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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO
.
Commission File Number: 0-25160
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ALABAMA NATIONAL BANCORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 63-1114426
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
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1927 First Avenue North, Birmingham, AL 35203-4009
(Address of principal executive offices) (Zip Code)
(205) 583-3600
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
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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. [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates of the
registrant at March 10, 2000 was $137,778,894.
As of March 10, 2000, the registrant had outstanding 11,065,890 shares of
its common stock.
DOCUMENTS INCORPORATED BY REFERENCE IN THIS FORM 10-K:
(i) The definitive Proxy Statement for the 2000 Annual Meeting of Alabama
National BanCorporation's Stockholders is incorporated by reference into
Part III of this report.
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TABLE OF CONTENTS
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Item No. Page No.
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS................... 2
PART I
1. Business.................................................. 3
Executive Officers........................................ 10
2. Properties................................................ 10
3. Legal Proceedings......................................... 10
4. Submission of Matters to a Vote of Security Holders....... 10
PART II
5. Market for Registrant's Common Equity and Related 11
Stockholder Matters......................................
6. Selected Financial Data................................... 12
7. Management's Discussion and Analysis of Financial 13
Condition and Results of Operations......................
7A. Quantitative and Qualitative Disclosures about Market 40
Risk.....................................................
8. Financial Statements and Supplementary Data............... 41
9. Changes in and Disagreements with Accountants on 42
Accounting and Financial Disclosure......................
PART III
10. Directors and Executive Officers of the Registrant........ 42*
11. Compensation of Executive Officers and Directors.......... 42*
12. Security Ownership of Certain Beneficial Owners and 42*
Management...............................................
13. Certain Relationships and Related Transactions............ 42*
PART IV
14. Exhibits, Financial Statement Schedules and Reports on 43
Form 8-K.................................................
SIGNATURES.......................................................... 44
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* Portions of the Proxy Statement for the Registrant's Annual Meeting of
Stockholders to be held on April 27, 2000 are incorporated by reference in
Part III of this Form 10-K.
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K, other periodic reports filed by Alabama
National BanCorporation (the "Company" or "ANB") under the Securities Exchange
Act of 1934, as amended, and any other written or oral statements made by or
on behalf of ANB may include "forward looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 which reflect ANB's
current views with respect to future events and financial performance. Such
forward looking statements are based on general assumptions and are subject to
various risks, uncertainties, and other factors that may cause actual results
to differ materially from the views, beliefs and projections expressed in such
statements. These risks, uncertainties and other factors include, but are not
limited to:
(1) Possible changes in economic and business conditions that may affect
the prevailing interest rates, the prevailing rates of inflation, or the
amount of growth, stagnation, or recession in the global, U.S., and
southeastern U.S. economies, the value of investments, collectibility of
loans and the profitability of business entities;
(2) Possible changes in monetary and fiscal policies, laws and
regulations, and other activities of governments, agencies and similar
organizations;
(3) The effects of easing of restrictions on participants in the
financial services industry, such as banks, securities brokers and dealers,
investment companies and finance companies, and changes evolving from the
enactment of the Gramm-Leach-Bliley Act of 1999, and attendant changes in
patterns and effects of competition in the financial services industry;
(4) The cost and other effects of legal and administrative cases and
proceedings, claims, settlements and judgments; and
(5) The ability of ANB to achieve the expected operating results related
to the acquired operations of recently-completed and future acquisitions
(if any), which depends on a variety of factors, including (i) the ability
of ANB to achieve the anticipated cost savings and revenue enhancements
with respect to the acquired operations, (ii) the assimilation of the
acquired operations to ANB's corporate culture, including the ability to
instill ANB's credit practices and efficient approach to the acquired
operations, (iii) the continued growth of the markets in which ANB operates
consistent with recent historical experience, (iv) the absence of material
contingencies related to the acquired operations, including asset quality
and litigation contingencies, and (v) ANB's ability to expand into new
markets and to maintain profit margins in the face of pricing pressures.
The words "believe," "expect," "anticipate," "project" and similar
expressions signify forward looking statements. Readers are cautioned not to
place undue reliance on any forward looking statements made by or on behalf of
ANB. Any such statement speaks only as of the date the statement was made. ANB
undertakes no obligation to update or revise any forward looking statements.
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PART I
ITEM 1. BUSINESS
Alabama National BanCorporation (the "Company" or "ANB") is a Delaware bank
holding company with its principal place of business in Birmingham, Alabama,
and its main office located at 1927 First Avenue North, Birmingham, Alabama
35203 (Telephone Number: (205) 583-3600). ANB is currently the parent of three
national banks, National Bank of Commerce of Birmingham ("NBC") (Birmingham,
Alabama and the Birmingham metropolitan area), Citizens & Peoples Bank,
National Association (Escambia County, Florida), and Community Bank of Naples,
National Association (Naples, Florida); three state member banks, Alabama
Exchange Bank (Tuskegee, Alabama), Bank of Dadeville (Dadeville, Alabama) and
First Gulf Bank (Baldwin County, Alabama); and four state nonmember banks,
First American Bank (Decatur, Alabama), Public Bank (St. Cloud, Florida),
Georgia State Bank (Mableton, Georgia) and First Citizens Bank, (Talladega,
Alabama) (collectively the "Banks"). In addition, ANB is currently the
ultimate parent of one securities brokerage firm, NBC Securities, Inc.
(Birmingham, Alabama); one receivables factoring company, Corporate Billing,
Inc. (Decatur, Alabama); and one insurance agency, Rankin Insurance, Inc.
(Decatur, Alabama).
Subsidiary Banks
ANB operates through ten subsidiary Banks which have a total of 46 banking
offices and one insurance office (where no banking is conducted) in the states
of Alabama, Georgia and Florida. The Banks focus on traditional consumer,
residential mortgage, commercial and real estate construction lending, and
equipment leasing to customers in their market areas. The Banks also offer a
variety of deposit programs to individuals and small businesses and other
organizations at interest rates generally consistent with local market
conditions. NBC offers trust services, investment services and securities
brokerage services. In addition, the Banks offer individual retirement and
KEOGH accounts, safe deposit and night depository facilities and additional
services such as the sale of traveler's checks, money orders and cashier's
checks.
Lending Activities
General
Through the Banks, ANB offers a range of lending services, including real
estate, consumer and commercial loans, to individuals and small businesses and
other organizations that are located in or conduct a substantial portion of
their business in the Banks' market areas. ANB's total loans, net of unearned
interest, at December 31, 1999, were approximately $1.32 billion, or
approximately 76.9% of total earning assets. The interest rates charged on
loans vary with the degree of risk, maturity and amount of the loan and are
further subject to competitive pressures, money market rates, availability of
funds and government regulations. ANB has no "foreign loans" or loans for
"highly leveraged transactions," as such terms are defined by applicable
banking regulations.
Loan Portfolio
Real Estate Loans. Loans secured by real estate are the primary component of
ANB's loan portfolio, constituting approximately $878.9 million, or 66.5% of
total loans, net of unearned interest, at December 31, 1999. The Banks often
take real estate as an additional source of collateral to secure commercial
and industrial loans. Such loans are classified as real estate loans rather
than commercial and industrial loans if the real estate collateral is
considered significant as a secondary source of repayment for the loan. The
Banks' real estate loan portfolio is comprised of commercial and residential
mortgages. Residential mortgages held in the Banks' loan portfolio, both fixed
and variable, are made based upon amortization schedules of up to 30 years but
generally have maturity dates of five years or less. The Banks' commercial
mortgages accrue at either variable or fixed rates. The variable rates
approximate current market rates. Construction loans are made on a variable
rate basis. Origination fees are normally charged for most loans secured by
real estate. The Banks' primary type of residential mortgage loan is the
single-family first mortgage, typically structured with fixed or adjustable
interest rates, based on market conditions. These loans usually have terms of
five years, with payments through the date of maturity generally based on a 15
or 30 year amortization schedule.
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The Banks originate residential loans for sale into the secondary market.
Such loans are made in accordance with underwriting standards set by the
purchaser of the loan, normally as to loan-to-value ratio, interest rate and
documentation. Such loans are generally made under a commitment to purchase
from a loan purchaser. The Banks generally collect from the borrower or
purchaser a combination of the origination fee, discount points and/or service
release fee. During 1999, the Banks sold approximately $265.0 million in loans
to such purchasers.
The Banks' nonresidential mortgage loans include commercial, industrial and
unimproved real estate loans. The Banks generally require nonresidential
mortgage loans to have an 80% loan-to-value ratio and usually underwrite their
commercial loans on the basis of the borrower's cash flow and ability to
service the debt from earnings, rather than on the basis of the value of the
collateral. Terms on construction loans are usually less than twelve months,
and the Banks typically require real estate mortgages and personal guarantees
supported by financial statements and a review of the guarantor's personal
finances.
Consumer Loans. Consumer lending includes installment lending to individuals
in the Banks' market areas and generally consists of loans to purchase
automobiles and other consumer durable goods. Consumer loans constituted $73.4
million, or 5.6% of ANB's loan portfolio at December 31, 1999. Consumer loans
are underwritten based on the borrower's income, current debt level, past
credit history and collateral. Consumer rates are both variable and fixed,
with terms negotiable. Terms generally range from one to five years depending
on the nature and condition of the collateral. Periodic amortization,
generally monthly, is typically required.
Commercial and Financial Loans. The Banks make loans for commercial purposes
in various lines of business. These loans are typically made on terms up to
five years at fixed or variable rates. The loans are secured by various types
of collateral including accounts receivable, inventory or, in the case of
equipment loans, the financed equipment. The Banks attempt to reduce their
credit risk on commercial loans by underwriting the loan based on the
borrower's cash flow and its ability to service the debt from earnings, and by
limiting the loan to value ratio. Historically, the Banks have typically
loaned up to 80% on loans secured by accounts receivable, up to 65% on loans
secured by inventory, and up to 80% on loans secured by equipment. The Banks
also make some unsecured commercial loans and offer equipment leasing.
Commercial and financial loans constituted $257.0 million, or 19.5% of ANB's
loan portfolio at December 31, 1999. Interest rates are negotiable based upon
the borrower's financial condition, credit history, management stability and
collateral.
Credit Procedures and Review
Loan Approval. Certain credit risks are inherent in making loans. These
include prepayment risks, risks resulting from uncertainties in the future
value of collateral, risks resulting from changes in economic and industry
conditions and risks inherent in dealing with individual borrowers. In
particular, longer maturities increase the risk that economic conditions will
change and adversely affect collectibility.
ANB attempts to minimize loan losses through various means and uses
standardized underwriting criteria. ANB has established a standardized loan
policy for all of the Banks that may be modified based on local market
conditions. In particular, on larger credits, ANB generally relies on the cash
flow of a debtor as the source of repayment and secondarily on the value of
the underlying collateral. In addition, ANB attempts to utilize shorter loan
terms in order to reduce the risk of a decline in the value of such
collateral.
ANB addresses repayment risks by adhering to internal credit policies and
procedures which all of the Banks have adopted. These policies and procedures
include officer and customer lending limits, a multi-layered loan approval
process for larger loans, documentation examination and follow-up procedures
for any exceptions to credit policies. The point in each Bank's loan approval
process at which a loan is approved depends on the size of the borrower's
credit relationship with such Bank. Each of the lending officers at each of
the Banks has the authority to approve loans up to an approved loan authority
amount as approved by each Bank's Board of Directors. Loans in excess of the
highest loan authority amount at each Bank must be approved by the ANB
Executive Vice President in charge of credit administration. In addition,
loans in excess of a particular loan officer's approval authority must be
approved by a more senior officer at the particular Bank, the loan committee
at such Bank, or both.
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Loan Review. ANB maintains a continuous loan review system for each of NBC
and First American Bank and a scheduled review system for the other Banks.
Under this system, each loan officer is directly responsible for monitoring
the risk in his portfolio and is required to maintain risk ratings for each
credit assigned. The risk rating system incorporates the basic regulatory
rating system as set forth in the applicable regulatory asset quality
examination procedures.
ANB's Loan Review Department ("LRD"), which is wholly independent of the
lending function, serves as a validation of each loan officer's risk
monitoring and rating system. LRD's primary function is to provide the Board
of Directors of each Bank with a thorough understanding of the credit quality
of such Bank's loan portfolio. Other review requirements are in place to
provide management with early warning systems for problem credits as well as
compliance with stated lending policies. LRD's findings are reported, along
with an asset quality review, to the ANB Board of Directors at each bi-monthly
meeting.
Deposits
The principal sources of funds for the Banks are core deposits, consisting
of demand deposits, interest-bearing transaction accounts, money market
accounts, savings deposits and certificates of deposit. Transaction accounts
include checking and negotiable order of withdrawal (NOW) accounts which
customers use for cash management and which provide the Banks with a source of
fee income and cross-marketing opportunities, as well as a low-cost source of
funds. Time and savings accounts also provide a relatively stable and low-cost
source of funding. The largest source of funds for the Banks are certificates
of deposit. Certificates of deposit in excess of $100,000 are held primarily
by customers in the Banks' market areas.
Deposit rates are reviewed weekly by senior management of each of the Banks.
Management believes that the rates the Banks offer are competitive with those
offered by other institutions in the Banks' market areas. ANB focuses on
customer service to attract and retain deposits.
Investment Services
NBC operates an investment department devoted primarily to handling
correspondent banks' investment needs. Services provided by the investment
department include the sale of securities, asset/liability consulting,
safekeeping and bond accounting. NBC also has a wholly owned subsidiary, NBC
Securities, Inc. ("NBC Securities"), that is licensed as a broker-dealer.
Started in mid-1995, NBC Securities provides investment services to
individuals and institutions. These services include the sale of stocks,
bonds, mutual funds, annuities, margin loans, other insurance products and
financial planning. NBC Securities has investment advisers in Birmingham,
Decatur and Gulf Shores, Alabama; Naples and Pensacola, Florida; and Mableton,
Georgia.
Competition
The Banks encounter strong competition in making loans, acquiring deposits
and attracting customers for investment and trust services. Competition among
financial institutions is based upon interest rates offered on deposit
accounts, interest rates charged on loans, other credit and service charges
relating to loans, the quality and scope of the services rendered, the
convenience of banking facilities and, in the case of loans to commercial
borrowers, relative lending limits. The Banks compete with other commercial
banks, savings and loan associations, credit unions, finance companies, mutual
funds, insurance companies, brokerage and investment banking companies, and
other financial intermediaries operating in Alabama and elsewhere. Many of
these competitors, some of which are affiliated with large bank holding
companies, have substantially greater resources and lending limits, and may
offer certain services that the Banks do not currently provide. In addition,
many of ANB's non-bank competitors are not subject to the same extensive
federal regulations that govern bank or thrift holding companies and federally
insured banks or thrifts.
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On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act which will, effective March 11, 2000, permit bank holding companies
to become financial holding companies and thereby affiliate with securities
firms and insurance companies and engage in other activities that are
financial in nature. See "Supervision and Regulation." Under the Act,
securities firms and insurance companies that elect to become financial
holding companies may acquire banks and other financial institutions. The
Gramm-Leach-Bliley Act, which represents the most sweeping reform of financial
services regulation in over sixty years, may significantly change the
competitive environment in which ANB and the Banks conduct business. At this
time, however, it is not possible to predict the full effect that the Act will
have on ANB. One consequence may be increased competition from large financial
services companies that will be permitted to provide many types of financial
services, including bank products, to their customers.
The financial services industry is also likely to become more competitive as
further technological advances enable more companies to provide financial
services. These technological advances may diminish the importance of
depository institutions and other financial intermediaries in the transfer of
funds between parties.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"IBBEA") authorized bank holding companies to acquire banks and other bank
holding companies without geographic limitations beginning September 30, 1995.
The arrival of interstate banking is expected to increase further the
competitiveness of the banking industry.
In addition, beginning on June 1, 1997, the IBBEA authorized interstate
mergers and consolidations of existing banks, provided that neither bank's
home state had opted out of interstate branching by May 31, 1997. The States
of Alabama, Georgia and Florida have opted in to interstate branching.
Interstate branching provides that once a bank has established branches in a
state through an interstate merger, the bank may establish and acquire
additional branches at any location in the state where any bank involved in
the interstate merger could have established or acquired branches under
applicable federal or state law.
Size gives the larger banks certain advantages in competing for business
from large corporations. These advantages include higher lending limits and
the ability to offer services in other areas of Alabama and the southeast
region. Some of ANB's competitors still maintain substantially greater
resources and lending limits than ANB. As a result, ANB has not generally
attempted to compete for the banking relationships of large corporations, and
generally concentrates its efforts on small to medium-sized businesses and
individuals to which ANB believes it can compete effectively by offering
quality, personal service. However, management believes it may be able to
compete more effectively for the business of some large corporations, given
its current growth pattern.
Management believes that the Banks' commitment to their respective primary
market areas, as well as their commitment to quality and personalized banking
services, are factors that contribute to the Banks' competitiveness.
Management believes that ANB's decentralized community banking strategy
positions the Banks to compete successfully in their market areas.
Market Areas and Growth Strategy
Through NBC, ANB serves the metropolitan Birmingham market, which includes
portions of Jefferson, Shelby and St. Clair Counties. ANB's First American
Bank subsidiary serves Morgan, Limestone and Madison Counties in north
Alabama. First American's largest market presence is in Decatur, Alabama,
which has demonstrated a growing economic base in recent years. Through First
Gulf Bank, ANB serves Baldwin County, Alabama. Located between Mobile, Alabama
and Pensacola, Florida, Baldwin County has a broad base of economic activity
in the retail and service, agriculture, seafood, tourism and manufacturing
industries. Baldwin County includes the popular tourism and retirement resort
communities of Gulf Shores and Fairhope. Shelby, Baldwin and St. Clair
Counties have been named in statistical surveys as three of the fastest
growing counties in Alabama. In 1997, ANB expanded outside of Alabama with the
opening of Citizens & Peoples Bank, N.A. in Escambia County, Florida. In 1998,
ANB further expanded its presence in markets outside of Alabama with two
acquisitions in Florida and one in Georgia. Public Bank is located in the
fast-growing greater Orlando area, with
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offices in Altamonte Springs, Kissimmee and St. Cloud, Florida. Community Bank
of Naples, N.A., located in Collier County, Florida, and Georgia State Bank,
located in Cobb County and Paulding County, Georgia, are located in markets
that are among the fastest growing in their respective states. The other
Banks, First Citizens, Alabama Exchange Bank and Bank of Dadeville, are
located in non-metropolitan areas. Each of these three Banks, while
experiencing minimal growth due to market growth that has not been
significant, typically operates at a high level of profitability. As a result,
these Banks tend to produce capital for growth in many of the high growth
markets served by the other Banks. ANB's strategy is to focus on growth in
profitability for these non-metropolitan banks, since market growth has not
been as significant.
Due to continuing consolidation within the banking industry, as well as in
the Southeastern United States, ANB may in the future seek to combine with
other banks or thrifts (or their holding companies) that may be of smaller,
equal or greater size than ANB. ANB currently intends to concentrate on
acquisitions of additional banks or thrifts (or their holding companies) which
operate in attractive market areas in Alabama, Florida and Georgia. In
addition to price and terms, the factors considered by ANB in determining the
desirability of a business acquisition or combination are financial condition,
asset quality, earnings potential, quality of management, market area and
competitive environment.
In addition to expansion through combinations with other banks or thrifts,
ANB intends to continue to expand where possible through growth of its
existing banks in their respective market areas. During 1998, NBC formed a
commercial leasing division which currently focuses on machinery and equipment
leases to business customers. Also, ANB is exploring expansion into lines of
business closely related to banking and will pursue such expansion if it
believes such lines could be profitable without causing undue risk to ANB.
