to 63,361
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"). As of September 30, 1998, a total of 63,361 shares had been
issued under the 1998 Stock Option Plan and, as of that date, no further shares
were available for future 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 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.
12
<PAGE> 14
The following table presents information regarding fiscal 1998 grants to
the Named Executive Officers of options to purchase shares of SouthFirst's
Common Stock.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
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:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
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.
13
<PAGE> 15
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) 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.
14
<PAGE> 16
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.
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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 First Federal solely for their
services to First Federal. In addition, directors are paid for attendance at
First Federal committee meetings, but employee members of committees are not
paid. Donald C. Stroup, President and Chief Executive Officer of SouthFirst and
First Federal, and Joe K. McArthur, Executive Vice President, Chief Operating
Officer, and Chief Financial Officer of First Federal, serve as members of the
Wage and Compensation Committee of First Federal. First Federal's Wage and
Compensation Committee is responsible for reviewing salaries and benefits of
directors, officers, and employees of First Federal. SouthFirst had no
"interlocking" relationships existing at or before the year ended September 30,
1998 in which (i) any executive officer is a member of the Board of
Directors/Trustees of another entity, one of whose executive officers is a
member of the First Federal Board of Directors, or where (ii) any executive
officer is a member of the compensation committee of another entity, one of
whose executive officers is a member of the First Federal Board of Directors.
15
<PAGE> 17
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of January 18,
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 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>
H. David Foote, Jr.(2) 9,320 *
John T. Robbs(3) 18,320 1.8%
Jimmy C. Maples(4) 13,276 1.3%
Allen Gray McMillan, III(5) 13,320 1.3%
Charles R. Vawter, Jr.(6) 33,020 3.3%
Donald C. Stroup(7) 47,798 4.7%
Joe K. McArthur(8) 18,557 1.8%
J. Malcomb Massey(9) 20,623 1.9%
Bobby R. Cook(10) 13,856 1.4%
Jeffrey L. Gendell, et. al.(11) 83,700 8.4%
------ ----
All directors and
executive officers
as a group (9 persons) 186,907 15.6%
</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 999,244 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 999,244 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, 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.
(3) 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.
(4) Of the amount shown, 900 shares are held in an Individual Retirement
Account, 6,668 shares are held in his account under the Company's
401(k) plan, 3,384 shares are held in his account under the Bank's
ESOP, 2,490 shares are subject to presently exercisable options and
1,660 shares represent restricted stock granted under the Company's
Management Recognition Plan "B," 996 shares of which are fully vested.
(5) 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.
(6) 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.
(7) 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
16
<PAGE> 18
restricted stock granted under SouthFirst's Management Recognition
Plans "A" and "B," 4,980 shares of which are fully vested.
(8) 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.
(9) 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.
(10) Of the amount shown, 1,624 shares are held in an Individual Retirement
Account for the benefit of Mr. Cook's wife.
(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.
17
<PAGE> 19
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A). EXHIBITS.
The following exhibits are filed with or incorporated by reference into
this report. The exhibits which are denominated by an asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference, from
SouthFirst's: Registration Statement on Form S-1 under the Securities Act of
1933 Registration No. 33-80730 ("1994 S-1"); Registration Statement on From S-8
under the Securities Act of 1933, Registration No. 333-4534 ("Plan "A" S-8");
Registration Statement on From S-8 under the Securities Act of 1933,
Registration No. 333-4536 ("Plan "B" S-8"); Registration Statement on From S-8,
Registration No. 333-4538 ("Option Plan S-8"); Annual Report on Form 10-K for
the year ended September 30, 1995 ("1995 10-K"); Annual Report on Form 10-K for
the year ended September 30, 1997.; or Annual Report on Form 10-KSB for the year
ended September 30, 1998. Unless otherwise indicated, the exhibit number
corresponds to the exhibit number in the referenced document.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
3.1 * Amended and Restated Certificate of Incorporation (1994 S-1).
3.2 * Bylaws (1994 S-1, Exhibit 3.2).
4 * Form of Common Stock Certificate (1994 S-1).
10.1 * Employment Agreement dated as of October 1, 1997 between SouthFirst
Bancshares, Inc. and Donald C. Stroup (1997 Form 10-K).
10.2 * Employment Agreement dated as of October 1, 1997 between SouthFirst
Bancshares, Inc. and Joe K. McArthur (1997 Form 10-K).
10.3 * Employment Agreement dated as of October 1, 1997 between First Federal of the
South and Donald C. Stroup (1997 Form 10-K).
10.4 * Employment Agreement dated as of October 1, 1997 between First Federal of the
South and Joe K. McArthur (1997 Form 10-K).
10.5 * Employment Agreement dated as of January 1, 1998 between First Federal of the
South and Bobby R. Cook (1998 Form 10-KSB).
10.5.1 * Form of Management Recognition Plan A (1994 S-1, Exhibit 10.5).
10.5.2 * Form of Management Recognition Plan A, as amended (1995 Form 10-K).
10.5.3 * Management Recognition Plan A Restated and Continued (Plan "A" S-8, Exhibit
4.1).
10.6.1 * Form of Management Recognition Plan B (1994 S-1, Exhibit 10.6).
10.6.2 * Form of Management Recognition Plan B, as amended (1995 Form 10-K).
</TABLE>
18
<PAGE> 20
<TABLE>
<S> <C>
10.6.3 * Management Recognition Plan B, Restated and Continued (Plan "B" S-8, Exhibit
4.1).
10.7.1 * Form of Stock Option and Incentive Plan (1994 S-1, Exhibit 10.7) (1995 Form
10-K).
10.7.2 * Form of Stock Option and Incentive Plan, as amended (1995 Form 10-K).
10.7.3 * Stock Option and Incentive Plan, Restated and Continued (Option Plan S-8, Exhibit
4.1).
10.7.4 * Form of Incentive Stock Option Agreement (Option Plan S-8, Exhibit 4.2).
10.8 * Form of SouthFirst Bancshares, Inc. Employee Stock Ownership Plan (1994 S-1,
Exhibit 10.8).
10.9 * Deferred Compensation Agreement between First Federal of the South and Joe K.
McArthur (1995 Form 10-K).
10.10 * Deferred Compensation Agreement between First Federal of the South and
Donald C. Stroup (1995 Form 10-K).
10.11 * Employment Agreement dated as of January 1, 1998 between First Federal of the
South and Jimmy C. Maples (1998 Form 10-KSB).
10.12 Employment Agreement dated as of April 11, 1997 between Pension & Benefit
Financial Services, Inc. (formerly Benefit Financial Services, Inc.) and J. Malcomb
Massey.
10.13 1998 Stock Option and Incentive Plan, as Amended and Restated.
11 * Statement Regarding Computation of Per Share Earnings (1998 Form 10-KSB).
21 * Subsidiaries of Registrant (1998 Form 10-KSB).
23.1 * Consent of Jones and Kirkpatrick, P.C. (1998 Form 10-KSB).
23.2 * Consent of KPMG Peat Marwick LLP (1998 Form 10-KSB).
27 * Financial Data Schedule (for SEC use only) (1998 Form 10-KSB).
</TABLE>
19
<PAGE> 21
(B) REPORTS ON FORM 8-K
SouthFirst filed one report on Form 8-K during the last quarter of the
fiscal year ended September 30, 1998, on August 20, 1998, reporting its
dismissal of KPMG Peat Marwick LLP as its independent auditors and engagement of
Jones & Kirkpatrick, P.C. as independent auditors.
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
SOUTHFIRST BANCSHARES, INC.
Date: January 27, 1999 By: /s/ Donald C. Stroup
------------------------------------------
Donald C. Stroup
President and Chief Executive Officer
(principal executive officer)
Date: January 27, 1999 By: /s/ Joe K. McArthur
------------------------------------------
Joe K. McArthur
Principal Financial Officer
(principal accounting officer)
21
<PAGE> 23
SOUTHFIRST BANCSHARES, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
10.12 Employment Agreement dated as of April 11, 1997 between Pension & Benefit
Financial Services, Inc. (formerly Benefit Financial Services, Inc.) and J. Malcomb
Massey.
10.13 1998 Stock Option and Incentive Plan, as Amended and Restated.
</TABLE>
22
<PAGE> 1
EXHIBIT 10.12
BENEFIT FINANCIAL SERVICES, INC.
EMPLOYMENT AGREEMENT
April 11, 1997
(J. Malcolm Massey)
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this
11th day of April, 1997 (the "Effective Date"), by and between Benefit Financial
Services, Inc., an Alabama corporation (the "Company") and J. Malcolm Massey
(the "Employee").
WHEREAS, the Employee has heretofore been employed by Pension & Benefit
Financial Services, Inc. ("Pension Benefit") and is experienced in all phases of
the planning, designing, implementation and administration of employee benefit
plans; and
WHEREAS, the parties desire by this writing to establish and to set
forth the employment relationship between the Company and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is hereby employed as the President
and Chief Executive Officer of the Company. The Employee shall render such
administrative and management services for the Company as were rendered at
Pension Benefit and as are customarily performed by persons situated in a
similar executive capacity. The Employee shall also promote, by entertainment or
otherwise, as and to the extent permitted by law, the business of the Company.
The Employee's other duties shall be such as the Board of Directors of the
Company ("Board") may from time to time reasonably direct, including normal
duties as an officer of the Company.
2. Compensation.
(a) The Company agrees to pay the Employee during the term of
this Agreement a salary at the rate of One Hundred Thirty Thousand Dollars
($130,000) per annum, payable in cash not less frequently than monthly (the
"Base Salary");
(b) In further consideration of Employee's services, Employee
shall receive Fifteen Thousand Five Hundred Twelve (15,512) shares (the
"Compensatory Shares") of $.01 par value Common Stock of SouthFirst Bancshares,
Inc. (the "Corporation"), vesting at the rate of one-fifteenth (1/15) per year
beginning on April 11, 1997 and each annual anniversary of that date until April
11, 2012. The Compensatory Shares shall be issued on April 11, 1997 but remain
subject to the fifteen year vesting schedule referenced in the preceding
sentence; and
<PAGE> 2
(c) The Company further agrees to furnish the Employee
a mutually acceptable automobile. The cost of maintenance, fuel, insurance and
upkeep to be borne by the Company.
3. Earnings and Distribution of Compensatory Shares; Voting
Rights.
(a) Compensatory Shares; Forfeitures.
(1) General Rules. Unless the Company shall
specifically state to the contrary at the time Compensatory Shares are awarded
(the "Compensatory Share Award"), Compensatory Shares subject to a Compensatory
Share Award shall be earned and non-forfeitable by the Employee at the rate of
one-fifteenth per year until April 11, 2012.
(2) Exception for Terminations Due to Death or
Disability. Notwithstanding the general rule contained in Section 3(a)(1) above,
all Compensatory Shares subject to a Compensatory Share Award held by the
Employee whose service with the Company terminates due to death or disability
(as determined by the Company), shall be deemed earned as of the Employee's last
day of service with the Company and shall be distributed as soon as practicable
thereafter.
(3) Exception for a Change in Control.
Notwithstanding the general rule contained in Section 3(a)(1) above, all
Compensatory Shares subject to a Compensatory Share Award held by the Employee
shall be deemed to be immediately 100% earned and non forfeitable in the event
of a "change in control" of the Company and shall be distributed as soon as
practicable thereafter. For purposes of this paragraph, "change in control"
shall mean the occurrence of any one of the following events: (1) a change in
the ownership, holding or power to vote more than 25% of the Company's voting
stock, (2) a change in the ownership or possession of the ability to control the
election of a majority of the Company's directors, (3) a change in the ownership
or possession of the ability to exercise a controlling influence over the
management or policies of the Company by any person or by persons acting as a
group within the meaning of Section 13(d) of the Securities Exchange Act of 1934
(except in the case of (1), (2) and (3) hereof, ownership or control of the
Company or its directors by SouthFirst Bancshares, Inc. (the "Corporation")
itself shall not constitute a "change in control"), or (4) during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company or the Corporation (the
"Continuing Directors") cease for any reason to constitute at least two-thirds
thereof, provided that any individual whose election or nomination for election
as a member of such Board of Directors was approved by a vote of at least
two-thirds of the Continuing Directors then in office shall be considered a
Continuing Director. For purposes of this subparagraph only, the term "person"
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein. The decision of the
Company as to whether a change in control has occurred shall be conclusive and
binding.
(4) Discretionary Acceleration of Vesting. In its
sole and absolute discretion, the Company may at any time, with respect to the
Employee, accelerate the schedule according to which the Employee's Compensatory
Share Award is earned and
2
<PAGE> 3
becomes non-forfeitable by the Employee, if the Company concludes that it is in
the best interests of the Company to do so.
(b) Accrual of Dividends. Whenever Compensatory Shares
are distributed to the Employee under Section 3(c) below, the Employee shall
also be entitled to receive, with respect to each Compensatory Share
distributed, an amount equal to any cash dividends and a number of shares of
Common Stock equal to any stock dividends declared and paid with respect to a
share of Common Stock after the date the relevant Compensatory Share Award was
initially granted.
(c) Distribution of Compensatory Shares.