During 1999, First American Bank acquired Rankin Insurance, Inc., a full
service independent property and casualty insurance agency located in Decatur,
Alabama. For the seven months of 1999 that it was owned by ANB, Rankin
generated approximately $1.1 million in commission revenue and is in the
process of expanding this business into several of the markets served by the
Bank. While ANB plans to continue its growth as described above, there is no
assurance that its efforts will be successful.
Employees
As of December 31, 1999, ANB and the Banks together had approximately 817
full-time equivalent employees. None of these employees is a party to a
collective bargaining agreement. ANB considers its relations with its
employees to be good.
Supervision and Regulation
ANB and the Banks are subject to state and federal banking laws and
regulations which impose specific requirements and restrictions on, and
provide for general regulatory oversight with respect to, virtually all
aspects of operations. These laws and regulations are generally intended to
protect depositors, not stockholders. To the extent that the following summary
describes statutory or regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any change
in applicable laws or regulations may have a material effect on the business
and prospects of ANB.
Beginning with the enactment of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA") and following in December 1991 with the
Federal Deposit Insurance Corporation Act ("FDICIA"), numerous additional
regulatory requirements have been placed on the banking industry in the past
ten years, and additional changes have been proposed. The operations of ANB
and the Banks may be affected by legislative changes and the policies of
various regulatory authorities. ANB is unable to predict the nature or the
extent of the effect on its business and earnings that fiscal or monetary
policies, economic control, or new federal or state legislation may have in
the future.
As a bank holding company, ANB is subject to the regulation and supervision
of the Federal Reserve. The Banks are subject to supervision and regulation by
applicable state and federal banking agencies, including the Federal Reserve,
the Office of the Comptroller of the Currency (the "OCC") and the Federal
Deposit Insurance Corporation (the "FDIC"). The Banks are also subject to
various requirements and restrictions under federal
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and state law, including requirements to maintain allowances against deposits,
restrictions on the types and amounts of loans that may be granted and the
interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of the Banks.
In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve as it attempts to control
the money supply and credit availability in order to influence the economy.
Pursuant to the IBBEA, bank holding companies from any state may now acquire
banks located in any other state, subject to certain conditions, including
concentration limits. As of June 1, 1997, a bank may establish branches across
state lines by merging with a bank in another state (unless applicable state
law prohibits such interstate mergers), provided certain conditions are met. A
bank may also establish a de novo branch in a state in which the bank does not
maintain a branch if that state expressly permits such interstate de novo
branching and certain other conditions are met.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance fund in
the event the depository institution becomes in danger of default or is in
default. For example, under a policy of the Federal Reserve with respect to
bank holding company operations, a bank holding company is required to serve
as a source of financial strength to its subsidiary depository institutions
and commit resources to support such institutions in circumstances where it
might not do so absent such policy. In addition, the "cross-guarantee"
provisions of federal law require insured depository institutions under common
control to reimburse the FDIC for any loss suffered or reasonably anticipated
as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly
controlled insured depository institution in danger of default.
The federal banking agencies have broad powers under current federal law to
take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized" as such terms are defined under regulations issued by each
of the federal banking agencies. In general, the agencies measure capital
adequacy within a framework that makes capital requirements sensitive to the
risk profiles of individual banking companies. The guidelines define capital
as either Tier 1 (primarily common shareholders' equity) or Tier 2 (certain
debt instruments and a portion of the allowance for loan losses). ANB and the
Banks are subject to a minimum Tier 1 capital ratio (Tier 1 capital to risk-
weighted assets) of 4%, a total capital ratio (Tier 1 plus Tier 2 to risk-
weighted assets) of 8% and a Tier 1 leverage ratio (Tier 1 to average
quarterly assets) of 3%. To be considered a "well capitalized" institution,
the Tier 1 capital ratio, the total capital ratio, and the Tier 1 leverage
ratio must equal or exceed 6%, 10% and 5%, respectively.
The Banks are subject to the provisions of Section 23A of the Federal
Reserve Act, which place limits on the amount of loans or extensions of credit
to, investments in or certain other transactions with affiliates, and on the
amount of advances to third parties collateralized by the securities or
obligations of affiliates. In general, the Banks' "affiliates" are ANB and
ANB's non-bank subsidiaries.
The Banks are also subject to the provisions of Section 23B of the Federal
Reserve Act that, among other things, prohibit a bank from engaging in certain
transactions with affiliates unless the transactions are on terms
substantially the same, or at least as favorable to the bank, as those
prevailing at the time for comparable transactions with non-affiliated
companies.
The Banks are also subject to certain restrictions on extensions of credit
to executive officers, directors, certain principal stockholders and their
related interests. Such extensions of credit (i) must be made on substantially
the same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with third parties and (ii) must not
involve more than the normal risk of repayment or present other unfavorable
features.
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The Community Reinvestment Act ("CRA") requires that, in connection with
examinations of financial institutions within their respective jurisdictions,
the Federal Reserve, the FDIC or the OCC shall evaluate the record of the
financial institutions in meeting the credit needs of their local communities,
including low and moderate income neighborhoods, consistent with the safe and
sound operation of those institutions. The CRA does not establish specific
lending requirements or programs for financial institutions nor does it limit
an institution's discretion to develop the types of products and services that
it believes are best suited to its particular community, consistent with the
CRA. These factors are considered in evaluating mergers, acquisitions and
applications to open a branch or facility. The CRA also requires all
institutions to make public disclosure of their CRA ratings. Each of the Banks
received outstanding or satisfactory ratings in its most recent evaluation.
There are various legal and regulatory limits on the extent to which the
Banks may pay dividends or otherwise supply funds to ANB. In addition, federal
and state regulatory agencies also have the authority to prevent a bank or
bank holding company from paying a dividend or engaging in any other activity
that, in the opinion of the agency, would constitute an unsafe or unsound
practice.
FDIC regulations require that management report on its responsibility for
preparing its institution's financial statements and for establishing and
maintaining an internal control structure and procedures for financial
reporting and compliance with designated laws and regulations concerning
safety and soundness.
On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act which will, effective March 11, 2000, permit bank holding companies
to become financial holding companies and thereby affiliate with securities
firms and insurance companies and engage in other activities that are
financial in nature. A bank holding company may become a financial holding
company by filing a declaration if each of its subsidiary banks is well
capitalized under the FDICIA prompt corrective action provisions, is well
managed, and has at least a satisfactory rating under the CRA. No regulatory
approval will be required for a financial holding company to acquire a
company, other than a bank or savings association, engaged in activities that
are financial in nature or incidental to activities that are financial in
nature, as determined by the Federal Reserve.
The Gramm-Leach-Bliley Act broadly defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual funds
and investment companies; insurance underwriting and agency; merchant banking;
and activities that the Federal Reserve has determined to be closely related
to banking. The Act also permits the Federal Reserve, in consultation with the
Department of Treasury, to determine that other activities are "financial in
nature" and therefore permissible for financial holding companies. A national
bank also may engage, subject to limitations on investment, in activities that
are financial in nature (other than insurance underwriting, insurance company
portfolio investment, merchant banking, real estate development and real
estate investment) through a financial subsidiary of the bank, if the bank is
well capitalized, well managed and has at least a satisfactory CRA rating.
Subsidiary banks of a financial holding company or national banks with
financial subsidiaries must continue to be well capitalized and well managed
in order to continue to engage in activities that are financial in nature
without regulatory actions or restrictions, which could include divestiture of
the financial subsidiary or subsidiaries. In addition, a financial holding
company or a bank may not acquire a company that is engaged in activities that
are financial in nature unless each of the subsidiary banks of the financial
holding company or the bank at issue has a CRA rating of satisfactory or
better.
The Act preserves the role of the Federal Reserve as the umbrella supervisor
for holding companies while at the same time incorporating a system of
functional regulation designed to take advantage of the strengths of the
various federal and state regulators. In particular, the Act replaces the
broad exemption from Securities and Exchange Commission regulation that banks
previously enjoyed with more limited exemptions, and it reaffirms that states
are the regulators for the insurance activities of all persons, including
federally-chartered banks.
The Gramm-Leach-Bliley Act also establishes a minimum federal standard of
financial privacy. Financial institutions are required to institute written
privacy policies that must be disclosed to customers at certain required
intervals.
NBC Securities is a broker-dealer registered with the Securities and
Exchange Commission and is a member of the National Association of Securities
Dealers, Inc.
9
<PAGE>
Executive Officers of the Registrant
The Executive Officers of ANB serve at the pleasure of the Board of
Directors. Set forth below are the current Executive Officers of ANB and a
brief explanation of their principal employment during the last five
(5) years.
John H. Holcomb, III--Age 48--Chairman and Chief Executive Officer. Mr.
Holcomb has served as Chairman and Chief Executive Officer of ANB since April,
1996. Prior to such date, Mr. Holcomb served as President and Chief Operating
Officer of ANB beginning December, 1995. Mr. Holcomb has been President and
Chief Executive Officer of NBC since 1990.
Victor E. Nichol, Jr.--Age 53--President and Chief Operating Officer. Mr.
Nichol has served as President and Chief Operating Officer of ANB since April
1996. Prior to such date, Mr. Nichol served as Executive Vice President of ANB
beginning December 1995. Mr. Nichol has been Executive Vice President of NBC
since 1994.
Dan M. David--Age 54--Vice Chairman. Mr. David has served as Vice Chairman
of ANB since November 30, 1997 when FAB merged with and into ANB. Mr. David
serves as Chairman of First American Bank, a position he has held since 1995.
Mr. David served as Chairman and Chief Executive Officer of FAB from 1995
through 1997, as Vice Chairman and Chief Executive Officer during 1994 and
1995 and as President and Chief Executive Officer from 1986 through 1994.
John R. Bragg--Age 38--Executive Vice President. Mr. Bragg has served as
Executive Vice President of ANB since April 1998 and Executive Vice President
of NBC since 1997. Mr. Bragg served as Senior Vice President of NBC from 1992
until 1997.
Richard Murray, IV--Age 37--Executive Vice President. Mr. Murray has served
as Executive Vice President of ANB since April 1998 and Executive Vice
President of NBC since 1997. Mr. Murray served as Senior Vice President of NBC
from 1990 until 1997.
William G. Sanders, Jr.--Age 36--Executive Vice President. Mr. Sanders has
served as Executive Vice President of ANB since April 1998 and Executive Vice
President of NBC since 1997. Mr. Sanders served as Senior Vice President of
NBC from 1993 until 1997.
William E. Matthews, V--Age 35--Executive Vice President and Chief Financial
Officer. Mr. Matthews has served as Executive Vice President and Chief
Financial Officer of ANB and NBC since April 1998. Prior to that date, Mr.
Matthews served as Senior Vice President of NBC beginning in 1996, and Vice
President of NBC from 1992 through 1996.
ITEM 2. PROPERTIES
ANB, through the Banks, currently operates 46 banking offices and one
insurance office. Of these offices, ANB, through the Banks, owns 38 banking
offices without encumbrance and leases an additional 8 banking offices and its
one insurance office. ANB, through NBC, leases its principal administrative
offices, which are located at 1927 First Avenue North, Birmingham, Alabama.
See Notes 6 and 9 to the Consolidated Financial Statements of ANB and
Subsidiaries included in this Annual Report on Form 10-K beginning on page F-1
for additional information regarding ANB's premises and equipment.
ITEM 3. LEGAL PROCEEDINGS
ANB, in the normal course of business, is subject to various pending and
threatened litigation. Although it is not possible to determine at this point
in time, based on consultation with legal counsel, management does not
anticipate that the ultimate liability, if any, resulting from such litigation
will have a material effect on ANB's financial condition and results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At March 10, 2000 ANB had 1,250 stockholders of record (including shares
held in "street" names by nominees who are record holders) and 11,065,890
shares of ANB Common Stock outstanding. ANB Common Stock is traded in the
over-the-counter market and prices are quoted on the NASDAQ/NMS under the
symbol "ALAB."
The reported sales price range for ANB Common Stock and the dividends
declared during each calendar quarter of 1998 and 1999 are shown below:
<TABLE>
<CAPTION>
Dividends
High Low Declared
--------- ------ ---------
<S> <C> <C> <C>
1998
First Quarter..................................... $33 3/4 25 3/4 $.15
Second Quarter.................................... 37 5/8 31 1/2 .15
Third Quarter..................................... 39 1/2 24 7/8 .15
Fourth Quarter.................................... 28 24 1/8 .15
1999
First Quarter..................................... $26 29/32 21 3/4 .18
Second Quarter.................................... 25 3/8 22 1/2 .18
Third Quarter..................................... 27 1/2 22 5/8 .18
Fourth Quarter.................................... 24 5/8 17 3/4 .18
</TABLE>
The last reported sales price of ANB Common Stock as reported on the
NASDAQ/NMS on March 10, 2000 was $16.50. The prices shown do not reflect
retail mark-ups and mark-downs. All share prices have been rounded to the
nearest 1/64 of one dollar. The market makers for ANB Common Stock as of
December 31, 1999, were J.C. Bradford & Co., Raymond James & Associates, Inc.,
Legg Mason Wood Walker Inc., The Robinson Humphrey Company, LLC, ABN AMRO
Securities (USA), Inc., Speer, Leeds & Kellogg, Mayer & Schweitzer, Inc., and
Sherwood Securities Corp.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except ratios and per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1999 1998(1) 1997(1) 1996(1) 1995(1)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income......... $ 125,668 $ 115,704 $ 104,508 $ 93,178 $ 62,090
Interest expense........ 59,283 56,555 48,379 42,174 30,079
---------- ---------- ---------- ---------- ----------
Net interest income..... 66,385 59,149 56,129 51,004 32,011
Provision for loan
losses................. 1,954 1,796 3,421 1,035 1,171
---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses............ 64,431 57,353 52,708 49,969 30,840
Net securities gains
(losses)............... 190 174 (2) (84) 21
Noninterest income...... 30,367 29,176 20,296 19,214 10,749
Noninterest expense..... 62,455 61,154 52,788 50,175 32,141
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 32,533 25,549 20,214 18,924 9,469
Provision for income
taxes.................. 10,237 8,154 6,086 5,279 951
---------- ---------- ---------- ---------- ----------
Income before minority
interest in earnings of
consolidated subsidiary
....................... 22,296 17,395 14,128 13,645 8,518
Minority interest in
earnings of
consolidated
subsidiary............. 25 23 12 14 650
---------- ---------- ---------- ---------- ----------
Net income.............. $ 22,271 $ 17,372 $ 14,116 $ 13,631 $ 7,868
========== ========== ========== ========== ==========
Balance Sheet Data:
Total assets............ $1,921,884 $1,672,049 $1,495,814 $1,260,635 $1,142,064
Earning assets.......... 1,716,935 1,493,122 1,313,097 1,149,038 1,035,396
Securities.............. 345,123 324,213 265,102 224,939 227,087
Loans held for sale..... 8,615 19,047 5,291 4,339 2,431
Loans, net of unearned
income................. 1,320,160 1,087,027 961,079 863,968 743,530
Allowance for loan
losses................. 18,068 16,540 14,844 12,633 11,621
Deposits................ 1,442,155 1,275,175 1,125,479 988,876 945,544
Short-term debt......... 18,389 21,700 29,087 42,205 21,280
Long-term debt.......... 124,005 32,328 16,587 12,939 1,089
Stockholders' equity.... 138,255 130,993 116,888 105,204 88,230
Weighted Average Shares
Outstanding--
Diluted(2)............. 11,273 11,173 10,999 10,490 6,429
Per Common Share Data:
Net income--diluted(3).. $ 1.98 $ 1.55 $ 1.28 $ 1.30 $ 1.09
Book value (period
end)................... 12.36 11.94 11.02 10.43 9.04
Tangible book value
(period end)........... 11.40 11.19 10.20 9.66 8.24
Dividends declared...... 0.72 0.60 0.46 0.28 --
Performance Ratios:
Return on average
assets................. 1.26% 1.10% 1.05% 1.17% 1.02%
Return on average
equity................. 16.28 13.81 12.73 14.22 14.30
Net interest margin(4).. 4.18 4.24 4.62 4.75 4.44
Net interest margin
(taxable
equivalent)(4)......... 4.25 4.31 4.71 4.83 4.53
Asset Quality Ratios:
Allowance for loan
losses to period end
loans(5)............... 1.37% 1.52% 1.54% 1.46% 1.56%
Allowance for loan
losses to period end
nonperforming
loans(6)............... 394.67 340.61 281.14 377.22 296.61
Net charge-offs to
average loans(5)....... 0.04 0.01 0.13 0.00 0.05
Nonperforming assets to
period end loans and
foreclosed
property(5)(6)......... 0.40 0.56 0.73 0.48 0.63
Capital and Liquidity
Ratios:
Average equity to
average assets......... 7.77% 7.95% 8.27% 8.21% 7.11%
Leverage (4.00% required
minimum)(7)............ 7.18 7.41 7.75 8.64 10.33
Risk-based capital
Tier 1 (4.00% required
minimum)(7)........... 9.38 10.03 9.89 10.91 10.83
Total (8.00% required
minimum)(7)........... 10.62 11.28 11.14 12.16 12.08
Average loans to average
deposits............... 88.96 83.02 85.44 84.08 78.81
</TABLE>
12
<PAGE>
- --------
(1) On December 31, 1998, Community Bank of Naples, N.A. ("Naples") merged
with and into a subsidiary of ANB (the "Naples Merger"). Pursuant to the
terms of the Naples Merger, each share of Naples common stock was
converted into 0.53271 shares of the Company's common stock. On October 2,
1998, Community Financial Corporation ("CFC") merged with and into the
Company (the "CFC Merger"). Pursuant to the terms of the CFC Merger, each
share of CFC common stock was converted into 0.351807 shares of the
Company's common stock. On May 29, 1998, Public Bank Corporation ("PBC")
merged with and into the Company (the "PBC Merger"). Pursuant to the terms
of the PBC Merger, each share of PBC common stock was converted into
0.2353134 shares of the Company's common stock. On November 30, 1997,
First American Bancorporation ("FAB") merged with and into the Company
(the "FAB Merger"). Pursuant to the terms of the FAB Merger, each share of
FAB common stock was converted into 0.7199 shares of the Company's common
stock. On September 30, 1996, FIRSTBANC Holding Company, Inc.
("FIRSTBANC") was merged with and into the Company, with each share of
common stock of FIRSTBANC being converted into 7.12917 shares of the
Company's common stock. Each of the aforementioned mergers was accounted
for as pooling of interests. On December 29, 1995, National Commerce
Corporation ("NCC") and Commerce Bankshares, Inc. ("CBS") merged with and
into the Company (the "NCC Merger"). Pursuant to the terms of the NCC
Merger, each share of NCC common stock was converted into 348.14 shares of
the Company's common stock and each share of CBS common stock was
converted into 7.0435 shares of the Company's common stock for a total of
3,106,981 shares (or 50.1%) of the then outstanding Company common stock
being issued to NCC and CBS shareholders. The NCC Merger was accounted for
as a "reverse acquisition," whereby NCC is deemed to have acquired ANB for
financial reporting purposes. However, ANB remained as the continuing
legal entity and registrant for Securities and Exchange Commission filing
purposes. Consistent with the reverse acquisition accounting treatment,
the historical income statement information included in the Five-Year
Summary of Selected Financial Data of the Company is that of NCC for 1995.