(1) Timing of Distributions. Except as provided
in Section 3(c)(2) below, the Company shall distribute Compensatory Shares and
accumulated cash from dividends and interest, if any, to the Employee or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
(2) Form of Distribution. At any time on or
after the date on which the Employee receives a Compensatory Share Award, the
Employee may file a written request with the Company to have such Compensatory
Share Award distributed as soon as practicable in the form of a transfer to the
Employee of Common Stock subject to the forfeiture provisions applicable under
the Employee's Compensatory Share Award. In such event, the Company may, in its
sole and absolute discretion, transfer to the Employee Common Stock
certificate(s) in the name of the Employee, whereupon the Employee shall become
a stockholder of the Company with respect to such Common Stock and shall have
all the rights of a stockholder, including but not limited to the right to
receive all dividends paid on such shares and the right to vote such shares.
Said Common Stock shall be subject to the forfeiture provisions applicable under
the Employee's Compensatory Share Award, and the certificate(s) for such Common
Stock shall bear the following legend reflecting that the shares represented
thereby are subject to restrictions against transfer and to forfeiture in
accordance with the Agreement and the Employee's Compensatory Share Award:
"The transferability of this certificate and the shares of
stock represented thereby are subject to the terms and
conditions (including forfeiture) contained in the Employee's
Employment Agreement between Benefit Financial Services, Inc.
and J. Malcolm Massey and a Compensatory Share Award made
thereunder by Benefit Financial Services, Inc. Copies of such
Agreement and Compensatory Share Award are on file in the
offices of the Secretary of South First Bancshares, Inc., 126
North Norton Avenue, Sylacauga, Alabama 35150."
As the Employee earns the Common Stock subject to the Compensatory
Share Award, the Employee (or, in the event of the Employee's death, the legal
representative of his estate, or if the personal representative of the
Employee's estate shall have assigned the estate's interest in the Common Stock,
the person or persons to whom his rights under such Common Stock shall have
passed by assignment pursuant to his will or to the laws of descent and
3
<PAGE> 4
distribution) may surrender the Common Stock certificates bearing the foregoing
legend, whereupon the Company shall cause such certificate(s) to be reissued
without the legend. If the Employee who has received Common Stock hereunder
forfeits any or all of such Common Stock, the Employee shall, within thirty (30)
days after terminating employment, pay the Company an amount equal to the
dividends attributable to the forfeited Common Stock. To the extent not
inconsistent herewith, Common Stock distributed hereunder will be subject to the
terms and conditions applicable to the Compensatory Share Award underlying the
Common Stock.
Further, the Company shall distribute all Compensatory Shares, together
with any shares representing stock dividends only, in the form of Common Stock.
One share of Common Stock shall be given for each Compensatory Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
(3) Acquisition for Investment. Employee
understands and acknowledges that the shares of Common Stock which he may
acquire pursuant to the terms of this Agreement are being acquired by him solely
for his own account, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933 (the "Securities Act").
(4) Unregistered Securities. Employee further
understands and acknowledges that the shares of Common Stock which he may
acquire under this Agreement have not been registered under the Securities Act
or the securities laws of any state, and will not at the time of issuance and
delivery of such shares as contemplated by the terms of this Agreement have been
so registered, in reliance upon certain exemptions from the registration and
prospectus delivery requirements of the Securities Act and such laws. Employee
understands that the Shares so acquired by him must be held indefinitely, and
that he must therefore bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the Securities Act
and any applicable state securities laws, or is exempt from such registration to
the satisfaction of counsel for the Corporation. Employee further acknowledges
that the availability of the exemptions described in the first sentence of this
Section depend upon, among other things, the bona fide nature of his investment
intent expressed herein, upon which the Company hereby expressly relies.
(d) Voting of Compensatory Shares. All shares of Common Stock
held by the Company (whether or not subject to a Compensatory Share Award) shall
be voted by the Company as directed by the Board.
4. Discretionary Bonuses. The Employee shall participate in an
equitable manner with all other senior management employees of the Holding
Company in discretionary bonuses that the Board may award from time to time to
the Holding Company's senior management employees. No other compensation
provided for in this Agreement shall be deemed a substitute for the Employee's
right to participate in such discretionary bonuses.
5. Participation in Retirement, Medical and Other Plans. The Employee
shall participate in any plan that the Company maintains for the benefit of its
employees if the plan relates to (i) pension, profit-sharing, or other
retirement benefits, (ii) medical insurance or the
4
<PAGE> 5
reimbursement of medical or dependent care expenses, or (iii) other group
benefits, including disability and life insurance plans.
6. Employee Benefits; Expenses. The Employee shall retain the use of
the automobile provided by Pension Benefit and, in addition, shall participate
in any fringe benefits which are or may become available to the Company's senior
management employees, including for example: any stock option or incentive
compensation plans, club memberships, and any other benefits which are
commensurate with the responsibilities and functions to be performed by the
Employee under this Agreement. The Employee shall be reimbursed for all
reasonable out-of-pocket business expenses which he shall incur in connection
with his services under this Agreement upon substantiation of such expenses in
accordance with the policies of the Company.
7. Term. The Company hereby employs the Employee, and the Employee
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending 36 months thereafter (or such earlier date as
is determined in accordance with Section 10). Additionally, on each annual
anniversary date from the Effective Date, this Agreement and the Employee's term
of employment shall be extended for an additional one-year period beyond the
then effective expiration date, provided the Board determines in a duly adopted
resolution that the performance of the Employee has met the Board's requirements
and standards, and that this Agreement shall be extended.
8. Loyalty; Full Time and Attention.
(a) During the period of his employment hereunder and except
for illnesses, reasonable vacation periods, and reasonable leaves of absence,
the Employee shall devote all his full business time, attention, skill, and
efforts to the faithful performance of his duties hereunder; provided, however,
from time to time, Employee may serve on the boards of directors of, and hold
any other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Company or any of its subsidiaries or
affiliates, or unfavorably affect the performance of Employee's duties pursuant
to this Agreement, or will not violate any applicable statute or regulation.
"Full business time" is hereby defined as that amount of time usually devoted to
like companies by similarly situated executive officers. During the term of his
employment under this Agreement, the Employee shall not engage in any business
or activity contrary to the business affairs or interests of the Company, or be
gainfully employed in any other position or job other than as provided above.
(b) Nothing contained in this Paragraph 8 shall be deemed to
prevent or limit the Employee's right to invest in the capital stock or other
securities of any business dissimilar from that of the Company, or, solely as a
passive or minority investor, in any business.
9. Standards. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Company will provide Employee with the working
facilities and staff customary for similar executives and necessary for him to
perform his duties.
5
<PAGE> 6
10. Vacation and Sick Leave. The Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
duties under this Agreement in accordance with the terms set forth below, all
such voluntary absences to count as vacation time; provided that:
(a) The Employee shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management employees of the Company.
(b) The Employee shall not receive any additional compensation
from the Company on account of his failure to take a vacation, and the Employee
shall not accumulate unused vacation from one fiscal year to the next, except in
either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee
shall be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment obligations with the Company for such additional
periods of time and for such valid and legitimate reasons as the Board may in
its discretion approve. Further, the Board may grant to the Employee a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as the Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual
sick leave benefit as established by the Board.
11. Termination and Termination Pay. Subject to the provisions of
Section 11 hereof, the Employee's employment hereunder may be terminated under
the following circumstances:
(a) Death. The Employee's employment under this Agreement
shall terminate upon his death during the term of this Agreement, in which event
the Employee's estate shall be entitled to receive the compensation due the
Employee through the last day of the calendar month in which his death occurred.
(b) Disability. The Company may terminate the Employee's
employment after having established, through a determination by the Board, the
Employee's Disability. For purposes of this Agreement, "Disability" means a
physical or mental infirmity which impairs the Employee's ability to
substantially perform his duties under this Agreement and which results in the
Employee becoming eligible for long-term disability benefits under the Company's
long-term disability plan (or, if the Company has no such plan in effect, which
impairs the Employee's ability to substantially perform his duties under this
Agreement for a period of one hundred eighty (180) consecutive days). The
Employee shall be entitled to the compensation and benefits provided for under
this Agreement for (i) any period during the term of this Agreement and prior to
the establishment of the Employee's Disability during which the Employee is
unable to work due to the physical or mental infirmity, or (ii) any period of
Disability which is prior to the Executive's termination of employment pursuant
to this Section 11(b).
6
<PAGE> 7
(c) For Cause. The Board may, by written notice to the
Employee, immediately terminate his employment at any time, for Cause. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for Cause. Termination for "Cause" shall mean
termination because of, in the good faith determination of the Board, the
Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. Notwithstanding the foregoing, the
Employee shall not be deemed to have been terminated for Cause unless (i)
Employee shall have been given written notice regarding such alleged Cause and a
reasonable period of time to cure or correct such action or omision which is
alleged to constitute such Cause and (ii) there shall have been delivered to the
Employee a copy of a resolution duly adopted by the affirmative vote of not less
than a majority of the entire membership of the Board (excluding the Employee if
a member of the Board) at a meeting of the Board called and held for the purpose
(after reasonable notice to the Employee and an opportunity for the Employee to
be heard before the Board), finding that in the good faith opinion of the Board
the Employee was guilty of conduct set forth above in the second sentence of
this Subsection (c) and specifying the particulars thereof in detail.
(d) Without Cause. Subject to the provisions of Section 11
hereof, the Board may, by written notice to the Employee, immediately terminate
his employment at any time for any reason; provided that if such termination is
for any reason other than pursuant to Sections 11 (a) (b) or (c) above, the
Employee shall be entitled to receive the following compensation and benefits:
(i) the salary provided pursuant to Section 2 hereof, up to the date of
expiration of the term (including any renewal term then in effect) of this
Agreement (the "Termination Date"), plus said salary for an additional 12-month
period, and (ii) the cost to the Employee of obtaining all health, life,
disability and other benefits (excluding any bonus, stock option or other
compensation benefits) which the Employee would have been eligible to
participate in through the Termination Date based upon the benefit levels
substantially equal to those that the Company provided for the Employee at the
date of termination of employment. Said sum shall be paid, at the option of the
Employee, either (I) in periodic payments over the remaining term of this
Agreement, as if the Employee's employment had not been terminated, or (II) in
one lump sum within ten (10) days of such termination; provided however, that
the amount to be paid by the Association to the Employee hereunder shall not
exceed three (3) times the Employee's "average annual compensation". The
Employee's "annual average compensation" shall be the average of the total
annual "compensation" acquired by the Employee during each of the five (5)
fiscal years (or the number of full fiscal years of employment, if the
Employee's employment is less than five (5) years at the termination thereof)
immediately preceding the date of termination. The term "compensation" shall
mean any payment of money or provision of any other thing of value in
consideration of employment, including, without limitation, base compensation,
bonuses, pension and profit sharing plans, directors fees or committees fees,
fringe benefits and deferred compensation accruals.
(e) Voluntary Termination by Employee. Subject to the
provisions of Section 10 hereof, the Employee may voluntarily terminate
employment with the Company during the term of this Agreement, upon at least 60
days' prior written notice to the Board of
7
<PAGE> 8
Directors, in which case the Employee shall receive only his compensation,
vested rights and employee benefits accrued up to the date of his termination.
12. Non-Competition.
(a) If the Employee's employment by the Company terminates
during the initial three (3) year period of employment, Employee agrees that for
two (2) years following such termination he will not, (i) directly or
indirectly, engage (whether as an employee, director, officer, shareholder,
owner, partner or otherwise) in activities related to the planning, designing,
implementation, or administration of employment benefit plans within Montgomery
County, Alabama, or any county contiguous to Montgomery County, Alabama;
provided, that the Employee's ownership of less than five percent (5%) of the
issued and outstanding stock of a corporation or five percent (5%) interest in
any other entity shall not by itself be deemed to constitute such competition,
or (ii) without the prior written consent of the Company: (I) furnish anyone
with the name of, or any list or lists which identify, any customers or
stockholders of the Company or utilize such list or information himself; (II)
furnish, use or divulge to anyone any confidential information of the Company
acquired by him from the Company and relating to the Company's business
activities; (III) contact directly or indirectly any customer of the Company for
the purpose of soliciting such person's business for another bank or similar
financial institution; (iv) pursue an actual or potential business opportunity
of interest to and which could be pursued by the Company which came to the
attention of the Employee in connection with his employment with the Company and
which Employee had not previously offered in writing to the Company with
sufficient advance notice to allow the Company to examine and pursue or reject
such opportunity. Excepted from the requirements of subparagraphs (I) and (II)
in this paragraph is any information which is or becomes publicly available
information through no fault or act of the Employee.
(b) It is understood and agreed by the parties hereto that the
provisions of subparagraph (a) above are independent of each other, and to the
extent any provision or portion thereof shall be determined by a court of
competent jurisdiction to be enforceable, such determination shall not affect
the validity or unenforceability of any other provision of subparagraph (a) or
the remainder of this Agreement.
13. Non-Solicitation of Employees. Employee agrees that he will,
for so long as he is engaged hereunder, and for a period of three (3) years
after termination of his employment, refrain from recruiting or hiring, or
attempting to recruit or hire, directly or by assisting others, any other
employee of the Company who is employed by the Company or any successor or
affiliate of the Company.
14. No Mitigation. The Employee shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise, and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Employee in any
subsequent employment.
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<PAGE> 9
15. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Company.
(b) Since the Company is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his rights or duties hereunder without first obtaining the written
consent of the Company.