The historical Five-Year Summary of Selected Financial Data for all
periods have been restated to include the results of operations of Naples,
CFC, PBC, FAB, and FIRSTBANC from the earliest period presented, except
for dividends per common share. (See Note 2 to the Company's consolidated
financial statements included in this Annual Report).
(2) The weighted average common share and common equivalent shares outstanding
are those of NCC, CBS, Naples, CFC, PBC, FAB, and FIRSTBANC converted into
ANB common stock and common stock equivalents at the applicable exchange
ratios.
(3) Net income per common share--diluted is calculated based upon net income
adjusted for cash dividends on preferred stock.
(4) Net interest income divided by average earning assets.
(5) Does not include loans held for sale.
(6) Nonperforming loans and nonperforming assets includes loans past due 90
days or more that are still accruing interest. It is the Company's policy
to place all loans on nonaccrual status when over ninety days past due.
(7) Based upon fully phased-in requirements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Basis of Presentation
The following is a discussion and analysis of the consolidated financial
condition of the Company and results of operations as of the dates and for the
periods indicated. All significant intercompany accounts and transactions have
been eliminated. The accounting and reporting policies of the Company conform
with generally accepted accounting principles and with general financial
service industry practices.
The historical consolidated financial statements of the Company and the
"FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA" derived from the historical
consolidated financial statements of the Company are set forth elsewhere
herein. This discussion should be read in conjunction with those consolidated
financial statements and selected consolidated financial data and the other
financial information included in this Annual Report.
13
<PAGE>
Selected Bank Financial Data
The Company's success is dependent upon the financial performance of its
subsidiary banks (the "Banks"). The Company, with input from the management of
each Bank, establishes operating goals for each Bank. The following tables
summarize selected financial information for 1999 and 1998 for each of the
Banks.
SELECTED BANK FINANCIAL DATA
(Amounts in thousands, except ratios)
(Unaudited)
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------------------------------------------------------------------------
National Alabama Citizens & First First First Georgia Community
Bank of Exchange Bank of Peoples American Citizens Gulf Public State Bank of
Commerce Bank Dadeville Bank, N.A. Bank Bank Bank Bank Bank Naples, N.A.
-------- -------- --------- ---------- -------- -------- -------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Interest income....... $ 55,306 $ 4,813 $ 5,039 $ 2,772 $ 22,386 $ 6,389 $ 9,058 $ 4,475 $ 10,823 $ 6,014
Interest expense...... 28,747 1,590 2,155 1,776 9,781 2,891 3,780 1,500 4,760 2,801
Net interest income... 26,559 3,223 2,884 996 12,605 3,498 5,278 2,975 6,063 3,213
Provision for loan
losses................ 25 150 117 166 680 27 353 65 15 356
Securities gains
(losses).............. -- -- -- 6 -- 7 6 -- 23 --
Noninterest income.... 18,674 683 644 298 4,518 806 1,624 1,082 1,660 590
Noninterest expense... 30,287 1,895 1,615 1,100 10,418 2,052 4,080 2,332 4,507 1,739
Net income............ 10,269 1,249 1,267 40 4,232 1,634 1,636 1,021 2,103 1,061
Balance Sheet
Highlights:
At Period-End:
Total assets......... $893,076 $72,162 $70,702 $44,857 $301,440 $92,442 $131,229 $71,444 $160,135 $106,619
Securities........... 120,638 21,310 16,382 13,892 41,489 39,354 11,988 14,499 40,468 25,006
Loans, net of
unearned income...... 639,859 41,643 42,636 24,932 226,161 43,489 103,577 45,218 90,039 69,069
Allowance for loan
losses............... 8,517 623 500 359 3,318 580 1,448 547 1,213 963
Deposits............. 583,739 60,794 55,914 36,697 240,606 78,967 109,328 60,563 136,702 84,790
Short-term debt...... 6,199 -- -- -- -- -- 2,000 -- -- --
Long-term debt....... 56,000 5,000 8,700 -- 23,039 6,000 10,000 5,000 5,000 5,000
Stockholders'
equity............... 61,855 5,780 5,196 3,598 27,667 6,198 9,088 5,597 10,693 6,703
Performance Ratios:
Return on average
assets................ 1.29% 1.84% 1.86% 0.09% 1.50% 1.83% 1.33% 1.63% 1.46% 1.16%
Return on average
equity................ 17.25 19.90 21.26 1.03 16.46 20.66 19.35 18.22 19.88 16.39
Net interest margin... 3.64 5.28 4.64 2.65 4.94 4.29 4.74 5.30 4.65 4.17
Capital and Liquidity
Ratios:
Average equity to
average assets........ 7.45 9.26 8.77 9.26 9.09 8.87 6.86 8.97 7.33 7.09
Leverage (4.00%
required minimum)..... 7.26 7.81 8.25 9.37 8.43 7.16 7.19 8.75 7.37 7.29
Risk-based capital
Tier 1 (4.00%
required minimum).... 8.84 12.18 12.60 13.58 10.51 13.87 9.30 12.66 11.65 10.73
Total (8.00% required
minimum)............. 10.01 13.43 13.72 14.77 11.76 15.08 10.55 13.82 12.85 11.98
Average loans to
average deposits...... 108.95 62.85 77.01 56.75 90.97 54.38 90.51 67.04 67.92 70.52
</TABLE>
14
<PAGE>
SELECTED BANK FINANCIAL DATA (continued)
(Amounts in thousands, except ratios)
(Unaudited)
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------------------------------------------------------------------------------
National Alabama Citizens & First First First Georgia Community
Bank of Exchange Bank of Peoples American Citizens Gulf Public State Bank of
Commerce Bank Dadeville Bank, N.A. Bank Bank Bank Bank Bank Naples, N.A.
-------- -------- --------- ---------- -------- -------- -------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Interest income....... $ 51,527 $ 4,958 $ 5,143 $ 1,621 $ 20,014 $ 6,607 $ 7,945 $ 3,917 $ 9,764 $ 5,415
Interest expense...... 27,550 1,726 2,232 1,110 9,293 3,143 3,397 1,356 4,334 2,657
Net interest income... 23,977 3,232 2,911 511 10,721 3,464 4,548 2,561 5,430 2,758
Provision for loan
losses............... -- 283 21 183 509 16 387 44 10 343
Securities gains
(losses)............. -- -- 3 -- 28 -- 4 -- -- --
Noninterest income.... 19,374 708 747 132 3,505 777 1,329 841 1,644 244
Noninterest expense... 29,509 1,932 1,706 882 8,685 2,134 3,953 1,919 4,544 2,353
Net income............ 9,428 1,186 1,343 (266) 3,665 1,509 1,053 966 1,651 43
Balance Sheet
Highlights:
At Period-End:
Total assets........ $767,245 $66,779 $67,958 $40,007 $268,460 $88,465 $112,453 $57,713 $131,294 $92,639
Securities.......... 93,863 21,198 18,076 20,714 30,423 34,189 13,035 13,320 46,075 32,952
Loans, net of
unearned income.... 528,176 38,488 43,977 13,503 199,302 46,567 87,756 34,457 72,104 40,365
Allowance for loan
losses............. 8,271 521 467 203 2,982 647 1,100 498 1,245 606
Deposits............ 482,339 59,938 54,550 35,743 229,682 77,811 98,376 51,860 114,468 73,609
Short-term debt..... 5,000 -- 5,200 -- -- -- -- -- 4,550 --
Long-term debt...... 20,244 -- -- -- 10,084 -- -- -- -- 2,000
Stockholders'
equity............. 57,348 6,239 6,055 4,129 23,511 7,711 7,776 5,371 10,062 6,241
Performance Ratios:
Return on average
assets............... 1.27% 1.76% 2.07% (1.02)% 1.50% 1.69% 1.01% 1.82% 1.33% 0.05%
Return on average
equity............... 17.44 20.83 22.23 (6.28) 16.64 18.07 14.38 18.71 17.05 0.85
Net interest margin... 3.74 5.27 4.85 2.22 4.87 4.26 4.92 5.23 4.77 3.76
Capital and Liquidity
Ratios:
Average equity to
average assets....... 7.30 8.44 9.31 16.31 9.03 9.37 7.04 9.71 7.82 6.42
Leverage (4.00%
required minimum).... 7.33 7.80 9.02 11.37 9.00 8.06 7.20 9.55 7.24 7.44
Risk-based capital
Tier 1 (4.00%
required minimum).. 9.65 12.47 12.76 20.11 10.59 13.60 8.74 14.92 12.30 13.70
Total (8.00%
required minimum).. 10.90 13.72 13.76 21.11 11.84 14.82 9.97 16.17 13.55 14.95
Average loans to
average deposits..... 99.15 58.33 80.68 35.83 91.85 61.46 82.08 66.63 63.62 47.20
</TABLE>
15
<PAGE>
Results of Operations
Year ended December 31, 1999, compared with year ended December 31, 1998
The Company's net income increased by $4.9 million, or 28.2%, to $22.3
million in the year ended December 31, 1999, from $17.4 million in the year
ended December 31, 1998. Return on average assets during 1999 was 1.26%,
compared with 1.10% during 1998, and return on average equity was 16.28%
during 1999, compared with 13.81% during 1998.
Net interest income increased $7.3 million, or 12.2%, to $66.4 million in
1999 from $59.1 million in 1998, as interest income increased by $10.0 million
and interest expense increased $2.7 million. The increase in net interest
income is primarily attributable to a $193.3 million increase in average loans
to $1.2 billion during 1999, from $1.0 billion in 1998, as a result of
management emphasis on loan growth. In general, loans are the Company's
highest yielding earning asset. The increased interest expense is primarily
attributable to an increase in average time deposits of $71.1 million to
$612.3 million in 1999, from $541.1 million in 1998 and an increase in average
long-term debt to $58.4 million in 1999, from $30.5 million in 1998, an
increase of $27.4 million. The increases are due to the Company's need to fund
loan growth and these funding sources generally bear higher interest rates
than interest-bearing transaction accounts.
The Company's net interest spread and net interest margin were 3.63% and
4.18%, respectively, in 1999, decreasing by 4 and 6 basis points,
respectively, from 1998. These slight decreases reflect declining yields on
average loans that exceeded the decline in cost of interest-bearing
liabilities, attributable to increased competition from banks and other
financial institutions.
The Company recorded a provision for loan losses of $2.0 million during 1999
compared with $1.8 million one year ago. Management believes that both loan
loss experience and asset quality indicate that the allowance for loan losses
is maintained at an adequate level. The Company's allowance for loan losses as
a percentage of period-end loans (excluding loans held for sale) was 1.37% at
December 31, 1999, compared with 1.52% at December 31, 1998, and the allowance
for loan losses as a percentage of period-end nonperforming assets was 343.2%
at December 31, 1999, compared with 271.6% at December 31, 1998. The Company
experienced net charge-offs of $426,000 in 1999 equating to a ratio of net
charge-offs to average loans of 0.04% compared with net charge-offs of
$100,000 in 1998 equating to a ratio of net charge-offs to average loans of
0.01%. See "Provision and Allowance for Loan Losses."
Noninterest income, including net securities gains and losses, increased
$1.2 million, or 4.1%, to $30.6 million in 1999, compared with $29.4 million
in 1998. The Company experienced revenue decreases in its investment services
and mortgage lending divisions of $1.7 million, or 10.9%, to $14.1 million in
1999 from $15.8 million in 1998. Service charges on deposit accounts increased
by $220,000, or 3.0%, to $7.5 million in 1999 from $7.3 million in 1998.
Earnings on bank owned life insurance policies totaled $1.5 million in 1999
compared with $1.2 million, representing an increase of 28.9%. The Company's
newly acquired insurance division recorded revenue of $1.1 million during
1999. During 1999, the Company also recognized a gain of $819,000 on the
curtailment of its defined benefit pension plan. Non-recurring sales of assets
resulted in gains of $249,000 in 1999 compared to $247,000 in 1998.
Noninterest expense increased $1.3 million, or 2.1%, to $62.5 million during
1999, compared with $61.2 million during 1998. See "Noninterest Income and
Expense."
Income before the provision for income taxes increased $7.0 million, or
27.4%, to $32.5 million in 1999, from $25.5 million in 1998. Net income
increased $4.9 million during 1999.
Year ended December 31, 1998, compared with year ended December 31, 1997
The Company's net income increased by $3.3 million, or 23.1%, to $17.4
million in the year ended December 31, 1998, from $14.1 million in the year
ended December 31, 1997. Return on average assets during 1998 was 1.10%,
compared with 1.05% during 1997, and return on average equity was 13.81%
during 1998, compared with 12.73% during 1997.
Net interest income increased $3.0 million, or 5.4%, to $59.1 million in
1998 from $56.1 million in 1997, as interest income increased by $11.2 million
and interest expense increased $8.2 million. The increase in net
16
<PAGE>
interest income was primarily attributable to a $103.8 million increase in
average loans to $1.0 billion during 1998, from $903.9 million during 1997, as
a result of management emphasis on loan growth. The increase in interest
expense was primarily attributable to an increase in average interest-bearing
deposits of $125.5 million to $1.0 billion in 1998, from $895.9 million in
1997. In general, loans are the Company's highest yielding earning asset.
The Company's net interest spread and net interest margin were 3.67% and
4.24%, respectively, in 1998, decreasing by 34 and 38 basis points,
respectively, from 1997. These decreases reflected a declining yield on
average loans and an increasing cost of interest-bearing liabilities, both
attributable to competition from banks and other financial institutions, a
flattening yield curve, and rate compression from recent reductions in the
prime rate.
The Company recorded a provision for loan losses of $1.8 million during 1998
compared with $3.4 million during 1997. $509,000 of the 1998 provision for
loan losses and $2.8 million of the 1997 provision for loan losses was
recorded at FAB, primarily associated with higher loss experience in FAB's
indirect automobile lending and sub-prime mortgage lending portfolios (which
lending businesses were discontinued during 1997). The Company's allowance for
loan losses as a percentage of period-end loans was 1.52% at December 31,
1998, compared to 1.54% at December 31, 1997, and the allowance for loan
losses as a percentage of period-end nonperforming assets was 271.6% at
December 31, 1998, compared with 211.0% at December 31, 1997. The Company
experienced net charge-offs of $100,000 in 1998 equating to a ratio of net
charge-offs to average loans of 0.01% compared with net charge-offs of $1.2
million in 1997 equating to a ratio of net charge-offs to average loans of
0.13%. See "Provision and Allowance for Loan Losses."
Noninterest income, including net securities gains and losses, increased
$9.1 million, or 44.6%, to $29.4 million in 1998, compared with $20.3 million
in 1997. The Company experienced increases in its fee-based divisions
(investment services, trust, and mortgage lending) of $6.3 million, or 54.3%,
to $17.9 million in 1998 from $11.6 million in 1997. Service charges increased
by $660,000, or 10.0%, to $7.3 million in 1998 from $6.6 million in 1997.
Earnings on bank owned life insurance policies totaled $1.2 million in 1998
compared with $39,000 in 1997. These policies were purchased in December of
1997 and, accordingly, 1998's earnings on these policies are substantially
higher as they reflect a full year's earnings. Non-recurring sales of assets
netted $247,000 in 1998 and included a gain of $310,000 resulting from the
sale of a certain portion of FAB's loan portfolio. In 1997, non-recurring
sales of assets included a charge to provide for the consolidation of FAB's
data processing facilities into the existing Company facility and included
losses resulting from abandonment of certain leasehold improvements, which
totaled $499,000. Noninterest expense increased $8.4 million, or 15.9%, to
$61.2 million during 1998, compared with $52.8 million during 1997. See
"Noninterest Income and Expense."
Income before the provision for income taxes increased $5.3 million, or
26.4%, to $25.5 million in 1998, from $20.2 million in 1997. Net income
increased $3.3 million during 1998.
Net Interest Income
The largest component of the Company's net income is its net interest
income--the difference between the income earned on assets and interest paid
on deposits and borrowed funds used to support its assets. Net interest income
is determined by the yield earned on the Company's earning assets and rates
paid on its interest-bearing liabilities, the relative amounts of earning
assets and interest-bearing liabilities and the maturity and repricing
characteristics of its earning assets and interest-bearing liabilities. Net
interest income divided by average earning assets represents the Company's net
interest margin.
Average Balances, Income, Expenses and Rates
The following table depicts, on a taxable equivalent basis for the periods
indicated, certain information related to the Company's average balance sheet
and its average yields on assets and average costs of liabilities. Such yields
or costs are derived by dividing income or expense by the average daily
balances of the associated assets or liabilities.
17
<PAGE>
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(Amounts in thousands, except yields and rates)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------------------
1999 1998 1997
--------------------------- --------------------------- ---------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
---------- -------- ------ ---------- -------- ------ ---------- -------- ------
ASSETS:
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans(1)(3)............ $1,201,041 $102,549 8.54% $1,007,695 $ 92,343 9.16% $ 903,930 $ 85,549 9.46%
Securities:
Taxable................ 297,843 18,834 6.32 273,782 17,213 6.29 213,533 13,829 6.48
Tax exempt............. 33,173 2,458 7.41 33,182 2,510 7.56 32,939 2,628 7.98
Cash balances in other
banks................. 1,830 110 6.01 2,019 106 5.25 1,042 55 5.28
Funds sold............. 46,647 2,406 5.16 75,039 4,256 5.67 59,683 3,353 5.62
Trading account
securities............ 6,669 356 5.34 4,352 264 6.07 3,488 193 5.53
---------- -------- ---------- -------- ---------- --------
Total earning
assets(2)........... 1,587,203 126,713 7.98 1,396,069 116,692 8.36 1,214,615 105,607 8.69
---------- -------- ---------- -------- ---------- --------
Cash and due from
banks.................. 65,474 56,529 49,004
Premises and equipment.. 42,041 37,404 35,142
Other assets............ 84,244 108,715 55,822
Allowance for loan
losses................. (17,323) (15,608) (13,329)
---------- ---------- ----------
Total assets......... $1,761,639 $1,583,109 $1,341,254
========== ========== ==========
<CAPTION>
LIABILITIES:
------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing
liabilities:
Interest-bearing
transaction accounts.. $ 197,811 4,860 2.46 $ 167,034 4,271 2.56 $ 141,830 3,703 2.61
Savings and money
market deposits....... 321,791 10,668 3.32 313,254 11,678 3.73 262,356 9,509 3.62
Time deposits.......... 612,263 32,061 5.24 541,142 30,466 5.63 491,751 27,477 5.59
Funds purchased........ 146,111 7,258 4.97 127,856 6,807 5.32 85,956 4,491 5.22
Other short-term
borrowings............ 25,539 1,407 5.51 26,323 1,613 6.13 43,988 2,712 6.17
Long-term debt......... 58,445 3,029 5.18 30,548 1,720 5.63 8,583 487 5.67
---------- -------- ---------- -------- ---------- --------
Total interest-
bearing
liabilities......... 1,361,960 59,283 4.35 1,206,157 56,555 4.69 1,034,464 48,379 4.68
---------- -------- ---------- -------- ---------- --------
Demand deposits........ 218,263 192,427 162,081
Accrued interest and
other liabilities..... 44,609 58,696 33,827
Stockholders' equity... 136,807 125,829 110,882
---------- ---------- ----------
Total liabilities and
stockholders'
equity.............. $1,761,639 $1,583,109 $1,341,254
========== ========== ==========
Net interest spread..... 3.63% 3.67% 4.01%
==== ==== ====
Net interest
income/margin on a
taxable equivalent
basis.................. 67,430 4.25% 60,137 4.31% 57,228 4.71%
==== ==== ====
Tax equivalent
adjustment(2).......... 1,045 988 1,099
-------- -------- --------
Net interest
income/margin.......... $ 66,385 4.18% $ 59,149 4.24% $ 56,129 4.62%
======== ==== ======== ==== ======== ====
</TABLE>
- --------
(1) Average loans include nonaccrual loans. All loans and deposits are
domestic.