16. Amendments. No amendments or additions to this Agreement shall
be binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
17. Applicable Law. Except to the extent preempted by Federal law,
the laws of the State of Alabama shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
18. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
19. Entire Agreement. This Agreement, together with any
understanding or modifications thereof as agreed to in writing by the parties,
shall constitute the entire agreement between the parties hereto. Further,
should any provision of this Agreement give rise to a discrepancy or conflict
with respect to any applicable law or regulation, then the applicable law or
regulation shall control the relevant construction and operation of this
Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
ATTEST: BENEFIT FINANCIAL SERVICES
/s/ Joe K. McArthur BY: /s/ Donald C. Stroup
- ---------------------- --------------------------
Secretary President and Chief
Executive Officer
SOUTHFIRST BANCSHARES, INC.
BY: /s/ Donald C. Stroup
--------------------------
President and Chief
Executive Officer
/s/ J. Malcomb Massey
-----------------------------
J. Malcolm Massey ("Employee")
10
<PAGE> 1
EXHIBIT 10.13
SOUTHFIRST BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
(AS AMENDED AND RESTATED)
1. PURPOSE OF THE PLAN
The purpose of this SouthFirst Bancshares, Inc. 1998 Stock Option and
Incentive Plan, as amended and restated (the "Plan") is to advance the interests
of SouthFirst Bancshares, Inc. (the "Company"), through providing select key
Employees and Directors of the Association, the Company and their Affiliates
with the opportunity to acquire Shares and participate in the equity of the
Company. By encouraging such stock ownership, the Company seeks to attract,
retain and motivate the best available personnel for positions of substantial
responsibility and to provide additional incentive to Directors and key
Employees of the Company, the Association or any Affiliate to promote the
success of the business.
2. DEFINITIONS
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company or the Association, as such terms are
defined in Section 424(e) and (f), respectively, of the Code, and shall also
include, as the context requires, the Company and the Association.
(b) "Agreement" shall mean a written agreement entered into in
accordance with Paragraph 5(c).
(c) "Association" shall mean First Federal of the South, a
Federal Savings Association.
(d) "Awards" shall mean, collectively, Options and SARs,
unless the context clearly indicates a different meaning.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Change in Control" shall mean the occurrence of any one
of the following events: (1) a change in the ownership, holding or power to vote
more than 25% of the Association's or Company's voting stock, (2) a change in
the ownership or possession of the ability to control the election of a majority
of the Association's or Company's directors, (3) a change in the ownership or
possession of the ability to exercise a controlling influence over the
management or policies of the Association or the Company by any person or by
persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) (except in the case of (1), (2) and (3) hereof,
ownership or control of the Association or its directors by the Company itself
shall not constitute a "Change in Control"), or (4) during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company or the Association (the "Continuing
Directors") cease for any reason to constitute at least two-thirds of the
members of such Board of Directors, provided that any individual whose election
or nomination for election as a member of such Board was approved by a vote of
at least two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director. For purposes of this subparagraph only, the
term "person" refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein. The
decision of the Committee as to whether a Change in Control has occurred shall
be conclusive and binding.
<PAGE> 2
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Committee" shall mean, as the case may be, either, a
committee appointed by the Board in accordance with Paragraph 5(a) hereof or the
Board.
(i) "Common Stock" shall mean the common stock, par value $.01
per share, of the Company.
(j) "Company" shall mean SouthFirst Bancshares, Inc.
(k) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or Director of the Company
or an Affiliate. Continuous Service shall not be considered interrupted in the
case of sick leave, military leave or any other leave or absence approved by the
Company or in the case of transfers between payroll locations of the Company or
between the Company, the Association or an Affiliate.
(l) "Director" shall mean any member of the Board or of the
Board of Directors of an Affiliate, including any member of the Board or Board
of Directors of an Affiliate who is serving as an Emeritus Director.
(m) "Disinterested Person" shall mean any Non-Employee
Director.
(n) "Effective Date" shall mean the date specified in
Paragraph 15 hereof.
(o) "Emeritus Director" means any Director of the Company
appointed by the Board who is 72 years of age or older.
(p) "Employee" shall mean any person employed by the Company
or an Affiliate.
(q) "Exercise Price" shall mean the price per Optioned Share
at which an Option or SAR may be exercised.
(r) "ISO" means an option to purchase Common Stock which meets
the requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(s) "Market Value" shall mean the fair market value of the
Common Stock, as determined under Paragraph 7(b) hereof.
(t) "Non-Employee Director" means any member of the Board who
is a 'non-employee director' within the meaning of Rule 16b-3.
(u) "Non-ISO" means an option to purchase Common Stock which
meets the requirements set forth in the Plan, but which is not intended to be,
and is not identified as, an ISO.
(v) "Officer" means any officer of the Company or an
Affiliate.
(w) "Option" means an ISO and/or a Non-ISO.
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(x) "Optioned Shares" shall mean Shares subject to an option
granted pursuant to this Plan.
(y) "Participant" shall mean any person who receives an Award
pursuant to the Plan.
(z) "Plan" shall mean the SouthFirst Bancshares, Inc. 1998
Stock Option and Incentive Plan, as amended and restated.
(aa) "Retirement" means termination of employment with the
Company, other than upon death, Total and Permanent Disability, or for Cause (as
defined in Section 8(c)), on or after the date of the 65th birthday of the
retiring person, in the case of an Employee, or on or after the date of the 72nd
birthday of the retiring person, in the case of a Director; provided that
Retirement for any Emeritus Director means termination of his or her
directorship, other than for Cause (as defined in Section 8(c)), on or after the
date of the 75th birthday of such Emeritus Director.
(bb) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended.
.
(cc) "SAR" (or "Stock Appreciation Right") means a right to
receive the appreciation in value, or a portion of the appreciation in value,
from the date of grant, of a specified number of shares of Common Stock.
(dd) "Shares" means the shares of Common Stock reserved for
issuance under the Plan.
3. TERM OF THE PLAN AND AWARDS
(a) Term of the Plan. The Plan shall continue in effect for a
term of ten (10) years from the Effective Date, unless sooner terminated
pursuant to Paragraph 19 hereof. No Award shall be granted under the Plan after
ten (10) years from the Effective Date.
(b) Term of Awards. The term of each Award granted under the
Plan shall be established by the Committee, but shall not exceed ten (10) years
from the date of grant; provided, however, that in the case of the grant of an
ISO to an Employee who owns shares representing more than 10% of the outstanding
Common Stock of the Company at the time the ISO is granted, the term of such ISO
shall not exceed five (5) years.
4. SHARES SUBJECT TO THE PLAN
(a) General Rule. Except as otherwise required by the
provisions of Paragraph 12 hereof, the aggregate number of Shares issuable
pursuant to Awards shall be 63,361 Shares. Such Shares may either be
authorized-but-unissued shares of Common Stock or shares of Common Stock held in
treasury. If Awards shall expire, become unexercisable or be forfeited for any
reason without having been exercised or become vested in full, the Optioned
Shares shall, unless the Plan shall have been terminated, be available for the
grant of additional Awards under the Plan.