(2) Tax equivalent adjustments are based on the assumed rate of 34%, and do
not give effect to the disallowance for Federal income tax purposes of
interest expense related to certain tax-exempt assets.
(3) Fees in the amount of $3,268,000, $3,273,000, and $3,244,000 are included
in interest and fees on loans for 1999, 1998, and 1997, respectively.
18
<PAGE>
During 1999, the Company experienced an increase in net interest income of
$7.3 million, or 12.2%, to $66.4 million, compared with $59.1 million in 1998.
Net interest income increased despite a decrease in the net interest spread of
4 basis points to 3.63% in 1999 from 3.67% in 1998, and a decrease in the net
interest margin of 6 basis points to 4.18% in 1999, compared with 4.24% in
1998. Because the relative yield on loans exceeds that of all other earnings
assets, the primary reason for the increased net interest income was a 19.2%
increase in average loan volume. The slight decline in net interest spread and
net interest margin is due to declining yields on average loans that exceeded
the decline in cost of interest-bearing liabilities, attributable to
competition from banks and other financial institutions. The Company's average
liabilities in 1999 included more interest bearing liabilities than in 1998.
During 1999, net average earning assets increased by $191.1 million, or
13.79%, to $1.59 billion from $1.40 billion in 1998. The major components of
this increase included average loans which increased $193.3 million, or 19.2%,
to $1.20 billion in 1999 from $1.01 billion in 1998, and securities which
increased $24.0 million, or 7.8%, to $331.0 million in 1999 from $307.0
million in 1998.
Analysis of Changes in Net Interest Income
The following table sets forth, on a taxable equivalent basis, the effect
which varying levels of earning assets and interest-bearing liabilities and
the applicable rates had on changes in net interest income for 1999 and 1998.
For the purposes of this table, changes which are not solely attributable to
volume or rate are allocated to volume and rate on a pro rata basis.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1999 Compared to 1998 1998 Compared to 1997
Variance Due to Variance Due to
--------------------------- ---------------------------
Volume Yield/Rate Total Volume Yield/Rate Total
------- ---------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans................... $16,782 $(6,576) $10,206 $ 9,573 $(2,779) $ 6,794
Securities:
Taxable............... 1,538 83 1,621 3,801 (417) 3,384
Tax exempt............ (1) (51) (52) 19 (137) (118)
Cash balances in other
banks.................. (10) 14 4 51 -- 51
Funds sold.............. (1,494) (356) (1,850) 873 30 903
Trading account
securities............. 127 (35) 92 51 20 71
------- ------- ------- ------- ------- -------
Total interest
income............. 16,942 (6,921) 10,021 14,368 (3,283) 11,085
Interest-bearing
liabilities:
Interest-bearing
transaction accounts... 762 (173) 589 641 (73) 568
Savings and money market
deposits............... 309 (1,319) (1,010) 1,875 294 2,169
Time deposits........... 3,808 (2,213) 1,595 2,790 199 2,989
Funds purchased......... 921 (470) 451 2,228 88 2,316
Other short-term
borrowings............. (47) (159) (206) (1,081) (18) (1,099)
Long-term debt.......... 1,456 (147) 1,309 1,236 (3) 1,233
------- ------- ------- ------- ------- -------
Total interest
expense............ 7,209 (4,481) 2,728 7,689 487 8,176
------- ------- ------- ------- ------- -------
Net interest income
on a taxable
equivalent basis... $ 9,733 $(2,440) 7,293 $ 6,679 $(3,770) 2,909
======= ======= ======= =======
Taxable equivalent
adjustment............. (57) 111
------- -------
Net interest income..... $ 7,236 $ 3,020
======= =======
</TABLE>
19
<PAGE>
Interest Sensitivity and Market Risk
Interest Sensitivity
The Company monitors and manages the pricing and maturity of its assets and
liabilities in order to diminish the potential adverse impact that changes in
interest rates could have on net interest income. The principal monitoring
technique employed by the Company is simulation analysis, which technique is
augmented by "gap" analysis.
In sensitivity analysis, the Company reviews each individual asset and
liability category and their projected behavior in various different interest
rate environments. These projected behaviors are based upon management's past
experiences and upon current competitive environments, including the various
environments in the different markets in which the Company competes. Using
this projected behavior and differing rate scenarios as inputs, the simulation
analysis generates as output a projection of net interest income. The Company
also periodically verifies the validity of this approach by comparing actual
results with those that were projected in previous models. See "Market Risk."
Another technique used by the Company in interest rate management is the
measurement of the interest sensitivity "gap," which is the positive or
negative dollar difference between assets and liabilities that are subject to
interest rate repricing within a given period of time. Interest rate
sensitivity can be managed by repricing assets and liabilities, selling
securities available for sale, replacing an asset or liability at maturity or
by adjusting the interest rate during the life of an asset or liability.
The Company evaluates interest sensitivity risk and then formulates
guidelines regarding asset generation and repricing, and sources and prices of
off-balance sheet commitments in order to decrease interest sensitivity risk.
The Company uses computer simulations to measure the net income effect of
various interest rate scenarios. The modeling reflects interest rate changes
and the related impact on net income over specified periods of time.
20
<PAGE>
The following table illustrates the Company's interest rate sensitivity at
December 31, 1999, assuming the relevant assets and liabilities are collected
and paid, respectively, based upon historical experience rather than their
stated maturities.
INTEREST SENSITIVITY ANALYSIS
(Amounts in thousands, except ratios)
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------------
After One After Three
Within Through Through Greater
One Three Twelve Within Than One
Month Months Months One Year Year Total
-------- --------- ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
-------
Earning assets:
Loans(1).............. $485,302 $ 99,398 $ 181,673 $766,373 $558,256 $1,324,629
Securities(2)......... 17,999 11,364 45,710 75,073 261,381 336,454
Trading securities.... 2,701 -- -- 2,701 -- 2,701
Interest-bearing
deposits in other
banks................ 6,768 -- -- 6,768 -- 6,768
Funds sold............ 33,568 -- -- 33,568 -- 33,568
-------- -------- --------- -------- -------- ----------
Total interest-
earning assets...... $546,338 $110,762 $ 227,383 $884,483 $819,637 $1,704,120
LIABILITIES:
------------
Interest-bearing
liabilities:
Interest-bearing
deposits:
Demand deposits...... $ 69,825 $ -- $ -- $ 69,825 $148,058 $ 217,883
Savings and money
market deposits..... 122,195 -- 8,165 130,360 166,363 296,723
Time deposits(3)..... 76,675 161,918 367,559 606,152 111,212 717,364
Funds purchased....... 131,878 -- -- 131,878 -- 131,878
Short-term
borrowings(4)........ 24,588 -- -- 24,588 -- 24,588
Long-term debt........ 1 2 15 18 123,721 123,739
-------- -------- --------- -------- -------- ----------
Total interest-
bearing
liabilities......... $425,162 $161,920 $ 375,739 $962,821 $549,354 $1,512,175
-------- -------- --------- -------- -------- ----------
Period gap.............. $121,176 $(51,158) $(148,356) $(78,338) $270,283
======== ======== ========= ======== ========
Cumulative gap.......... $121,176 $ 70,018 $ (78,338) $(78,338) $191,945 $ 191,945
======== ======== ========= ======== ======== ==========
Ratio of cumulative gap
to total earning
assets................. 22.18% 63.21% (34.45)% (34.45)% 23.42%
</TABLE>
- --------
(1) Excludes nonaccrual loans of $4,146,000.
(2) Excludes investment equity securities with a market value of $8,669,000.
(3) Excludes matured certificates which have not been redeemed by the
customer and on which no interest is accruing.
(4) Includes treasury, tax and loan account of $6,199,000.
The Company generally benefits from increasing market rates of interest when
it has an asset-sensitive gap and generally benefits from decreasing market
interest rates when it is liability sensitive. The Company is liability
sensitive throughout one year after three months. The analysis presents only a
static view of the timing and repricing opportunities, without taking into
consideration that changes in interest rates do not affect all assets and
liabilities equally. For example, rates paid on a substantial portion of core
deposits may change contractually within a relatively short time frame, but
those are viewed by management as significantly less interest sensitive than
market-based rates such as those paid on non-core deposits. For this and other
reasons, management relies more upon the simulation analysis (as noted above)
in managing interest rate risk. Accordingly, management believes that a
liability-sensitive gap position is not as indicative of the Company's true
interest sensitivity as it would be for an organization which depends to a
greater extent on purchased funds to support earning assets. Net interest
income may be impacted by other significant factors in a given interest rate
environment, including changes in the volume and mix of earning assets and
interest-bearing liabilities.
21
<PAGE>
Market Risk
The Company's earnings are dependent on its net interest income which is the
difference between interest income earned on all earning assets, primarily
loans and securities, and interest paid on all interest bearing liabilities,
primarily deposits. Market risk is the risk of loss from adverse changes in
market prices and rates. The Company's market risk arises primarily from
inherent interest rate risk in its lending, investing and deposit gathering
activities. The Company seeks to reduce its exposure to market risk through
actively monitoring and managing its interest rate risk. Management relies
upon static "gap" analysis to determine the degree of mismatch in the maturity
and repricing distribution of interest earning assets and interest bearing
liabilities which quantifies, to a large extent, the degree of market risk
inherent in the Company's balance sheet. Gap analysis is further augmented by
simulation analysis to evaluate the impact of varying levels of prevailing
interest rates and the sensitivity of specific earning assets and interest
bearing liabilities to changes in those prevailing rates. Simulation analysis
consists of evaluating the impact on net interest income given changes from
200 basis points below to 200 basis points above the current prevailing rates.
Management makes certain assumptions as to the effect varying levels of
interest rates have on certain earning assets and interest bearing
liabilities, which assumptions consider both historical experience and
consensus estimates of outside sources.
With respect to the primary earning assets, loans and securities, certain
features of individual types of loans and specific securities introduce
uncertainty as to their expected performance at varying levels of interest
rates. In some cases, imbedded options exist whereby the borrower may elect to
repay the obligation at any time. These imbedded prepayment options make
anticipating the performance of those instruments difficult given changes in
prevailing rates. At December 31, 1999, mortgage backed securities totaling
$207.0 million, or 10.8% of total assets and essentially every underlying
loan, net of unearned income, (totaling $1.32 billion, or 68.7% of total
assets), carry such imbedded options. Management believes that assumptions
used in its simulation analysis about the performance of financial instruments
with such imbedded options are appropriate. However, the actual performance of
these financial instruments may differ from management's estimates due to
several factors, including the diversity and sophistication of the customer
base, the general level of prevailing interest rates and the relationship to
their historical levels, and general economic conditions. The difference
between those assumptions and actual results, if significant, could cause the
actual results to differ from those indicated by the simulation analysis.
Deposits totaled $1.44 billion, or 75.0% of total assets, at December 31,
1999. Since deposits are the primary funding source for earning assets, the
associated market risk is considered by management in its simulation analysis.
Generally, it is anticipated that deposits will be sufficient to support
funding requirements. However, the rates paid for deposits at varying levels
of prevailing interest rates have a significant impact on net interest income
and therefore, must be quantified by the Company in its simulation analysis.
Specifically, the Company's spread, the difference between the rates earned on
earning assets and rates paid on interest bearing liabilities, is generally
higher when prevailing rates are higher. As prevailing rates reduce, the
spread tends to compress, with severe compression at very low prevailing
interest rates. This characteristic is called "spread compression" and
adversely effects net interest income in the simulation analysis when
anticipated prevailing rates are reduced from current rates. Management relies
upon historical experience to estimate the degree of spread compression in its
simulation analysis. Management believes that such estimates of possible
spread compression are reasonable. However, if the degree of spread
compression varies from that expected, the actual results could differ from
those indicated by the simulation analysis.
22
<PAGE>
The following table illustrates the results of simulation analysis used by
the Company to determine the extent to which market risk would have effected
the net interest margin if prevailing interest rates differed from actual
rates during 1999. Because of the inherent use of estimates and assumptions in
the simulation model used to derive this information, the actual results for
1999 and, certainly, the future impact of market risk on the Company's net
interest margin, may differ from that found in the table.
MARKET RISK
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December 31, 1999 Year ended December 31, 1998
Change in --------------------------------- ---------------------------------
Prevailing Net Interest Change from Net Interest Change from
Interest Rates Income Amount Income Amount Income Amount Income Amount
- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
+200 basis points....... $ 74,125 1.49 % $ 63,238 6.91 %
+100 basis points....... 73,490 0.62 61,194 3.46
0 basis points.......... 73,037 -- 59,149 --
- -100 basis points....... 71,591 (1.98) 57,063 (3.53)
- -200 basis points....... 69,424 (4.95) 54,977 (7.05)
</TABLE>
Provision and Allowance for Loan Losses
The Company has policies and procedures for evaluating the overall credit
quality of its loan portfolio including timely identification of potential
problem credits. On a monthly basis, management reviews the appropriate level
for the allowance for loan losses. This review and analysis is based on the
results of the internal monitoring and reporting system, analysis of economic
conditions in its markets and a review of historical statistical data, current
trends regarding the volume and severity of past due and problem loans and
leases, the existence and effect of concentrations of credit, and changes in
national and local economic conditions for both the Company and other
financial institutions. Management also considers in its evaluation of the
adequacy of the allowance for loan losses the results of regulatory
examinations conducted for each Bank, including evaluation of the Company's
policies and procedures and findings from the Company's independent loan
review department.
The provision for loan losses increased by $158,000, or 8.8%, to $1.95
million in 1999 from $1.8 million in 1998. This increased provision reflected
the Company's large growth in loans during 1999. The growth in loans exceeded
the growth in loan loss provision, primarily due to the Company's low charge
off experience and low nonperforming asset levels. Management believes the
allowance for loan losses, at its current level, adequately covers the
Company's exposure to loan losses.
Management's periodic evaluation of the adequacy of the allowance for loan
losses is based on the Company's past loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrowers'
ability to repay, estimated value of any underlying collateral, and an
analysis of current economic conditions. While management believes that it has
established the allowance in accordance with generally accepted accounting
principles and has taken into account the views of its regulators and the
current economic environment, there can be no assurance that in the future the
Company's regulators or its economic environment will not require further
increases in the allowance.
Additions to the allowance for loan losses, which are expensed as the
provision for loan losses on the Company's income statement, are made
periodically to maintain the allowance for loan losses at an appropriate level
as determined by management. Loan losses and recoveries are charged or
credited directly to the allowance for loan losses.
23
<PAGE>
The following table presents the information associated with the Company's
allowance and provision for loan losses for the dates indicated.
ALLOWANCE FOR LOAN LOSSES
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total loans outstanding
at end of period, net
of unearned income(1).. $1,320,160 $1,087,027 $961,079 $863,968 $743,530
========== ========== ======== ======== ========
Average amount of loans
outstanding, net of
unearned income(1)..... $1,190,111 $1,003,366 $900,644 $794,105 $509,956
========== ========== ======== ======== ========
Allowance for loan
losses at beginning of
period................. $ 16,540 $ 14,844 $ 12,633 $ 11,621 $ 7,597
Charge-offs:
Commercial, financial
and agricultural..... 211 418 516 809 1,247
Real estate--
mortgage............. 392 200 531 160 454
Consumer.............. 674 1,246 1,880 1,027 543
---------- ---------- -------- -------- --------
Total charge-offs... 1,277 1,864 2,927 1,996 2,244
---------- ---------- -------- -------- --------
Recoveries:
Commercial, financial
and agricultural..... 188 1,012 1,068 1,525 1,294
Real estate--
mortgage............. 348 296 200 152 296
Consumer.............. 315 456 449 296 383
---------- ---------- -------- -------- --------
Total recoveries.... 851 1,764 1,717 1,973 1,973
---------- ---------- -------- -------- --------
Net charge-offs..... 426 100 1,210 23 271
Provision for loan
losses................. 1,954 1,796 3,421 1,035 1,171
Changes incidental to
acquisitions........... -- -- -- -- 3,124
---------- ---------- -------- -------- --------
Allowance for loan
losses at period-end... $ 18,068 $ 16,540 $ 14,844 $ 12,633 $ 11,621
========== ========== ======== ======== ========
Allowance for loan
losses to period-end
loans(1)............... 1.37% 1.52% 1.54% 1.46% 1.56%
Net charge-offs to
average loans(1)....... 0.04 0.01 0.13 0.00 0.05
</TABLE>
- --------
(1) Does not include loans held for sale.
Allocation of Allowance
There is no formal allocation of the allowance for loan losses by loan
category.
24
<PAGE>
Nonperforming Assets
The following table presents the Company's nonperforming assets for the
dates indicated.
NONPERFORMING ASSETS
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans................. $ 4,146 $ 4,357 $ 4,228 $ 2,735 $ 2,843
Restructured loans............... 432 499 1,052 605 949
Loans past due 90 days or more
and still accruing.............. -- -- -- 9 126
------- ------- ------- ------- -------
Total nonperforming loans...... 4,578 4,856 5,280 3,349 3,918
Other real estate owned.......... 687 1,234 1,756 842 780
------- ------- ------- ------- -------
Total nonperforming assets..... $ 5,265 $ 6,090 $ 7,036 $ 4,191 $ 4,698
======= ======= ======= ======= =======
Allowance for loan losses to
period-end loans(1)............. 1.37% 1.52% 1.54% 1.46% 1.56%
Allowance for loan losses to
period-end nonperforming loans.. 394.67 340.61 281.14 377.22 296.61
Allowance for loan losses to
period-end nonperforming
assets.......................... 343.17 271.59 210.97 301.43 247.36
Net charge-offs to average
loans(1)........................ 0.04 0.01 0.13 0.00 0.05
Nonperforming assets to period-
end loans and foreclosed
property(1)..................... 0.40 0.56 0.73 0.48 0.63
Nonperforming loans to period-end
loans(1)........................ 0.35 0.45 0.55 0.39 0.53
</TABLE>
- --------
(1) Does not include loans held for sale.
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts,
that the borrower's financial condition is such that collection of interest is
doubtful. It is the Company's policy to place a delinquent loan on nonaccrual
status when it becomes 90 days or more past due. When a loan is placed on
nonaccrual status, all interest which is accrued on the loan is reversed and
deducted from earnings as a reduction of reported interest. No additional
interest is accrued on the loan balance until collection of both principal and
interest becomes reasonably certain. When a problem loan is finally resolved,
there may ultimately be an actual writedown or charge-off of the principal
balance of the loan which would necessitate additional charges to the
allowance for loan losses. During the years ending December 31, 1999, 1998 and
1997, approximately $391,000, $384,000, and $371,000, respectively, in
additional interest income would have been recognized in earnings if the
Company's nonaccrual loans had been current in accordance with their original
terms.
Total nonperforming assets decreased $825,000 to $5.3 million at December
3l, 1999, from $6.1 million at December 31, 1998. The allowance for loan
losses to period-end nonperforming assets was 343.17% at December 31, 1999,
compared with 271.59% at December 31, 1998. This ratio will generally
fluctuate from period to period depending upon nonperforming asset levels at
period end. All categories of nonperforming assets decreased at year end 1999
compared with 1998, with the largest decline being a $547,000 reduction in
other real estate owned.