(b) Special Rule for SARs. The number of Shares with respect
to which an SAR is granted, but not the number of Shares which the Company
delivers or could deliver to an Employee or individual upon exercise of an SAR,
shall be charged against the aggregate number of Shares remaining available
under the Plan; provided, however, that in the case of an SAR granted in
conjunction with an Option, under circumstances in which the exercise of the SAR
results in termination of the Option and
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vice versa, only the number of Shares subject to the Option shall be charged
against the aggregate number of Shares remaining available under the Plan. The
Shares relating to an Option as to which option rights have terminated by reason
of the exercise of a related SAR, as provided in Paragraph 10 hereof, shall not
be available for the grant of further Options under the Plan.
5. ADMINISTRATION OF THE PLAN
(a) Administration by Entire Board or Committee. The Plan
shall be administered by, either, the Board or by a committee appointed by the
Board, which committee, if appointed, shall consist of not less than two (2)
members of the Board who are Disinterested Persons. Members of this committee
shall serve at the pleasure of the Board. In the absence at any time of a duly
appointed committee, the Plan shall be administered by the Board.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have the sole and complete authority and discretion (i) to select
Participants and grant Awards, (ii) to determine the form and content of Awards
to be issued and the form of Agreements under the Plan, (iii) to interpret the
Plan, (iv) to prescribe, amend and rescind rules and regulations relating to the
Plan, and (v) to make other determinations necessary or advisable for the
administration of the Plan. The Committee shall have and may exercise such other
power and authority as may be delegated to it by the Board from time to time. A
majority of the entire Committee shall constitute a quorum and the action of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee without a meeting, shall
be deemed the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the Committee. Each
such Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The terms
of each such Agreement shall be in accordance with the Plan, but each Agreement
may include such additional provisions and restrictions determined by the
Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise Price of an Option
or SAR, (ii) the number of Shares subject to, and the expiration date of, the
Award, (iii) the manner, time and rate (cumulative or otherwise) of exercise or
vesting of such Award, and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such Award.
The Chairman of the Committee and such other officers as shall
be designated by the Committee are hereby authorized to execute Agreements on
behalf of the Company and to cause them to be delivered to the recipients of
Awards.
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in connection
with the Plan or any Award, granted hereunder to the full extent provided for
under the Company's Charter or By-Laws with respect to the indemnification of
Directors.
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6. GRANT OF OPTIONS
(a) General Rule. In its sole discretion, the Committee may
grant Options to Employees of the Company or its Affiliates. Non-Employee
Directors may be granted Options only in accordance with Paragraph 9 hereof.
(b) Special Rules for ISOs. The aggregate Market Value, as of
the date the Option is granted, of the Shares with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all incentive stock option plans, as defined in Section 422 of the Code, of the
Company or any present or future Parent or Subsidiary of the Company) shall not
exceed $100,000. Notwithstanding the prior provisions of this paragraph, the
Committee may grant Options in excess of the foregoing limitation, in which case
such Options granted in excess of which limitation shall be Options which are
Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS
(a) Limits on Committee Discretion. The Exercise Price as to
any particular Option granted under the Plan shall be determined by the
Committee but shall not be less than the Market Value of the Optioned Shares on
the date of grant. In the case of an Employee who owns shares of Common Stock
representing more than 10% of the Company's outstanding shares of Common Stock
at the time an ISO is granted, the Exercise Price of such ISO shall not be less
than 110% of the Market Value of the Optioned Shares at the time the ISO is
granted.
(b) Standards for Determining Exercise Price. If the Common
Stock is listed on a national securities exchange (including the NASDAQ National
Market System) on the date in question, then the Market Value per Share shall be
not less than the average of the highest and lowest selling price on such
exchange on such date, or if there were no sales on such date, then the Exercise
Price shall be not less than the mean between the bid and asked price on such
date. If the Common Stock is traded otherwise than on a national securities
exchange on the date in question, then the Market Value per Share shall be not
less than the mean between the bid and asked price on such date, or, if there is
no bid and asked price on such date, then on the next prior business day on
which there was a bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair market value as
determined by the Committee, in its sole and absolute discretion.
8. EXERCISE OF OPTIONS
(a) Generally. Any Option granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and of the Agreement granted to a Participant.
However, the exercise of any Option granted hereunder shall be subject to, and
shall not exceed, vesting at a rate of 20% a year, from the date of the Award,
provided that (i) each Participant shall be 100% vested upon death or upon
Permanent and Total Disability (as defined in Section 8 (c) below), (ii) each
Participant shall be 100% vested upon Retirement, and (iii) each Participant
shall be 100% vested upon the occurrence of a Change in Control event in
accordance with Section 11, below. An Option may not be exercised for a
fractional Share.
(b) Procedure for Exercise. A Participant may exercise
Options, subject to provisions relative to its termination and limitations on
its exercise, only by (1) written notice to the Company of intent to exercise
the Option with respect to a specified number of Shares, and (2) payment to the
Company (contemporaneously with delivery of such notice) in cash, in Common
Stock, or a combination of cash and Common Stock, of the amount of the Exercise
Price for the number of Shares with respect
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<PAGE> 6
to which the Option is then being exercised. Each such notice (and payment where
required) shall be delivered, or mailed by prepaid registered or certified mail,
addressed to the Treasurer of the Company at the Company's executive offices.
Common Stock utilized in full or partial payment of the Exercise Price for
Options shall be valued at its Market Value at the date of exercise.
(c) Period of Exercisability. Except to the extent otherwise
provided by the Committee in the terms of an Agreement, an Option may be
exercised by an Employee only while he is an Employee and has maintained
Continuous Service from the date of the grant of the Option, or within three (3)
months after termination of such Continuous Service (but not later than the date
on which the Option would otherwise expire), except if the Participant's
Continuous Service terminates by reason of --
(1) "Cause" which for purposes hereof shall have the meaning
set forth in any unexpired employment or severance agreement
between the Participant and the Association and/or the Company
(and, in the absence of any such agreement, shall mean
termination because of the Participant's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses)
or final cease-and-desist order), in which case the
Participant's rights to exercise such Option shall expire on
the date of such termination;
(2) Death, in which case, 100% of the outstanding Options of
the deceased Participant such Options having vested in their
entirety as a consequence of the death of the Participant, as
provided in Section 8(a), may be exercised within two (2)
years from the date of his death (but not later than the date
on which the Option would otherwise expire) by the personal
representative of his estate or person or persons to whom his
rights under such Option shall have passed by will or by laws
of descent and distribution;
(3) Permanent and Total Disability (as such term is defined in
Section 22(e)(3) of the Code), in which case, 100% of the
outstanding Options of the Permanently and Totally disabled
Participant, such Options having vested in their entirety as a
consequence of the Permanent and Total Disability of the
Participant, as provided in Section 8(a), may be exercised
within one (1) year from the date of such permanent and total
disability, but not later than the date on which the Option
would otherwise expire.