Potential Problem Loans
A potential problem loan is one that management has concerns as to the
borrower's future performance under terms of the loan contract. These loans
are current as to principal and interest, and accordingly, they are not
included in the nonperforming asset categories. Management monitors these
loans closely in order to ensure that the Company's interests are protected.
At December 31, 1999, the Company had certain loans considered by management
to be potential problem loans totaling $21.2 million. The level of potential
problem loans is factored into the determination of the adequacy of the
allowance for loan losses.
25
<PAGE>
Noninterest Income and Expense
Noninterest income
The Company relies on five distinct product lines for the production of
recurring noninterest income: traditional retail and commercial banking, and
operating segments including mortgage banking, trust services, investment
services and insurance services. Combined fees associated with these product
lines totaled $24.8 million in 1999, compared with $25.2 million in 1998, a
decrease of $344,000, or 1.4%.
The following table sets forth, for the periods indicated, the principal
components of noninterest income.
NONINTEREST INCOME
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service charges on deposit accounts.................... $ 7,479 $ 7,259 $ 6,599
Investment services income............................. 10,097 11,508 8,162
Trust fees............................................. 2,190 2,101 1,799
Origination and sale of mortgage loans................. 3,993 4,303 1,644
Gain on disposal of assets and deposits................ 249 247 (497)
Securities gains (losses).............................. 190 174 (2)
Bank owned life insurance.............................. 1,504 1,167 39
Insurance commissions.................................. 1,068 -- --
Gain on pension curtailment............................ 819 -- --
Other.................................................. 2,968 2,591 2,550
------- ------- -------
Total noninterest income............................. $30,557 $29,350 $20,294
======= ======= =======
</TABLE>
Noninterest Expense
The following table sets forth, for the periods indicated, the principal
components of noninterest expense.
NONINTEREST EXPENSE
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Salaries and employee benefits......................... $37,452 $36,021 $29,992
Net occupancy expense.................................. 7,265 6,724 6,623
Amortization of goodwill............................... 387 302 298
Advertising............................................ 1,028 976 1,445
Banking assessments.................................... 482 473 411
Data processing expenses............................... 1,442 2,435 2,151
Legal and professional fees............................ 2,911 3,609 1,947
Non-credit losses (recoveries)......................... 206 129 283
Other.................................................. 11,282 10,485 9,638
------- ------- -------
Total noninterest expense............................ $62,455 $61,154 $52,788
======= ======= =======
</TABLE>
Salaries and employee benefits increased $1.4 million, or 4.0%, in 1999.
This increase reflects the Company's general growth in employment concurrent
with its asset and revenue growth as well as salary increases reflecting
employee performance, job duties, and competitive employment market
conditions. These factors were somewhat offset by reduced commission
compensation in the some of the Company's commission based businesses, such as
mortgage origination and investment services, where revenue declined.
26
<PAGE>
Noninterest expenses increased $1.3 million, or 2.1%, to $62.5 million in
1999, from $61.2 million in 1998. Data processing fees decreased $993,000, or
68.9%, in 1999 to $1.4 million, in part due to costs associated with
conversion costs related to completed mergers during 1998 as well as operating
efficiencies from consolidating such operations in 1999. Legal and
professional fees, $2.9 million in 1999, decreased $698,000, or 27.7%, from
$3.6 million in 1998 as a result of costs associated with mergers completed
during 1998. The Company completed three mergers during 1998 and one during
1999.
Investment Services
The following table sets forth, for the periods indicated, the summary of
operations for the investment services departments of the Company:
INVESTMENT SERVICES DIVISION
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December
31,
----------------------
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Investment services revenue............................. $10,097 $11,508 $8,162
Other revenue........................................... 2,765 1,409 1,311
------- ------- ------
Total investment revenue.............................. 12,862 12,917 9,473
Expenses and allocated charges.......................... 11,193 10,500 8,479
------- ------- ------
Net investment services revenue....................... $ 1,669 $ 2,417 $ 994
======= ======= ======
</TABLE>
National Bank of Commerce of Birmingham ("NBC") operates an investment
department devoted primarily to handling correspondent banks' investment
needs. NBC has a wholly owned subsidiary, NBC Securities, Inc. ("NBC
Securities"), that is licensed as a broker-dealer. Together, NBC's investment
department and NBC Securities comprise the Investment Service Division.
Investment services revenues consist primarily of commission income from the
sale of investment securities. Investment services revenue decreased $1.4
million, or 12.3%, to 10.1 million in 1999 from $11.5 million in 1998. This
decrease occurred in the fixed income division of NBC's investment services
department, whose customers are primarily correspondent banks. The rising
interest rate environment in 1999 combined with strong loan demand in the
economy reduced these investors' demand for fixed income securities. In
addition, many of these customers elected to retain greater liquidity at year
end 1999 in preparation for potential Year 2000 liquidity needs, resulting in
further reduced demand in the 1999 fourth quarter. NBC Securities experienced
a $1.2 million increase in its investment services revenue due to the addition
of additional investment advisors as well as favorable market conditions. The
total of these two areas was a net decrease in investment services revenue,
which decrease was partially offset by an increase in other revenue of $1.4
million, or 96.2%, to $2.8 million in 1999 compared to $1.4 million in 1998.
This other revenue consists primarily of net interest income earned on margin
loans at NBC Securities but also includes interest and dividends on trading
assets and fee based services including asset/liability consulting, bond
accounting and security safekeeping. Investment services revenues increased
$3.3 million, or 41.0%, to $11.5 million in 1998 from $8.2 million in 1997,
primarily as a result of favorable market conditions. These results include
certain income and expense items that are allocated by management to the
investment services areas of the Company.
These results are not necessarily the same as would be expected if these
activities were conducted by a stand-alone entity because certain corporate
overhead expenses are not allocated directly to this division.
27
<PAGE>
Trust Division
The following table sets forth, for the periods indicated, the summary of
operations for the trust division of the Company:
TRUST DIVISION
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December
31,
--------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Trust division income..................................... $2,190 $2,101 $1,799
Expenses and allocated charges............................ 1,149 1,169 1,105
------ ------ ------
Net trust division revenue.............................. $1,041 $ 932 $ 694
====== ====== ======
</TABLE>
Trust division income increased $89,000, or 4.2%, to $2.2 million in 1999
from $2.1 million in 1998 due to new customer relationships and growth of
existing assets managed. Similar conditions resulted in a 16.8% increase in
trust department fees to $2.1 million in 1998 from $1.8 million in 1997.
Despite the increase in Trust division income, Trust division expenses and
allocated charges decreased $20,000, or 1.7% in 1999 versus 1998, from $1.2
million to $1.1 million due to tight expense control, resulting in an 11.7%
increase in net trust division revenue. These results include certain income
and expense items that are allocated by management to the trust services area
of the Company.
These results are not necessarily the same as would be expected if these
activities were conducted by a stand-alone entity because certain corporate
overhead expenses are not allocated directly to this division.
Mortgage Lending Division
The following table sets forth, for the periods indicated, the summary of
operations for the mortgage lending division of the Company.
MORTGAGE LENDING DIVISION
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December
31,
--------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Origination and sale of mortgage loans(1)................. $4,240 $4,405 $1,644
Interest income........................................... 527 649 545
------ ------ ------
Total revenue........................................... 4,767 5,054 2,189
Expenses and allocated charges............................ 3,391 3,061 1,643
------ ------ ------
Net mortgage lending division revenue................... $1,376 $1,993 $ 546
====== ====== ======
</TABLE>
- --------
(1) Includes intercompany income allocated to mortgage lending division
totaling $247,000 and $102,000 at December 31, 1999 and 1998,
respectively.
Fees charged in connection with the origination and resale of mortgage loans
decreased $165,000, or 3.7%, to $4.2 million in 1999 from $4.4 million in
1998, due primarily to changing market conditions. As interest rates rose in
1999, mortgage origination volume declined. The expenses and allocated charges
increased by $330,000 to $3.4 million in 1999 from $3.1 million in 1998. The
rise in expenses was largely due to expansion of the mortgage lending business
into four new markets and the increased level of expenses associated with such
expansion. As the new mortgage lending branches acquire market share,
management expects the profit margin in these areas will be comparable to that
in existing markets served by the Company. Fees charged in connection with the
origination and resale of mortgage loans totaled $4.4 million in 1998 and $1.6
million in 1997, an
28
<PAGE>
increase of $2.8 million, or 167.9%, resulting from a favorable interest rate
environment, staff additions, and expansion of services into different
geographic areas serviced by the Company. Expenses and allocated charges in
the mortgage lending division grew 86.3% to $3.1 million in 1998 from $1.6
million in 1997. In spite of this 86.3% increase, these expenses grew at a
lower rate than revenues as a result of more efficient operations and
leveraging the available fixed cost structure. These results include certain
income and expense items that are allocated by management to the mortgage
lending area of the Company.
These results are not necessarily the same as would be expected if these
activities were conducted by a stand-alone entity because certain corporate
overhead expenses are not allocated directly to this division.
Insurance Services Division
The following table sets forth, for the periods indicated, a summary of
operations for the insurance services division of the Company.
INSURANCE DIVISION
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1999(1) 1998(1) 1997(1)
------- ------- -------
<S> <C> <C> <C>
Commission income....................................... $1,068 $-- $--
Other income............................................ 16 -- --
------ ---- ----
Total revenue......................................... 1,084 -- --
Expenses and allocated charges.......................... 884 -- --
------ ---- ----
Net insurance division revenue........................ $ 200 $-- $--
====== ==== ====
</TABLE>
- --------
(1) The insurance division was acquired in May 1999.
The Company purchased an existing insurance company in May of 1999, thus the
operating results indicated above only include activity since the date of
acquisition. These results include certain income and expense items that are
allocated by management to the insurance services division of the Company.
These results are not necessarily the same as would be expected if these
activities were conducted by a stand-alone entity because certain corporate
overhead expenses are not allocated directly to this division.
Earning Assets
Loans
Loans are the largest category of earning assets and typically provide
higher yields than the other types of earning assets. Associated with the
higher loan yields are the inherent credit and liquidity risks which
management attempts to control and counterbalance. Loans averaged $1.20
billion in 1999 compared to $1.01 billion in 1998, an increase of $193.3
million, or 19.2%. At December 31, 1999, total loans, net of unearned income,
were $1.32 billion compared to $1.09 billion at the end of 1998, an increase
of $233.1 million, or 21.4%.
The growth in the Company's loan portfolio is attributable to the Company's
ability to attract new customers while maintaining consistent underwriting
standards and general economic conditions that resulted in
29
<PAGE>
increased loan demand from existing customers. The following table details the
composition of the loan portfolio by category at the dates indicated.
COMPOSITION OF LOAN PORTFOLIO
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------- ------------------- ----------------- ----------------- -----------------
Percent Percent Percent Percent Percent
of of of of of
Amount Total Amount Total Amount Total Amount Total Amount Total
---------- ------- ---------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
financial.............. $ 257,047 19.45% $ 257,409 23.65% $208,666 21.66% $203,616 23.45% $177,906 23.76%
Real estate:
Construction........... 148,228 11.22 74,024 6.80 72,166 7.49 62,628 7.21 47,313 6.32
Mortgage--residential.. 358,400 27.13 291,644 26.80 289,395 30.05 262,320 30.20 210,813 28.15
Mortgage--commercial... 369,158 27.94 291,437 26.78 253,338 26.30 206,393 23.76 195,856 26.15
Mortgage--other........ 3,111 .24 2,215 .20 2,299 .24 3,627 .42 4,407 .59
Consumer................ 73,388 5.55 77,187 7.09 89,971 9.34 94,888 10.93 93,163 12.44
Other................... 111,913 8.47 94,509 8.68 47,346 4.92 35,005 4.03 19,415 2.59
---------- ------ ---------- ------ -------- ------ -------- ------ -------- ------
Total gross loans...... 1,321,245 100.00% 1,088,425 100.00% 963,181 100.00% 868,477 100.00% 748,873 100.00%
====== ====== ====== ====== ======
Unearned income......... (1,085) (1,398) (2,102) (4,509) (5,343)
---------- ---------- -------- -------- --------
Total loans, net of
unearned income(1).... 1,320,160 1,087,027 961,079 863,968 743,530
Allowance for loan
losses................. (18,068) (16,540) (14,844) (12,633) (11,621)
---------- ---------- -------- -------- --------
Total net loans(1)..... $1,302,092 $1,070,487 $946,235 $851,335 $731,909
========== ========== ======== ======== ========
</TABLE>
- --------
(1) Does not include loans held for sale.
In the context of this discussion, a "real estate mortgage loan" is defined
as any loan, other than loans for construction purposes, secured by real
estate, regardless of the purpose of the loan. It is common practice for
financial institutions in the Company's market areas, and for the Company in
particular, to obtain a security interest or lien in real estate whenever
possible, in addition to any other available collateral. This collateral is
taken to reinforce the likelihood of the ultimate repayment of the loan and
tends to increase the magnitude of the real estate loan portfolio component.
The principal component of the Company's loan portfolio is real estate
mortgage loans. At year-end 1999, this category totaled $878.9 million and
represented 66.5% of the total loan portfolio, compared to $659.3 million, or
60.6%, of the total loan portfolio, at year-end 1998.
Residential mortgage loans increased $66.8 million, or 22.9%, to $358.4
million at December 31, 1999, compared with $291.6 million at December 31,
1998. Commercial mortgage loans increased $77.7 million, or 26.7%, to $369.2
million at December 31, 1999. Increases in both of these categories of loans
are primarily the result of the Company's expertise in and appetite for these
commercial and residential real estate loans. In addition, the general
economic conditions in its markets, which generate such lending opportunities,
are partially responsible for this growth.
Real estate construction loans increased $74.2 million, or 100.2%, to $148.2
million at December 31, 1999, compared with $74.0 million at December 31,
1998. The Company's focus on the home construction market and strong
construction activity in markets it serves caused this increase.
Consumer loans decreased $3.8 million, or 4.9%, during 1999 to $73.4 million
from $77.2 million in 1998 as a result of a continuation of a reduced emphasis
on certain areas of consumer lending.
Other categories of loans increased $17.4 million, or 18.4% to $111.9
million during 1999 in part due to growth in margin lending in the investment
services division, which loans are fully secured by marketable
30
<PAGE>
securities, and leases from the Company's leasing division, which had its
first full year of operations in 1999 as it was formed in late 1998. The
Company engages in no foreign lending operations.
The repayment of loans is a source of additional liquidity for the Company.
The following table sets forth the Company's loans maturing within specific
intervals at December 31, 1999.
LOAN MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------
Over one year Over
One year through five five
or less years years Total
-------- ------------- -------- --------
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural........................ $146,635 $ 99,054 $ 11,358 $257,047
Real estate--construction............ 85,044 40,041 23,143 148,228
Real estate--residential............. 52,155 103,726 202,519 358,400
Real estate--commercial.............. 64,384 183,295 121,479 369,158
Consumer............................. 28,809 42,926 1,653 73,388
</TABLE>
<TABLE>
<CAPTION>
Predetermined Floating
Rates Rates
------------- --------
<S> <C> <C>
Maturing after one year but within five years........ $359,447 $109,595
Maturing after five years............................ 117,934 242,218
-------- --------
$477,381 $351,813
======== ========
</TABLE>
The information presented in the above table is based upon the contractual
maturities of the individual loans, including loans which may be subject to
renewal at their contractual maturity. Renewal of such loans is subject to
review and credit approval, as well as modification of terms upon their
maturity. Consequently, management believes this treatment presents fairly the
maturity and repricing structure of the loan portfolio.
Securities
Securities, including securities classified as held to maturity (or
investment securities) and available for sale, represent a significant portion
of the Company's earning assets. Securities averaged $331.0 million during
1999, compared with $307.0 million during 1998, an increase of $24.0 million,
or 7.8%. Growth in the securities portfolio is generally a function of growth
in funding sources net of lending opportunities. At December 31, 1999, the
securities portfolio totaled $345.1 million, including securities held to
maturity with an amortized cost of $19.6 million and securities available for
sale with a market value of $325.5 million.
The following tables set forth the carrying value of securities held by the
Company at the dates indicated.
INVESTMENT SECURITIES
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
--------------- ---------------
Cost Market Cost Market
------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Treasury securities.................... $ -- $ -- $ 2,607 $ 2,623
U.S. Government Agencies.................... 279 279 787 792
State and political subdivisions............ 8,942 9,064 9,673 10,087
Mortgage backed securities.................. 10,395 10,395 21,588 21,712
------- ------- ------- -------
Total................................... $19,616 $19,738 $34,655 $35,214
======= ======= ======= =======
</TABLE>
31
<PAGE>
AVAILABLE FOR SALE SECURITIES
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1999 1998
----------------- -----------------
Cost Market Cost Market
-------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities................ $ 4,574 $ 4,561 $ 8,624 $ 8,724
U.S. Government Agencies................ 94,593 91,159 86,130 85,986
State and political subdivisions........ 24,909 24,543 25,659 26,377
Mortgage backed securities.............. 202,646 196,575 160,589 161,442
Other................................... 8,675 8,669 7,090 7,029
-------- -------- -------- --------
Total............................... $335,397 $325,507 $288,092 $289,558
======== ======== ======== ========
</TABLE>
The following tables show the scheduled maturity and average yields of
securities owned by the Company at December 31, 1999.
INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
(Amounts in thousands, except yields)
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------------------------------------------
After one but After five but
Within five Within ten
Within one year years years After ten years Other securities
--------------- --------------- --------------- --------------- ----------------
Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1)
------ -------- ------ -------- ------ -------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securi-
ties................... $--
U.S. Government Agen-
cies................... -- $ 279 6.18% $ --
State and political
subdivisions........... 570 7.71 5,476 7.83 2,628 8.27 $268 10.39%
Mortgage backed securi-
ties................... -- -- -- -- $10,395 6.43%
---- ------ ------ ---- -------
Total................. $570 7.71% $5,755 7.75% $2,628 8.27% $268 10.39% $10,395 6.43%
==== ==== ====== ==== ====== ==== ==== ===== ======= ====
</TABLE>
- --------
(1) Computed on a tax-equivalent basis utilizing a 34% tax rate, without
giving effect to the disallowance for Federal income tax purposes of
interest related to certain tax-exempt assets.
SECURITIES AVAILABLE FOR SALE MATURITY DISTRIBUTION AND YIELDS
(Amounts in thousands, except yields)
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------------------------------
After one but
Within five After five but
Within one year years Within ten years After ten years Other securities
--------------- ---------------- ---------------- --------------- -----------------
Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1)
------ -------- ------- -------- ------- -------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
securities............. $2,958 5.11% $ 1,603 6.07%
U.S. Government
Agencies............... 3,480 6.77 54,196 5.99 $33,483 6.54%
State and political
subdivisions........... 2,194 7.11 9,189 7.27 10,218 7.85 $2,942 7.00%
Mortgage backed
securities............. -- -- -- -- -- $196,575 6.76%
Equity securities....... -- -- -- -- 8,669 7.12
------ ------- ------- ------ --------
Total ................ $8,632 6.29% $64,988 6.17% $43,701 6.85% $2,942 7.00% $205,244 6.78%
====== ==== ======= ==== ======= ==== ====== ==== ======== ====
</TABLE>
- --------
(1) Computed on a tax-equivalent basis utilizing a 34% tax rate, without
giving effect to the disallowance for Federal income tax purposes of
interest related to certain tax-exempt assets.
32
<PAGE>
At December 31, 1999, mortgage-backed securities consisting of
collateralized mortgage obligations and pass-through mortgage obligations
totaled $207.0 million. These mortgage-backed securities include $10.4 million
classified as investment securities and $196.6 million classified as
securities available for sale. Management expects the annual repayment of the
underlying mortgages to vary as a result of monthly repayment of principal
and/or interest required under terms of the underlying promissory notes.