(4) Retirement, in which case 100% of the outstanding Options
of the retiring Participant, such Options having vested in
their entirety as a consequence of the Retirement of the
Participant, as provided in Section 8(a), may be exercised
within six (6) months from the date of the Participant's
retirement, but not later than the date on which the Option
would otherwise expire.
(5) Change in Control, in which case 100% of the outstanding
Options of each Participant in the Plan shall become
immediately exercisable in accordance with Section 11 of the
Plan.
Notwithstanding the provisions of any Option which provides for its exercise in
installments as designated by the Committee, such Option shall become
immediately exercisable upon the vesting of such Option upon the occurrence of a
vesting event set forth in Section 8(a).
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(d) Effect of the Committee's Decisions. The Committee's
determination whether a Participant's Continuous Service has ceased, and the
effective date thereof shall be final and conclusive on all persons affected
thereby.
9. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) Automatic Grants. Notwithstanding any other provisions of
this Plan, each Director who is a Non-Employee Director, other than an Emeritus
Director, on the Effective Date shall receive, on said date, Non-ISOs to
purchase 2,700 Shares, at an Exercise Price per Share equal to the Market Value
of the Common Stock on the date of grant.
(b) Terms of Exercise. Options received under the provisions
of this Paragraph 9 may be exercised from time to time by (a) written notice to
the Company of intent to exercise the Option with respect to all or a specified
number of the Optioned Shares, and (b) payment to the Company (contemporaneously
with the delivery of such notice), in cash, in Common Stock, or a combination of
cash and Common Stock, of the amount of the Exercise Price for the number of
Optioned Shares with respect to which the Option is then being exercised. Each
such notice and payment shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at the Company's
executive offices. A Director who exercises Options pursuant to this Paragraph
may satisfy all applicable federal, state and local income and employment tax
withholding obligations, in whole or in part, by irrevocably electing to have
the Company withhold shares of Common Stock, or to deliver to the Company shares
of Common Stock that he already owns, having a value equal to the amount
required to be withheld; provided that to the extent not inconsistent herewith,
such election otherwise complies with those requirements of Paragraphs 8 and 21
hereof.
Options granted under this Paragraph shall have a term of ten (10)
years, and may be exercised at any time and from time to time prior to their
expiration only while the Participant is a Director of the Company, or within
three (3) months after termination of the Participant's Continuous Service as a
Director for reasons other than "Cause," death, "Permanent and Total Disability"
or "Retirement" of the Director, or a "Change in Control" of the Company. In the
event of such Director's death during the term of his directorship, Options
granted under this Paragraph may be exercised within one (1) year from the date
of his death by the personal representatives of his estate or person or persons
to whom his rights under such Options shall have passed by will or by laws of
descent and distribution, but in no event later than the date on which such
Options would otherwise expire. Unless otherwise inapplicable or inconsistent
with the provisions of this Paragraph, the Options to be granted to Directors
hereunder shall be subject to all other provisions of this Plan, including the
provisions of Section 8(c) relating to the period of exercisability if a
Director's Continuous Service terminates for "Cause," "Permanent and Total
Disability" or "Retirement" and the provisions of Section 11 relating to the
vesting and exercise of Options upon a "Change in Control" of the Company.
10. SARS (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the Committee
may from time to time grant SARs to Employees either in conjunction with, or
independently of, any Options granted under the Plan. An SAR granted in
conjunction with an Option may be an alternative right wherein the exercise of
the Option terminates the SAR to the extent of the number of shares purchased
upon exercise of the Option and, correspondingly, the exercise of the SAR
terminates the Option to the extent of the number of Shares with respect to
which the SAR is exercised. Alternatively, an SAR granted in conjunction with an
Option may be an additional right wherein both the SAR and the Option may be
exercised. An SAR
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<PAGE> 8
may not be granted in conjunction with an ISO under circumstances in which the
exercise of the SAR affects the right to exercise the ISO or vice versa, unless
the SAR, by its term, meets all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between the
Exercise Price of the ISO and the Market Value of the Shares
subject to the ISO at the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is transferable,
and under the same conditions;
(4) The SAR may be exercised only when the ISO may be
exercised; and
(5) The SAR may be exercised only when the Market Value of the
Shares subject to the ISO exceed the Exercise Price of the
ISO.
(b) Exercise Price. The Exercise Price as to any particular
SAR shall not be less than the Market Value of the Optioned Shares on the date
of grant.
(c) Timing of Exercise. Any election by a Participant to
exercise SARs shall be made during the period beginning on the 3rd business day
following the release for publication of quarterly or annual financial
information and ending on the 12th business day following such date. This
condition shall be deemed to be satisfied when the specified financial data is
first made publicly available. In no event, however, may an SAR be exercised
within the six-month period following the date of its grant.
The provisions of Paragraph 8(c) regarding the period of
exercisability of Options is incorporated by reference herein, and shall
determine the period of exercisability of SARs.
(d) Exercise of SARs. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the term of the Plan and of the Agreement granted to a Participant,
provided that an SAR may not be exercised for a fractional Share. Upon exercise
of an SAR, the Participant shall be entitled to receive, without payment to the
Company except for applicable withholding taxes, an amount equal to the excess
of (or, in the discretion of the Committee if provided in the Agreement, a
portion of the excess of) the then aggregate Market Value of the number of
Optioned Shares with respect to which the Participant exercises the SAR, over
the aggregate Exercise Price of such number of Optioned Shares. This amount
shall be payable by the Company, in the discretion of the Committee, in cash or
in Shares valued at the then Market Value thereof, or any combination thereof.
(e) Procedure for Exercising SARs. To the extent not
inconsistent herewith, the provisions of Paragraph 8(b) as to the procedure for
exercising Options are incorporated by reference, and shall determine the
procedure for exercising SARs.
11. CHANGE IN CONTROL
(a) General Rule. Notwithstanding the provisions of any Award
which provides for the exercise or vesting in installments, and for a period of
sixty (60) days beginning on the date of such Change in Control, all Options and
SARs shall be immediately exercisable and fully vested. With respect to Options,
at the time of a Change in Control, the Participant shall, at the discretion of
the Committee,
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<PAGE> 9
be entitled to receive cash in an amount equal to the excess of the Market Value
of the Common Stock subject to such Option over the Exercise Price of such
Shares, in exchange for the cancellation of such Options by the Participant.
(b) Exception to General Rule. Notwithstanding subparagraph
(a) of this Paragraph, in no event may an SAR be exercised, or an Option be
canceled in exchange for cash, within the six-month period following the date of
its grant.
12. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN
(a) Recapitalizations; Stock Splits, Etc. The number and kind
of Shares reserved for issuance under the Plan, and the number and kind of
Shares subject to outstanding Awards (and the Exercise Price thereof in the case
of Options and SARs), shall be proportionately adjusted for any increase,
decrease, change or exchange of Shares for a different number or kind of Shares
or other securities of the Company which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock dividend, split-up,
combination of Shares, or similar event in which the number or kind of Shares is
changed without the receipt or payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving
Entity. In the event of (i) the liquidation or dissolution of the Company, (ii)
a merger or consolidation in which the Company is not the surviving entity, or
(iii) the sale or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to herein as a "Transaction"), all
outstanding Awards shall be surrendered. With respect to each Award so
surrendered, the Committee shall in its sole and absolute discretion, but
subject to the vesting requirements of Section 8(a), determine whether the
holder of the surrendered Award shall receive --
(1) for each Share then subject to an outstanding Award the
number and kind of Shares into which each outstanding Share
(other than Shares held by dissenting stockholders) is changed
or exchanged, together with an appropriate adjustment to the
Exercise Price in the case of Options and SARs; or
(2) a cash payment (from the Company or the successor
corporation), in an amount equal to the Market Value of the
Shares subject to the Award on the date of the Transaction,
less the Exercise Price of the Award in the case of Options
and SARs.
(c) Special Rule for ISOs. Any adjustment made pursuant to
subparagraphs (a) or (b)(1) hereof shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or
Different Shares or Securities. If, by reason of any adjustment made pursuant to
this Paragraph, a Participant becomes entitled to new, additional, or different
Shares of stock or securities, such new, additional, or different Shares of
stock or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.
(e) Other Issuances. Except as expressly provided in this
Paragraph, the issuance by the Company or an Affiliate of Shares of stock of any
class, or of securities convertible into Shares or stock of another class, for
cash or property or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with
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<PAGE> 10
respect to, the number, class, or Exercise Price of Shares then subject to
Awards or reserved for issuance under the Plan.
13. NON-TRANSFERABILITY OF AWARDS
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution, or pursuant to the terms of a "qualified domestic relations order"
(within the meaning of Section 414(p) of the Code and the regulations and
rulings thereunder).
14. TIME OF GRANTING AWARDS
The date of grant of an Award shall, for all purposes, be the date on
which the Committee makes the determination for granting such Award. Notice of
the determination shall be given to each Participant to whom an Award is so
granted within a reasonable time after the date of such grant.
15. EFFECTIVE DATE
The effective date of the Plan (the "Effective Date") shall be the date
the Plan is adopted by the Board or the date the Plan is approved by the
shareholders of the Company, whichever is earlier. The Plan must be approved by
the affirmative vote, cast either in person or by proxy, of not less than a
majority of the Shares entitled to vote at a meeting at which a quorum is
present, which shareholder vote must be taken within twelve (12) months after
the date the Plan is adopted by the Board of Directors. Such shareholder vote
shall not alter the Effective Date of the Plan. In the event shareholder
approval of the adoption of the Plan is not obtained within the aforesaid twelve
(12) month period, then any Options granted in the intervening period shall be
void.
16. MODIFICATION OF AWARDS
At any time, and from time to time, the Board may authorize the
Committee to direct execution of an instrument providing for the modification of
any outstanding Award, provided no such modification shall confer on the holder
of such Award any right or benefit which could not be conferred on him by the
grant of a new Award at such time, or impair the Award without the consent of
the holder of the Award, or revise the terms of the Award, including the
exercise price at which the Award was granted.
17. AMENDMENT AND TERMINATION OF THE PLAN
With respect to any shares of stock at the time not subject to an award
of Options or SARs under the Plan, the Board may at any time and from time to
time, terminate, modify or amend the Plan in any respect, except that no such
modification or amendment shall be made absent the approval of the shareholders
of the Company to: (i) increase the number of shares for which Options or SARs
may be granted under the Plan; (ii) extend the period during which Options or
SARs may be granted or exercised; (iii) change the class of persons eligible for
awards of Options or SARs; or (iv) otherwise materially modify the requirements
as to eligibility
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for participation in the Plan. The Company's Board of Directors may also suspend
the granting of Options or SARs pursuant to the Plan at any time and may
terminate the Plan at any time; provided, however, no such suspension or
termination shall modify or amend any Option or SAR granted before such
suspension or termination unless the affected participant consents in writing,
to such modification or amendment or there is a dissolution or liquidation of
the Company.
18. CONDITIONS UPON ISSUANCE OF SHARES
(a) Compliance with Securities Laws. Shares of Common Stock
shall not be issued with respect to any Award unless the issuance and delivery
of such Shares shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed. The
Plan is intended to comply with Rule 16b-3, and any provision of the Plan which
the Committee determines in its sole and absolute discretion to be inconsistent
with said Rule shall, to the extent of such inconsistency, be inoperative and
null and void, and shall not affect the validity of the remaining provisions of
the Plan.
(b) Special Circumstances. The inability of the Company to
obtain approval from any regulatory body or authority deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder
shall relieve the Company of any liability in respect of the non-issuance or
sale of such Shares. As a condition to the exercise of an option or SAR, the
Company may require the person exercising the Option or SAR to make such
representations and warranties as may be necessary to assure the availability of
an exemption from the registration requirements of federal or state securities
law.
(c) Committee Discretion. The Committee shall have the
discretionary authority to impose in Agreements such restrictions on Shares as
it may deem appropriate or desirable, including, but not limited to, the
authority to impose a right of first refusal or to establish repurchase rights
or both of these restrictions.
19. RESERVATION OF SHARES
The Company, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of the Plan.
20. WITHHOLDING TAX
The Company's obligation to deliver Shares upon exercise of Options
and/or SARs (or such earlier time that the Participant makes an election under
Section 83(b) of the Code) shall be subject to the Participant's satisfaction of
all applicable federal, state and local income and employment tax withholding
obligations. The Committee, in its discretion, may permit the Participant to
satisfy the obligation, in whole or in part, by irrevocably electing to have the
Company withhold the Shares, or to deliver to the Company the Shares that he
already owns, having a value equal to the amount required to be withheld. The
value of Shares to be withheld, or delivered to the Company, shall be based on
the Market Value of the Shares on the date the
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amount of tax to be withheld is to be determined. As an alternative, the Company
may retain, or sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld.
21. NO EMPLOYMENT OR OTHER RIGHTS
In no event shall an Employee's or Director's eligibility to
participate or participation in the Plan create or be deemed to create any legal
or equitable right of the Employee, Director, or any other party to continue
service with the Company, the Association, or any Affiliate of such
corporations. No Employee or Director shall have a right to be granted an Award
or, having received an Award, the right to again be granted an Award, except to
the extent provided in Paragraph 9(a). However, an Employee or Director who has
been granted an Award may, if otherwise eligible, be granted an additional Award
or Awards.
22. GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws
of the State of Delaware, except to the extent that federal law shall be deemed
to apply.
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