Further, the actual rate of repayment is subject to changes depending upon
both terms of the underlying mortgages and the relative level of mortgage
interest rates. When relative interest rates decline to levels below that of
the underlying mortgages, acceleration of principal repayment is expected as
some borrowers on the underlying mortgages refinance to lower rates. When the
underlying rates on mortgage loans are comparable to, or in excess of, market
rates, repayment more closely conforms to scheduled amortization in accordance
with terms of the promissory note. Accordingly, management generally expects
repayment of the collateralized mortgage obligations in three to five years,
and repayment of the pass-through mortgage obligations in five to seven years.
Other attributes of securities are discussed in "Interest Sensitivity and
Market Risk."
Short-Term Investments
The Company utilizes overnight investment of funds in Federal funds sold and
securities purchased under agreements to resell to ensure that adequate
liquidity will be maintained, while at the same time minimizing the level of
uninvested cash reserves. Short-term investments are also utilized by the
Company when the level of funds committed to lending and investment portfolio
programs changes or the level of deposit generation changes. During 1999,
Federal funds sold and securities purchased under agreements to resell
averaged $46.6 million, compared to $75.0 million during 1998, representing a
$28.4 million, or 37.8%, decrease as the Company experienced growth in both
loans and investment securities.
Trading Account Securities
An important aspect of investment department operations, but less so to the
Company in total, are trading account securities, which represent securities
owned by the Company prior to sale and delivery to the Company's customers.
Trading account securities averaged $6.7 million in 1999 and were $2.7 million
at December 31, 1999, compared with an average of $4.4 million in 1998 and
$5.5 million at December 31, 1998. This small dollar amount reflects
management's policy of limiting positions in such securities to reduce its
exposure to market and interest rate changes.
Deposits and Other Interest-Bearing Liabilities
Average interest-bearing liabilities increased $155.8 million, or 12.9%, to
$1.36 billion in 1999, from $1.21 billion in 1998. Average interest-bearing
deposits increased $110.4 million, or 10.8%, to $1.13 billion in 1999, from
$1.02 billion in 1998. This increase is attributable to competitive rate and
product offerings by the Company and successful marketing efforts. Average
Federal funds purchased and securities sold under agreements to repurchase
increased $18.2 million, or 14.3%, to $146.1 million in 1999, from $127.9
million in 1998 due, in part, to additional liquidity provided by downstream
correspondent banks. Average short-term borrowings decreased by $784,000, or
3.0%, to $25.5 million in 1999, compared to $26.3 million in 1998 as some of
the Company's funding shifted from short-term to long-term. Average long-term
borrowings increased $27.9 million to $58.4 million in 1999, from $30.5
million in 1998, as the Company utilized more borrowing programs offered to
its Federal Home Loan Bank member subsidiaries.
Deposits
Average total deposits increased $136.3 million, or 11.2%, to $1.35 billion
during 1999, from $1.21 billion during 1998. At December 31, 1999, total
deposits were $1.44 billion, compared with $1.28 billion at December 31, 1998,
an increase of $167.0 million, or 13.1%.
33
<PAGE>
The following table sets forth the deposits of the Company by category at
the dates indicated.
DEPOSITS
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------- ------------------- ------------------- ----------------- -----------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
---------- -------- ---------- -------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand................. $ 210,185 14.57% $ 232,450 18.23% $ 180,341 16.02% $155,695 15.74% $148,816 15.74%
NOW ................... 217,883 15.11 187,481 14.70 155,147 13.78 133,762 13.52 156,464 16.55
Savings and money
market................ 296,723 20.57 298,817 23.43 294,072 26.13 254,570 25.74 239,031 25.28
Time less than
$100,000.............. 492,328 34.14 403,156 31.63 369,363 32.83 332,278 33.59 308,223 32.59
Time greater than
$100,000.............. 225,036 15.60 153,271 12.01 126,556 11.24 112,877 11.41 93,010 9.84
---------- ------ ---------- ------ ---------- ------ -------- ------ -------- ------
Total deposits........ $1,442,155 100.00% $1,275,175 100.00% $1,125,479 100.00% $989,182 100.00% $945,544 100.00%
========== ====== ========== ====== ========== ====== ======== ====== ======== ======
</TABLE>
Core deposits, which exclude time deposits of $100,000 or more, provide for
a relatively stable funding source that supports earning assets. The Company's
core deposits totaled $1.22 billion, or 84.4%, of total deposits at December
31, 1999 and totaled $1.12 billion, or 88.0%, of total deposits at December
31, 1998.
Deposits, in particular core deposits, have historically been the Company's
primary source of funding and have enabled the Company to meet successfully
both short-term and long-term liquidity needs. Management anticipates that
such deposits will continue to be the Company's primary source of funding in
the future. The Company's loan-to-deposit ratio was 91.5% at December 31,
1999, and 85.2% at the end of 1998, and the ratio averaged 89.0% during 1999
and 83.0% during 1998. These increases in the Company's loan-to-deposit ratio
are due to loan growth exceeding deposit growth in 1999. The maturity
distribution of the Company's time deposits in excess of $100,000 at December
31, 1999, is shown in the following table.
MATURITIES OF CERTIFICATES OF DEPOSIT AND OTHER TIME
DEPOSITS OF $100,000 OR MORE
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------------------------------
After
After One Six
Through After Three Through After
Within One Three Through Six Twelve Twelve
Month Months Months Months Months Total
---------- --------- ----------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Certificates of deposit
of $100,000 or more.... $18,549 $30,654 $39,916 $46,065 $18,030 $153,214
Other time deposits of
$100,000 or more....... 21,685 25,155 20,435 2,350 2,197 71,822
------- ------- ------- ------- ------- --------
Total................. $40,234 $55,809 $60,351 $48,415 $20,227 $225,036
======= ======= ======= ======= ======= ========
</TABLE>
Approximately 42.7% of the Company's time deposits over $100,000 had
scheduled maturities within three months. Large certificate of deposit
customers tend to be extremely sensitive to interest rate levels, making these
deposits less reliable sources of funding for liquidity planning purposes than
core deposits. Many financial institutions partially fund their balance sheets
with large certificates of deposit obtained through brokers, and the Company
had $47.5 million in brokered deposits outstanding at December 31, 1999,
compared to no such deposits at December 31, 1998.
34
<PAGE>
Borrowed Funds
Borrowed funds include four broad categories; (i) Federal funds purchased
and securities sold under agreements to repurchase, (ii) treasury, tax and
loan balances, (iii) Federal Home Loan Bank ("FHLB") borrowings, and (iv)
borrowings from an third party bank. Because of a relatively high loan-to-
deposit ratio, the existence and stability of these funding sources are
critical to the Company's maintenance of short-term and long-term liquidity.
Federal funds purchased and securities sold under agreements to repurchase
represent both an input of excess funds from correspondent bank customers of
the Company as well as a cash management tool offered to corporate customers.
At December 31, 1999, these funds totaled $131.9 million, compared with $162.6
million at December 31, 1998.
At December 31, 1999 treasury, tax and loan balances totaled $6.2 million,
compared to $1.5 million at December 31, 1998. The Company collects tax
deposits from customers and is permitted to retain these balances until
established collateral limits are exceeded or until the U.S. Treasury
withdraws its balances.
The Company's average borrowing from an third party bank under a $20 million
credit facility ("the Credit Facility") was $13.4 million during 1999,
compared with $13.5 million during 1998. As of December 31, 1999, the
outstanding balance under the Credit Facility was $16.4 million, leaving a
remaining availability under the Credit Facility of $3.6 million. The Credit
Facility bears interest at a rate that varies with LIBOR and is secured by
stock in the Banks. The Credit Facility is typically renewed on an annual
basis and has a current maturity date of May 31, 2000. The Company has
historically renewed the Credit Facility prior to its due date and anticipates
doing so again in 2000.
All of the Banks are members of the FHLB. At December 31, 1999, these Banks
had available FHLB lines of $222.9 million, under which $125.7 million was
outstanding, including advances classified as short-term of $2.0 million and
advances classified as long-term of $123.7 million. This compares to
borrowings of $42.2 million at December 31, 1998, of which $10.2 million was
short-term and $32.0 million was long-term.
35
<PAGE>
The following table sets forth, for the periods indicated, the principal
components of borrowed funds.
BORROWED FUNDS
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Federal funds purchased and securities sold un-
der agreements to repurchase:
Balance at end of period...................... $131,878 $162,633 $141,437
Average balance outstanding................... 146,111 127,856 85,956
Maximum outstanding at any month's end........ 178,166 162,633 141,610
Weighted average interest rate at period-end.. 5.07% 4.70% 6.15%
Weighted average interest rate during the pe-
riod......................................... 4.97 5.32 5.23
Treasury, tax and loan:
Balance at end of period...................... $ 6,199 $ 1,506 $ 5,210
Average balance outstanding................... 2,414 3,626 2,506
Maximum outstanding at any month's end........ 6,199 6,944 5,210
Weighted average interest rate at period-end.. 5.00% 4.45% 5.90%
Weighted average interest rate during the pe-
riod......................................... 4.18 4.30 4.99
Notes Payable:
Balance at end of period...................... $ 16,389 $ 11,500 $ 15,337
Average balance outstanding................... 13,410 13,516 18,037
Maximum outstanding at any month's end........ 16,389 15,250 19,350
Weighted average interest rate at period-end.. 7.21% 6.32% 6.70%
Weighted average interest rate during the pe-
riod......................................... 6.09 6.44 6.63
Short-term advances from the Federal Home Loan
Bank:
Balance at end of period...................... $ 2,000 $ 10,200 $ 13,750
Average balance outstanding................... 9,715 9,181 23,445
Maximum outstanding at any month's end........ 32,000 10,200 31,250
Weighted average interest rate at period-end.. 4.55% 5.54% 5.80%
Weighted average interest rate during the pe-
riod......................................... 5.04 6.40 5.81
Long-term advances from the Federal Home Loan
Bank:
Balance at end of period...................... $123,700 $ 32,000 $ 16,200
Average balance outstanding................... 58,150 30,192 8,157
Maximum outstanding at any month's end........ 123,700 32,000 28,700
Weighted average interest rate at period-end.. 5.30% 5.09% 5.73%
Weighted average interest rate during the pe-
riod......................................... 5.18 5.59 5.59
Convertible debentures:
Balance at end of period...................... $ -- $ -- $ --
Average balance outstanding................... -- -- 14
Maximum outstanding at any month's end........ -- -- 105
Weighted average interest rate at period-end.. % % %
Weighted average interest rate during the pe-
riod......................................... 7.14
Capital leases:
Balance at end of period...................... $ 266 $ 328 $ 387
Average balance outstanding................... 295 356 412
Maximum outstanding at any month's end........ 324 387 439
Weighted average interest rate at period-end.. 9.20% 9.04% 9.04%
Weighted average interest rate during the pe-
riod......................................... 9.15 8.98 8.98
</TABLE>
36
<PAGE>
Capital Resources and Liquidity Management
Capital Resources
The Company's stockholders' equity increased $7.3 million, or 5.5%, to
$138.3 million at December 31, 1999, from $131.0 million at December 31, 1998.
This net increase was primarily attributable to net income for 1999 of $22.3
million, less dividends paid of $8.0 million, and a change in net unrealized
losses in available-for-sale securities of $7.5 million.
Under the capital guidelines of their regulators, the Company and the Banks
are currently required to maintain a minimum risk-based total capital ratio of
8%, with at least 4% being Tier I capital. Tier I capital consists of common
stockholders' equity, qualifying perpetual preferred stock and minority
interests in equity accounts of consolidated subsidiaries, less goodwill. In
addition, under the guidelines, the Company and the Banks must maintain a
minimum Tier I leverage ratio of Tier I capital to total assets of at least
3%, but this minimum ratio is typically increased by 100 to 200 basis points
for other than the highest rated institutions.
The Company exceeded its fully phased-in regulatory capital ratios at
December 31, 1999, 1998 and 1997, as set forth in the following table.
ANALYSIS OF CAPITAL
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Tier 1 Capital............................ $ 134,922 $ 122,732 $ 109,682
Tier 2 Capital............................ 17,985 15,296 13,867
---------- ---------- ----------
Total qualifying capital (1) (2)........ $ 152,790 $ 138,028 $ 123,549
========== ========== ==========
Risk-adjusted total assets (including off-
balance sheet exposures)................. $1,438,689 $1,223,641 $1,109,326
Tier 1 risk-based capital ratio (4.00%
required minimum)........................ 9.38% 10.03% 9.89%
Total risk-based capital ratio (8.00%
required minimum)........................ 10.62 11.28 11.14
Tier 1 leverage ratio (4.00% required
minimum)................................. 7.18 7.41 7.75
</TABLE>
- --------
(1) Does not include $83,000, $1,244,000 and $977,000 of the Company's
allowance for loan losses at December 31, 1999, 1998 and 1997, respectively,
in excess of 1.25% of risk-adjusted total assets.
(2) Does not include capital of an unconsolidated subsidiary at December 31,
1999.
37
<PAGE>
Each of the Banks is required to maintain risk-based and leverage ratios
similar to those required for the Company. Each of the Banks exceeded these
regulatory capital ratios at December 31, 1999, as set forth in the following
table:
BANK CAPITAL RATIOS
<TABLE>
<CAPTION>
Tier 1 Risk Total Risk Tier 1
Based Based Leverage
----------- ---------- --------
<S> <C> <C> <C>
Alabama National BanCorporation............... 9.38% 10.62% 7.18%
National Bank of Commerce of Birmingham....... 8.84 10.01 7.26
Alabama Exchange Bank......................... 12.18 13.43 7.81
Bank of Dadeville............................. 12.60 13.72 8.25
Citizens & Peoples Bank, N.A.................. 13.58 14.77 9.37
Community Bank of Naples, National
Association.................................. 10.73 11.98 7.29
First American Bank........................... 10.51 11.76 8.43
First Citizens Bank........................... 13.87 15.08 7.16
First Gulf Bank............................... 9.30 10.55 7.19
Georgia State Bank............................ 11.65 12.85 7.37
Public Bank................................... 12.66 13.82 8.75
Required minimums............................. 4.00 8.00 4.00
</TABLE>
Liquidity Management
Liquidity management involves monitoring the Company's sources and uses of
funds in order to meet its day-to-day cash flow requirements while maximizing
profits. Liquidity represents the ability of an entity to convert assets into
cash or cash equivalents without significant loss and to raise additional
funds by increasing liabilities.
Without proper liquidity management, the Company will not be able to perform
the primary function of a financial intermediary and would, therefore, not be
able to meet the needs of the communities it serves.
Increased liquidity in typical interest rate environments often involves
decreasing profits by investing in earning assets with shorter maturities.
Liquidity management is made more complex because different balance sheet
components are subject to varying degrees of management control. For example,
the timing of maturities of the investment portfolio is very predictable and
subject to a high degree of control at the time investment decisions are made.
However, net deposit inflows and outflows are far less predictable and are not
subject to nearly the same degree of control.
Assets included in the Company's Consolidated Statements of Condition
contribute to liquidity management. Federal funds sold and securities
purchased under agreements to resell, the Company's primary source of
liquidity, averaged $46.6 million during 1999 and was $33.6 million at
December 31, 1999, and averaged $75.0 million during 1998 and was $57.1
million at December 31, 1998. If required in short-term liquidity management,
these assets could be converted to cash immediately. Cash received from the
repayment of investment securities and loans provide a constant source of cash
that contributes to liquidity management. Unpledged securities, with a
carrying value of approximately $166.7 million at December 31, 1999, provide
the Company an opportunity to generate cash by, 1) providing additional
collateral by selling securities under agreements to repurchase, 2) providing
collateral to obtain public funds or 3) providing collateral to borrow
directly from the Federal Reserve Bank or the Federal Home Loan Bank. See
"Earning Assets--Loans" and "Earning Assets--Securities."
38
<PAGE>
Liquidity can also be managed using liabilities included in the Company's
Consolidated Statement of Condition, such as Federal funds purchased and
securities sold under agreements to repurchase and short-term borrowing.
Combined Federal funds purchased and securities sold under agreements to
repurchase, treasury, tax and loan, and short-term borrowings averaged $171.7
million during 1999 and was $156.5 million at December 31, 1999, and averaged
$154.2 million during 1998 and was $185.8 million at December 31, 1998.
Overnight borrowing lines with upstream correspondent banks, $162.1 million at
December 31, 1999, of which $103.5 million was unused, provide additional
sources of liquidity to the Company on an unsecured basis. The Federal Home
Loan Bank provides secured and unsecured credit lines to nine of the Company's
banks totaling approximately $222.9 million. At December 31, 1999, advances
under these lines totaled $125.7 million, including $2 million classified as
short-term and $123.7 million classified as long-term. Long-term liquidity
needs are met through the Company's deposit base (approximately 84.3% of the
Company's deposits at December 31, 1999, are considered core deposits), and
the repayment of loans and other investments as they mature. The Company is
able to manage its long-term liquidity needs by adjusting the rates it pays on
longer-term deposits and the amount and mix of longer-term investments in its
portfolio.
One of the Banks has pledged approximately $216 million in loans to the
Federal Reserve Bank of Atlanta as collateral for a discount window credit
facility, which facility management views as a backup liquidity facility. At
December 31, 1999, the Company had access to approximately $170 million under
this facility, with no outstanding borrowings.
The Company, as a stand alone corporation, has more limited access to
liquidity sources than its Banks and depends on dividends from its
subsidiaries as its primary source of liquidity. The Company's liquidity is
diminished by required payments on its outstanding short-term debt. The
ability of its subsidiaries to pay dividends is subject to general regulatory
restrictions which may, but are not expected to, have a material negative
impact on the liquidity available to the Company. (See Note 17 to the
Company's Consolidated Financial Statements included in this Annual Report.)
If circumstances warrant, the Company's short-term liquidity needs can also be
met by additional borrowings of approximately $3.6 million representing the
unused portion of the Company's credit facility with an unrelated bank. See
"Deposits and Other Interest-Bearing Liabilities--Borrowed Funds."
Accounting Rule Changes
Derivative Investments and Hedging Activities
In June 1998, the FASB issued Statement of Financial Standard No. 133,
Accounting for Derivative Instruments and Hedging Activities, ("Statement
133"), effective for all fiscal quarters of all fiscal years beginning after
June 30, 1999. Statement 133 standardizes the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, by requiring that an entity recognize those items as assets or
liabilities in the statement of financial position and measure them at fair
value. If certain conditions are met, an entity may elect to designate a
derivative instrument as a hedging instrument. Statement 133 generally
provides for matching the timing of gain or loss recognition on the hedging
instrument with the recognition of (a) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (b) the
earnings effect of the hedged forecasted transaction. Statement 133, as
amended by Statement of Financial Accounting Standards No. 137, Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date
of SFAS No. 133, is effective for fiscal years beginning after June 15, 2000,
and is effective for interim periods in the year of adoption. Management of
the Company does not expect the adoption of Statement 133 to have a material
impact on its financial statements since the Company does not invest in
derivative instruments.
Mortgage-Backed Securities
In October, 1998, the FASB issued Statement of Financial Accounting
Standards No. 134, Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by a Mortgage
39
<PAGE>
Banking Enterprise, an amendment of FASB Statement No. 65, ("Statement 134").
Statement 134 amends Statement 65 to require that after the securitization of
mortgage loans held for sale, an entity engaged in mortgage banking activities
classify the resulting mortgage-backed securities or other retained interests
based on its ability and intent to sell or hold those investments. This
statement was adopted January 1, 1999. However, since the Company does not
historically securitize mortgage loans, there has been no financial statement
impact since adopting this statement.
Impact of Inflation
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Company and its subsidiaries are primarily monetary
in nature. Therefore, interest rates have a more significant effect on the
Company's performance than do the effects of changes in the general rate of
inflation and change in prices. In addition, interest rates do not necessarily
move in the same direction or in the same magnitude as the prices of goods and
services. Management seeks to manage the relationships between interest-
sensitive assets and liabilities in order to protect against wide interest
rate fluctuations, including those resulting from inflation. See "Interest
Sensitivity and Market Risk."
Industry Developments
Certain recently enacted and proposed legislation could have an effect on
both the costs of doing business and the competitive factors facing the
financial institutions industry. The Company is unable at this time to assess
the impact of this legislation on its financial condition or results of
operations.
Year 2000--Technology Considerations
The Company did not experience any material problems related to the Year
2000 date change. In addition, management is not aware of any customers that
have experienced Year 2000 issues that would have a material impact on the
Company, nor have any of the Company's vendors experienced Year 2000 problems
that would impair its ability to provide services to the Company. However, it
is possible that the full impact of the date change has not been fully
recognized.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is contained in Item 7 herein under
the heading "Interest Sensitivity and Market Risk."
40
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements and Financial Statement Schedules of
ANB and subsidiaries listed in ITEM 14(a) have been included in this Annual
Report and should be referred to in their entirety. The Supplementary Financial
Information required by Item 302 of Regulation S-K is set forth below.
SELECTED QUARTERLY FINANCIAL DATA
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1999 Quarters 1998 Quarters
------------------------------------------- -------------------------------------------
First Second Third Fourth First Second Third Fourth
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Interest income......... $ 28,811 $ 29,668 $ 32,332 $ 34,857 $ 27,840 $ 29,565 $ 28,426 $ 29,873
Interest expense........ 13,435 13,706 15,300 16,842 13,718 14,734 13,997 14,106
Net interest income..... 15,376 15,962 17,032 18,015 14,122 14,831 14,429 15,767
Provision for loan
losses................. 562 368 408 616 345 256 287 905
Securities gains
(losses)............... 166 23 -- 1 28 145 1 --
Noninterest income...... 7,741 7,523 6,939 8,164 7,181 7,112 7,084 7,799
Noninterest expense..... 15,383 15,236 15,234 16,627 14,396 14,844 13,924 18,016
Net income.............. 5,019 5,380 5,720 6,152 4,550 4,749 5,052 3,021
Dividends on common
stock.................. 1,974 2,002 1,991 1,991 1,287 1,371 1,403 1,565
Per Common Share Data:
Book Value.............. $ 12.15 $ 12.03 $ 12.44 $ 12.36 $ 11.33 $ 11.54 $ 11.85 $ 11.94
Tangible book value..... 11.41 11.30 11.46 11.40 10.52 10.76 11.10 11.19
Net income.............. 0.45 0.48 0.51 0.55 0.41 0.43 0.45 0.27
Dividends declared...... 0.18 0.18 0.18 0.18 0.15 0.15 0.15 0.15
Balance Sheet Highlights
At Period-End:
Total assets........... $1,693,950 $1,776,413 $1,863,368 $1,921,884 $1,535,092 $1,575,768 $1,699,754 $1,672,049
Securities (1).......... 314,731 322,756 348,181 345,123 281,858 304,293 356,542 324,213
Loans held for sale..... 13,784 10,638 8,162 8,615 6,801 11,030 13,117 19,047
Loans, net of unearned
income................. 1,116,162 1,196,073 1,252,806 1,320,160 973,978 991,314 1,015,102 1,087,027
Allowance for loan
losses................. 17,167 17,335 17,553 18,068 15,054 15,776 16,016 16,540
Deposits................ 1,307,383 1,414,078 1,408,965 1,442,155 1,188,681 1,253,621 1,255,138 1,275,175
Short-term debt......... 31,700 14,339 48,389 18,389 35,785 14,150 22,200 21,700
Long-term debt.......... 32,313 46,079 71,025 124,005 21,576 26,653 17,344 32,328
Stockholders' equity.... 134,007 134,509 137,641 138,255 120,776 124,912 130,714 130,993
</TABLE>
- --------
(1) Does not include trading securities.
During the fourth quarter of 1998, the Company incurred after-tax merger-
related charges totaling $2.3 million, which reduced earnings per share on a
diluted basis to $.27 per share. In the absence of these charges, operating
earnings per share on a diluted basis would have been $.48 per share.
41
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item regarding Executive Officers is
included in Part I of this Form 10-K under the caption "Executive Officers of
the Registrant" in accordance with Instruction 3 of the Instructions to
Paragraph (b) of Item 401 of Regulation S-K.
The information required by this Item regarding directors is incorporated by
reference pursuant to General Instruction G(3) of Form 10-K from ANB's
definitive Proxy Statement for the 2000 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A
on or before March 30, 2000.
ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The information required by this Item is incorporated by reference pursuant
to General Instruction G(3) of Form 10-K from ANB's definitive Proxy Statement
for the 2000 Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A on or before March 30,
2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference pursuant
to General Instruction G(3) of Form 10-K from ANB's definitive Proxy Statement
for the 2000 Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A on or before March 30,
2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference pursuant
to General Instruction G(3) of Form 10-K from ANB's definitive Proxy Statement
for the 2000 Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A or before March 30, 2000.
42
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) and (2) and (d)--Financial Statements and Financial Statement
Schedules.
Financial Statements: The Consolidated Financial Statements of ANB and its
subsidiaries, included herein (beginning on page F-1), are as follows:
Report of Independent Auditors--PricewaterhouseCoopers LLP
Consolidated Statements of Condition--December 31, 1999 and 1998
Consolidated Statements of Income--Years ended December 31, 1999, 1998 and
1997
Consolidated Statements of Changes in Stockholders' Equity--Years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows--Years ended December 31, 1999, 1998
and 1997
Notes to Consolidated Financial Statements
Financial Statement Schedules: All schedules to the consolidated financial
statements required by Article 9 of Regulation S-X are inapplicable and
therefore have been omitted.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
The exhibits listed on the exhibit index beginning on page 46 of this Form
10-K are filed herewith or are incorporated herein by reference.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on this the 17th
day of March, 2000.
ALABAMA NATIONAL BANCORPORATION
/s/ John H. Holcomb, III
By: _________________________________
John H. Holcomb, III,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ John H. Holcomb, III Chairman and Chief Executive March 17, 2000
____________________________________ Officer (principal
John H. Holcomb, III executive officer)
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Victor E. Nichol, Jr. President and Chief March 22, 2000
____________________________________ Operating Officer and
Victor E. Nichol, Jr. Director
/s/ William E. Matthews, V Executive Vice President and March 22, 2000
____________________________________ Chief Financial Officer
William E. Matthews, V
/s/ Shelly S. Williams Senior Vice President and March 22, 2000
____________________________________ Controller (principal
Shelly S. Williams accounting officer)
/s/ W. Ray Barnes Director March 22, 2000
____________________________________
W. Ray Barnes
/s/ T. Morris Hackney Director March 17, 2000
____________________________________
T. Morris Hackney
/s/ John D. Johns Director March 22, 2000
____________________________________
John D. Johns
/s/ John J. McMahon, Jr. Director March 22, 2000
____________________________________
John J. McMahon, Jr.
/s/ C. Phillip McWane Director March 22, 2000
____________________________________
C. Phillip McWane
/s/ Drayton Nabers, Jr. Director March 22, 2000
____________________________________
Drayton Nabers, Jr.
/s/ G. Ruffner Page, Jr. Director March 22, 2000
____________________________________
G. Ruffner Page, Jr.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ W. Stancil Starnes Director March 22, 2000
____________________________________
W. Stancil Starnes
/s/ William D. Montgomery Director March 22, 2000
____________________________________
William D. Montgomery
/s/ Dan M. David Vice Chairman and Director March 22, 2000
____________________________________
Dan M. David
/s/ C. Lloyd Nix Director March 22, 2000
____________________________________
C. Lloyd Nix
/s/ William E. Sexton Director March 22, 2000
____________________________________
William E. Sexton
</TABLE>
45
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Reference
------- ----------- ---------
<C> <S> <C>
3.1 Certificate of Incorporation.............................. (1)
3.1A Certificate of Amendment of Certificate of Incorporation.. (2)
3.1B Certificate of Merger filed with the Secretary of State of
the State of Delaware on December 29, 1995............... (4)
3.1C Certificate of Amendment of Certificate of Incorporation.. (9)
3.2 Bylaws.................................................... (1)
4.1 Provisions of the Certificate of Incorporation and the
Bylaws of Alabama National BanCorporation which Define
the Rights of Security holders........................... (1)
10.1 Alabama National BanCorporation 1994 Stock Option Plan.... (1)
10.2 Form of Stock Option Agreement utilized in connection with
the 1994 Stock Option Plan............................... (2)
10.3 Agreement dated September 18, 1995, by and among James A.
Taylor and Frank W. Whitehead, Alabama National
BanCorporation, National Commerce Corporation and
Commerce Bankshares, Inc. ............................... (3)
10.3A Amendment to Agreement dated September 18, 1995 executed
by James A. Taylor, Alabama National BanCorporation,
National Commerce Corporation and Commerce Bankshares,
Inc. on November 17, 1995................................ (3)
10.4 Commerce Bankshares, Inc. Long Term Incentive Compensation
Plan..................................................... (3)
10.4A Form of Incentive Stock Option Agreement.................. (3)
10.4B Form of Restricted Stock Agreement........................ (3)
10.5 Lease Agreement between Woodward Properties and NBC....... (3)
10.6 NBC Pension Plan (amended and restated effective
January 1, 1997)......................................... (15)
10.7 Credit Agreement between Alabama National BanCorporation
and AmSouth Bank of Alabama dated as of December 29, 1995
relating to a $23,000,000 Revolving Loan................. (4)
10.7A Promissory Note between Alabama National BanCorporation
and AmSouth Bank of Alabama dated as of December 29, 1995
relating to a $23,000,000 Revolving Loan................. (4)
10.7B Pledge Agreement between Alabama National BanCorporation
and AmSouth Bank of Alabama dated as of December 29, 1995
relating to a $23,000,000 Revolving Loan................. (4)
10.7C First Amendment to Credit Agreement between Alabama
National BanCorporation and AmSouth Bank dated
February 10, 1997........................................ (6)
10.7D Second Amendment to Credit Agreement between Alabama
National BanCorporation and AmSouth Bank dated
January 19, 1998......................................... (8)
10.7E Third Amendment to Credit Agreement between Alabama
National BanCorporation and AmSouth Bank dated June 23,
1999..................................................... (14)
10.8 Amendment and Restatement of the Alabama National
BanCorporation Performance Share Plan.................... (15)
10.9 Alabama National BanCorporation Deferred Compensation Plan
for Directors Who Are Not Employees of the Company....... (5)
10.10 Agreement and Plan of Merger dated as of July 24, 1997
between Alabama National BanCorporation and First
American Bancorp......................................... (7)
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Reference
------- ----------- ---------
<C> <S> <C>
10.11 Employment Agreement dated November 30, 1997 between Dan
M. David and Alabama National BanCorporation............. (8)
10.12 First American Bancorp Stock Option Plan dated October 20,
1992..................................................... (8)
10.13 First American Bancorp 1994 Stock Option Plan............. (8)
10.14 First American Bancorp Nonqualified Stock Option Agreement
with Dan M. David dated March 7, 1997.................... (8)
10.15 Agreement and Plan of Merger dated as of March 5, 1998
between Alabama National BanCorporation and Public Bank
Corporation.............................................. (10)
10.16 Agreement and Plan of Merger dated as of June 8, 1998
between Alabama National BanCorporation and Community
Financial Corporation.................................... (11)
10.17 Agreement and Plan of Merger dated as of September 21,
1998 between Alabama National BanCorporation, Citizens &
Peoples Bank, National Association, and Community Bank of
Naples, National Association............................. (12)
10.18 Promissory Note dated April 15, 1999 executed by John R.
Bragg in favor of Alabama National BanCorporation in the
principal amount of $107,871.00.......................... (13)
10.19 Promissory Note dated April 15, 1999 executed by John R.
Bragg in favor of Alabama National BanCorporation in the
principal amount of $19,800.00........................... (13)
10.20 Pledge Agreement dated April 15, 1999 between John R.
Bragg and Alabama National BanCorporation................ (13)
10.21 Promissory Note dated April 15, 1999 executed by John H.
Holcomb, III in favor of Alabama National BanCorporation
in the principal amount of $93,747.00.................... (13)
10.22 Promissory Note dated April 15, 1999 executed by John H.
Holcomb, III in favor of Alabama National BanCorporation
in the principal amount of $83,400.00.................... (13)
10.23 Pledge Agreement dated April 15, 1999 between John H.
Holcomb, III and Alabama National BanCorporation......... (13)
10.24 Promissory Note dated April 15, 1999 executed by William
E. Matthews, V in favor of Alabama National
BanCorporation in the principal amount of $109,570.00.... (13)
10.25 Promissory Note dated April 15, 1999 executed by William
E. Matthews, V in favor of Alabama National
BanCorporation in the principal amount of $28,000.00..... (13)
10.26 Pledge Agreement dated April 15, 1999 between William E.
Matthews, V and Alabama National BanCorporation.......... (13)
10.27 Promissory Note dated April 15, 1999 executed by Richard
Murray, IV in favor of Alabama National BanCorporation in
the principal amount of $111,739.00...................... (13)
10.28 Promissory Note dated April 15, 1999 executed by Richard
Murray, IV in favor of Alabama National BanCorporation in
the principal amount of $29,400.00....................... (13)
10.29 Pledge Agreement dated April 15, 1999 between Richard
Murray, IV and Alabama National BanCorporation.......... (13)
10.30 Promissory Note dated April 15, 1999 executed by Victor E.
Nichol, Jr. in favor of Alabama National BanCorporation
in the principal amount of $99,558.00.................... (13)
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Reference
------- ----------- ---------
<C> <S> <C>
10.31 Promissory Note dated April 15, 1999 executed by Victor E.
Nichol, Jr. in favor of Alabama National BanCorporation
in the principal amount of $23,360.00.................... (13)
10.32 Pledge Agreement dated April 15, 1999 between Victor E.
Nichol, Jr. and Alabama National BanCorporation.......... (13)
10.33 Promissory Note dated April 15, 1999 executed by William
G. Sanders, Jr. in favor of Alabama National
BanCorporation in the principal amount of $109,833.00.... (13)
10.34 Promissory Note dated April 15, 1999 executed by William
G. Sanders, Jr. in favor of Alabama National
BanCorporation in the principal amount of $18,283.30..... (14)
10.35 Pledge Agreement dated April 15, 1999 between William G.
Sanders, Jr. and Alabama National BanCorporation......... (13)
10.36 Alabama National BanCorporation 1999 Long-Term Incentive
Plan..................................................... (15)
10.37 Alabama National BanCorporation Employee Capital
Accumulation Plan (amended and restated effective
January 1, 2000)......................................... (15)
11.1 Statement Regarding Computation of Per Share Earnings..... (15)
21.1 Subsidiaries of Alabama National BanCorporation........... (15)
23.1 Consent of PricewaterhouseCoopers LLP..................... (15)
27.1 Financial Data Schedule................................... (15)
</TABLE>
- --------
(1) Filed as an Exhibit to ANB's Annual Report on Registration Statement on
Form S-1 (Registration No. 33-83800) and incorporated herein by
reference.
(2) Filed as an Exhibit to ANB's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by reference.
(3) Filed as an Exhibit to ANB's Registration Statement on Form S-4
(Registration No. 33-97152) and incorporated herein by reference.
(4) Filed as an Exhibit to ANB's Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference.
(5) Filed as an Exhibit to ANB's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
(6) Filed as an Exhibit to ANB's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 and incorporated herein by reference.
(7) Filed as Appendix A to ANB's Registration Statement on Form S-4
(Registration No. 333-36565) and incorporated herein by reference.
(8) Filed as an Exhibit to ANB's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference.
(9) Filed as an Exhibit to ANB's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by reference.
(10) Filed as Appendix A to ANB's Registration Statement on Form S-4
(Registration No. 333-49771) and incorporated herein by reference.
(11) Filed as Appendix A to ANB's Registration Statement on Form S-4
(Registration No. 333-59813) and incorporated herein by reference.
(12) Filed as Appendix A to ANB's Registration Statement on Form S-4
(Registration No. 333-66327) and incorporated herein by reference.
48
<PAGE>
(13) Filed as an Exhibit to ANB's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 and incorporated herein by reference.
(14) Filed as an Exhibit to ANB's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 and incorporated herein by reference.
(15) Filed as an Exhibit to ANB's Annual Report on Form 10-K for the year ended
December 31, 1999.
49
<PAGE>
Alabama National BanCorporation and Subsidiaries
Consolidated Financial Statements
December 31, 1999 and 1998 and the
three years ended December 31, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Alabama National BanCorporation
In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of income, comprehensive
income, stockholders' equity, and cash flows present fairly, in all material
respects, the financial position of Alabama National BanCorporation and its
subsidiaries (the Company) at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
January 18, 2000
F-1
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998
(in thousands, except share data)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
ASSETS
------
<S> <C> <C>
Cash and due from banks................................ $ 73,125 $ 70,813
Interest-bearing deposits in other banks............... 6,768 225
Investment securities (market value $19,738 and $35,214
for 1999 and 1998, respectively)...................... 19,616 34,655
Securities available for sale.......................... 325,507 289,558
Trading securities..................................... 2,701 5,534
Federal funds sold and securities purchased under
agreements to resell.................................. 33,568 57,076
Loans held for sale.................................... 8,615 19,047
Loans.................................................. 1,321,245 1,088,425
Unearned income........................................ (1,085) (1,398)
---------- ----------
Loans, net of unearned income.......................... 1,320,160 1,087,027
Allowance for loan losses.............................. (18,068) (16,540)
---------- ----------
Net loans.......................................... 1,302,092 1,070,487
---------- ----------
Property, equipment, and leasehold improvements, net... 43,855 38,875
Intangible assets...................................... 10,730 8,226
Cash surrender value of life insurance................. 31,642 29,669
Receivable from investment division customers.......... 24,573 22,776
Other assets........................................... 39,092 25,108
---------- ----------
$1,921,884 $1,672,049
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Deposits:
Noninterest bearing.................................. $ 210,185 $ 232,450
Interest bearing..................................... 1,231,970 1,042,725
---------- ----------
Total deposits..................................... 1,442,155 1,275,175
---------- ----------
Federal funds purchased and securities sold under
agreements to repurchase............................. 131,878 162,633
Treasury, tax and loan accounts....................... 6,199 1,506
Short-term borrowings................................. 18,389 21,700
Accrued expenses and other liabilities................ 61,003 47,714
Long-term debt........................................ 124,005 32,328
---------- ----------
Total liabilities.................................. 1,783,629 1,541,056
---------- ----------
Commitments and contingencies (see Notes 9 and 10)
Stockholders' equity:
Common stock, $1 par; authorized 17,500,000 shares;
11,187,019 and 10,971,686 shares issued at December
31, 1999 and December 31, 1998, respectively........ 11,187 10,972
Additional paid-in capital........................... 81,939 78,570
Retained earnings.................................... 54,897 40,584
Treasury stock at cost, 121,129 shares at December
31, 1999............................................ (3,226)
Unearned ESOP shares................................. (75)
Accumulated other comprehensive income (loss), net of
tax................................................. (6,542) 942
---------- ----------
Total stockholders' equity......................... 138,255 130,993
---------- ----------
$1,921,884 $1,672,049
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1999, 1998, and 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans........................... $102,340 $92,208 $85,342
Interest on securities............................... 20,456 18,870 15,565
Interest on deposits in other banks.................. 110 106 55
Interest on trading securities....................... 356 264 193
Interest on federal funds sold....................... 2,406 4,256 3,353
-------- ------- -------
Total interest income............................... 125,668 115,704 104,508
-------- ------- -------
Interest expense:
Interest on deposits................................. 47,589 46,415 40,688
Interest on federal funds purchased.................. 7,258 6,807 4,527
Interest on short- and long-term borrowings.......... 4,436 3,333 3,164
-------- ------- -------
Total interest expense.............................. 59,283 56,555 48,379
-------- ------- -------
Net interest income................................. 66,385 59,149 56,129
Provision for loan losses.............................. 1,954 1,796 3,421
-------- ------- -------
Net interest income after provision for loan
losses............................................. 64,431 57,353 52,708
-------- ------- -------
Noninterest income:
Securities (losses) gains............................ 190 174 (2)
Gain (loss) on disposition of assets and deposits.... 249 247 (497)
Service charges on deposit accounts.................. 7,479 7,259 6,599
Investment services commission income................ 10,097 11,508 8,162
Trust department income.............................. 2,190 2,101 1,799
Origination and sale of mortgages.................... 3,993 4,303 1,644
Insurance commissions................................ 1,068
Bank owned life insurance............................ 1,504 1,167 39
Gain on pension curtailment.......................... 819
Other................................................ 2,968 2,591 2,550
-------- ------- -------
Total noninterest income............................ 30,557 29,350 20,294
-------- ------- -------
Noninterest expense:
Salaries and employee benefits....................... 37,452 36,021 29,992
Occupancy and equipment expense...................... 7,265 6,724 6,622
Other................................................ 17,738 18,409 16,174
-------- ------- -------
Total noninterest expense........................... 62,455 61,154 52,788
-------- ------- -------
Income before provision for income taxes and minority
interest in earnings of consolidated subsidiaries..... 32,533 25,549 20,214
Provision for income taxes............................. 10,237 8,154 6,086
-------- ------- -------
Income before minority interest in earnings of
consolidated subsidiaries............................. 22,296 17,395 14,128
Minority interest in earnings of consolidated
subsidiaries.......................................... 25 23 12
-------- ------- -------
Net income available for common shares.............. $ 22,271 $17,372 $14,116
======== ======= =======
Net income per common share (basic).................... 2.01 1.61 1.34
======== ======= =======
Weighted average common shares outstanding (basic)..... 11,079 10,804 10,552
======== ======= =======
Net income per common share (diluted).................. 1.98 1.55 1.28
======== ======= =======
Weighted average common and common equivalent shares
outstanding (diluted)................................. 11,273 11,173 10,999
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 1999, 1998, and 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Net income........................................... $ 22,271 $17,372 $14,116
Other comprehensive income:
Unrealized gains (losses) on securities available
for sale arising during the period................ (11,166) 773 1,585
Less: Reclassification adjustment for net gains
(losses) included in net income..................... 190 174 (2)
-------- ------- -------
Other comprehensive income (loss), before tax........ (11,356) 599 1,587
Provision for (benefit from) income taxes related to
items of other comprehensive income (expense)....... (3,872) 202 571
-------- ------- -------
Other comprehensive income (loss), net of tax........ (7,484) 397 1,016
-------- ------- -------
Comprehensive income, net of tax..................... $ 14,787 $17,769 $15,132
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended December 31, 1999, 1998, and 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
Accumulated
Other
Additional Unearned Comprehensive
Common Paid-In Retained Restricted Unearned Treasury Income (Loss) Total
Shares Stock Capital Earnings Stock ESOP Stock Net of Tax Equity
---------- ------- ---------- -------- ---------- -------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996.................... 10,082,968 $10,083 $77,805 $18,073 $(185) $(100) $ (471) $105,205
Net income.............. 14,116 14,116
Stock split of merged
bank.................... 414,174 414 (408) (6) --
Distribution for
fractional shares....... (399) (11) (3) (14)
Conversion of
debentures.............. 25,199 25 80 105
Issuance of restricted
stock................... 1,493 1 33 34
Common stock dividends
declared ($0.46 per
share).................. (3,342) (3,342)
Exercise of stock
options................. 75,168 75 (431) (356)
Shares released by
ESOP.................... 2 13 15
Amortization of unearned
restricted stock........ 93 93
Issuance of shares
associated with director
deferred
compensation plans...... 4,379 5 80 85
Proportional reduction
in consolidated
subsidiary.............. (69) (69)
Change in other
comprehensive income,
net of taxes............ 1,016 1,016
---------- ------- ------- ------- ----- ----- ------- ------- --------
Balance, December 31,
1997.................... 10,602,982 10,603 77,081 28,838 (92) (87) 545 116,888
Net income.............. 17,372 17,372
Common stock dividends
declared ($0.60 per
share).................. (5,626) (5,626)
Exercise of stock
options................. 368,704 369 1,489 1,858
Shares released by
ESOP.................... 12 12
Amortization of unearned
restricted stock........ 92 92
Change in other
comprehensive income,
net of taxes............ 397 397
---------- ------- ------- ------- ----- ----- ------- ------- --------
Balance, December 31,
1998.................... 10,971,686 10,972 78,570 40,584 -- (75) 942 130,993
Net income.............. 22,271 22,271
Common stock dividends
declared ($0.72 per
share).................. (7,958) (7,958)
Exercise of stock
options................. 94,204 94 643 737
Shares released by
ESOP.................... 75 75
Issuance of stock in
purchase business
combination............. 121,129 121 2,726 2,847
Purchase of treasury
stock at cost........... $(3,226) (3,226)
Change in other
comprehensive income
(loss), net of taxes.... (7,484) (7,484)
---------- ------- ------- ------- ----- ----- ------- ------- --------
Balance, December 31,
1999.................... 11,187,019 $11,187 $81,939 $54,897 $ -- $ -- $(3,226) $(6,542) $138,255
========== ======= ======= ======= ===== ===== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999, 1998, and 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 22,271 $ 17,372 $ 14,116
Adjustments to reconcile net income to net
cash provided by
operating activities:
Provision for loan losses................. 1,954 1,796 3,421
Deferred tax benefit...................... (1,570) (595) (1,191)
Depreciation and amortization............. 3,794 3,255 2,774
Loss (gain) on disposal of property and
equipment................................ 9 (142) 499
Securities (gain) loss.................... (190) (174) 2
Gain on other real estate................. (68) (15) (65)
Income earned on bank life insurance...... (1,504) (1,167)
Net amortization of securities............ 326 254 57
Net increase (decrease) in trading securi-
ties..................................... 2,833 (5,135) 1,537
Minority interest in earnings of consoli-
dated subsidiaries....................... 25 23 12
(Increase) decrease in other assets....... (12,649) 22,692 (45,912)
Increase (decrease) in other liabilities.. 14,399 (12,809) 46,718
Other..................................... 75 73 107
--------- --------- ---------
Net cash provided by operating activi-
ties................................... 29,705 25,428 22,075
--------- --------- ---------
Cash flows from investing activities:
Purchases of investment securities ......... (1,700)
Proceeds from calls and maturities of in-
vestment securities........................ 14,998 31,214 24,197
Purchases of securities available for sale.. (251,607) (248,716) (113,168)
Proceeds from sales of securities available
for sale................................... 6,139 1,236 6,835
Proceeds from calls and maturities of secu-
rities available for sale.................. 198,070 157,779 44,103
Net decrease (increase) in interest-bearing
deposits in other banks.................... (6,543) 2,166 (2,142)
Net decrease (increase) in federal funds
sold and securities
purchased under agreements to resell....... 23,508 21,759 (27,210)
Net increase in loans....................... (224,248) (141,575) (95,038)
Purchases of property, equipment, and lease-
hold improvements.......................... (7,973) (5,172) (6,773)
Proceeds from sale of property, equipment,
and leasehold
improvements............................... 117 299 767
Proceeds from sale of other real estate
owned...................................... 1,824 2,523 1,537
Costs capitalized on other real estate
owned...................................... (115) (118) (514)
Cash paid for bank-owned life insurance..... (1,000) (21,900)
Purchase acquisitions, net of cash ac-
quired..................................... (114) 14,483
Stock acquired for purchase business combi-
nation..................................... (3,226)
--------- --------- ---------
Net cash used in investing activities..... (249,170) (179,605) (176,523)
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
For the years ended December 31, 1999, 1998, and 1997
(in thousands, except share data)
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
-------- -------- --------
Cash flows from financing activities:
Net increase in deposits....................... 166,980 149,696 114,171
Increase (decrease) in federal funds purchased
and securities sold under
agreements to repurchase...................... (30,755) 21,196 46,037
Net increase (decrease) in short and long-term
borrowings and capital
leases........................................ 92,773 4,650 (5,571)
Exercise of stock options...................... 737 1,858 (356)
Dividends on common stock...................... (7,958) (5,626) (3,342)
Distribution for fractional shares............. (14)
-------- -------- --------
Net cash provided by financing activities.. 221,777 171,774 150,925
-------- -------- --------
Increase (decrease) in cash and cash equiv-
alents.................................... 2,312 17,597 (3,523)
Cash and cash equivalents, beginning of year..... 70,813 53,216 56,739
-------- -------- --------
Cash and cash equivalents, end of year........... $ 73,125 $ 70,813 $ 53,216
======== ======== ========
Supplemental disclosures of cash flow informa-
tion:
Cash paid for interest......................... $ 58,292 $ 54,886 $ 48,653
======== ======== ========
Cash paid for income taxes..................... $ 12,988 $ 4,810 $ 7,070
======== ======== ========
Supplemental schedule of noncash investing activ-
ities:
Foreclosure of other real estate owned......... $ 1,121 $ 1,771 $ 992
======== ======== ========
Transfer of property to other real estate
owned......................................... $ 97
========
Reduction in proportional interest in consoli-
dated subsidiary.............................. $ 69
========
(Increase) decrease in unrealized holding
(gain) loss on securities
available for sale............................ $ 7,484 $ (397) $ (1,016)
======== ======== ========
Unearned restricted stock and performance plan
awards........................................ $ 93 $ 178
======== ========
Conversion of debentures....................... $ 105
========
Assets acquired and liabilities assumed in
merger transactions (Note 2):
Assets acquired in business combination...... $ 3,704 $ 6,290
======== ========
Liabilities assumed in business combination.. $ 721 $ 22,120
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Alabama National Bancorporation and Subsidiaries (the Company) provides a
full range of banking and bank-related services to individual and corporate
customers through its ten subsidiary banks located in Alabama, Georgia, and
Florida.
Basis of Presentation and Principles of Consolidation--The accounting and
reporting policies of the Company conform with generally accepted accounting
principles and with general financial service industry practices. The
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates--In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the statement of condition dates and revenues and
expenses for the periods shown. Actual results could differ from those
estimates.
Cash and Cash Equivalents--For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and due from banks.
Securities--Investment securities are stated at amortized cost as a result
of management's ability and intent to hold the securities until maturity.
Related premiums are amortized and discounts are accreted on the effective
interest method.
Securities available for sale are those securities intended to be held for
an indefinite period of time. The Company may sell these securities as part of
its asset/liability strategy in response to changes in interest rates, changes
in prepayment risk, or similar factors. Securities available for sale are
recorded at market value. Unrealized holding gains and losses on securities
classified as available for sale are carried as a separate component of
stockholders' equity.
Trading securities, principally obligations of U.S. government agencies,
are securities held for sale and are stated at market. Bond purchases and
sales are recorded on the trade date. Accounts receivable from and accounts
payable to bond customers and dealers are included in other assets and
liabilities and represent security transactions entered into for which the
securities have not been delivered. Unrealized holding gains and losses on
securities classified as trading are reported in earnings.
Gains and losses on the sale of securities are computed using the specific
identification method.
Loans and Allowance for Loan Losses--Interest income with respect to loans
is accrued on the principal amount outstanding, except for interest on certain
consumer loans which is recognized over the term of the loan using a method
which approximates level yields.
Certain impaired loans are reported at the present value of expected future
cash flows using the loan's effective interest rate, or as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes the collection of principal is unlikely. The
allowance is the amount that management believes will be adequate to absorb
possible losses on existing loans which may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
loan problems, and current economic conditions which may affect the borrower's
ability to pay. Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that the collection
of interest is doubtful. Payments received on such loans are applied first to
principal until the obligation is satisfied. Any remaining payments are then
recorded as interest income.
F-8
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property, Equipment, and Leasehold Improvements--Property, equipment, and
leasehold improvements are stated at cost less accumulated depreciation and
amortization. Depreciation is principally computed using the straight-line
method over the estimated useful life of each type of asset. Leasehold
improvements are amortized using the straight-line method over the shorter of
the estimated useful lives of the improvements or the terms of the related
leases. Maintenance and repairs are expensed as incurred; improvements and
betterments are capitalized. When items are retired or otherwise disposed of,
the related costs and accumulated depreciation are removed from the accounts
and any resulting gains or losses are credited or charged to income. Estimated
useful lives generally are as follows:
<TABLE>
<S> <C>
Buildings..................................................... 5-45 years
Leasehold improvements........................................ 10-30 years
Furniture, equipment, and vault............................... 3-30 years
</TABLE>
Other Real Estate--Other real estate, primarily property acquired by
foreclosure, is capitalized at the lower of fair value less estimated selling
costs or cost of the property or loan immediately prior to its classification
as other real estate. Other real estate is not depreciated and is carried at
the lower of cost or fair value less estimated selling costs. Losses,
representing the difference between the sales price and the carrying value of
the property, are recorded immediately, while gains on sales financed by the
Company are deferred until the initial and continuing investment by the
borrower equals or exceeds specified equity percentages. Gains on all other
sales are recorded immediately.
Intangible Assets--Intangible assets consist of the excess of cost over the
fair value of net assets of acquired businesses and core deposit assets. The
excess of cost over the fair value of net assets of acquired businesses, which
totaled $11,095,000 and $8,006,000, and had related accumulated amortization
of approximately $2,087,000 and $1,699,000 at December 31, 1999 and 1998,
respectively, is being amortized over periods ranging from 15 to 25 years,
principally using the straight-line method of amortization. Core deposit
intangibles, which totaled approximately $3,625,000 at both December 31, 1999
and 1998, and had related accumulated amortization of approximately $1,903,000
and $1,706,000 at December 31, 1999 and 1998, respectively, are being
amortized over 10 years using the straight-line method of amortization. The
carrying value of the excess of cost over net assets of subsidiaries acquired
is reviewed if facts and circumstances suggest that it may be impaired. If
warranted, analysis, including undiscounted income projections, are made to
determine if adjustments to the carrying value or amortization periods are
necessary. No such adjustments were required or made during the years ended
December 31, 1999 or 1998.
Software costs--Software costs with a recorded cost of approximately
$2,453,000 and $2,079,000 and related accumulated amortization of
approximately $1,933,000 and $1,747,000 are included in other assets at
December 31, 1999 and 1998, respectively. Amortization expense related to
these costs of approximately $202,000, $140,000, and $212,000 was recorded in
1999, 1998, and 1997, respectively.
Income Taxes--Deferred income taxes are provided on all temporary
differences between the financial reporting basis and the income tax basis of
assets and liabilities.
Stock-Based Employee Compensation--The Company uses a value-based method of
accounting for compensation costs. Compensation cost for stock-based employee
compensation arrangements is measured at the grant date based on the value of
the award and is recognized over the service period.
Advertising Costs--The Company expenses the costs of advertising when those
costs are incurred.
Collateral Requirements--The Company requires collateral for certain
transactions with retail and commercial customers. Specifically, margin loans
made for the purpose of borrowing against marketable investment securities
generally do not exceed 50% of the total market value of a customer's
marginable securities portfolio at the time of the transaction or any time
thereafter. Repurchase agreements, limited to commercial
F-9
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
customers, generally do not exceed the market value of securities used to
secure such transactions at the time of the transaction or thereafter. Federal
funds sold are made to correspondent banks on an unsecured basis and generally
do not exceed limits established for each bank resulting from evaluation of
the bank's financial position.
Reclassifications--Certain reclassifications have been made to the prior
year financial statements to conform with the 1999 presentation.
Recently Issued Accounting Standards--In June 1998, the FASB issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (Statement 133). Statement 133 standardizes
the accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, by requiring that an entity recognize
those items as assets or liabilities in the statement of financial position
and measure them at fair value. If certain conditions are met, an entity may
elect to designate a derivative instrument as a hedging instrument. Statement
133 generally provides for matching the timing of gain or loss recognition on
the hedging instrument with the recognition of (a) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged
risk or (b) the earnings effect of the hedged forecasted transaction.
Statement 133, as amended by Statement of Financial Accounting Standards No.
137, Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of SFAS No. 133, is effective for fiscal years beginning
after June 15, 2000, and is effective for interim periods in the initial year
of adoption. Management of the Company does not expect the adoption of
Statement 133 to have a material impact on its financial statements since the
Company does not enter into derivative instruments.
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 134, Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise, an amendment of FASB Statement No. 65 (Statement
134). Statement 134 amends Statement 65 to require that after the
securitization of mortgage loans held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sell or hold those
investments. Since the Company does not securitize mortgage loans, there has
been no financial statement impact since the adoption of this statement.
2. Business Combinations
On December 31, 1998, Community Bank of Naples, N.A. (Naples),
headquartered in Naples, Florida, was merged (the Naples Merger) into the
Company. On October 2, 1998, Community Financial Corporation (CFC), a one bank
holding company headquartered in Mableton, Georgia, was merged (the CFC
Merger) into the Company. Public Bank Corporation (Public), a one bank holding
company headquartered in St. Cloud, Florida, was merged (the Public Merger)
into the Company on May 29, 1998. A one bank holding company headquartered in
Decatur, Alabama, First American Bancorp (FAB), was merged (the FAB Merger)
into the Company on November 30, 1997.
Additional information related to these mergers is presented in the
following table:
<TABLE>
<CAPTION>
Year-To-Date
Shares of Net Interest Year-To-Date
Company Total Assets at Income at Date Net Income at
Common Stock Date of Merger of Merger Date of Merger
Merger Issued (Approximately) (Approximately) (Approximately)
- ------ ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Naples............ 532,608 $ 92,600,000 $ 2,800,000 $ 43,000
CFC............... 1,076,032 $138,900,000 $ 4,000,000 $1,400,000
Public............ 549,913 $ 53,300,000 $ 1,000,000 $ 374,000
FAB............... 2,107,966 $235,000,000 $10,600,000 $ 754,000
</TABLE>
F-10
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The consolidated financial statements of the Company give effect to these
mergers, all of which were accounted for as poolings of interests and,
accordingly, financial statements for all periods have previously been
restated to reflect the results of operations of the companies on a combined
basis from the earliest period presented, except for dividends per share.
In the third quarter of 1999, the Board of Directors of the Company
authorized the repurchase of 121,129 shares of common stock. This repurchase,
which was completed during the third quarter at a cost of approximately
$3,226,000, was specifically related to the Company's issuance of an identical
number of shares to acquire Rankin Insurance Agency during May 1999 in a
purchase business combination. The pro forma impact of this purchase business
combination on the Company's financial statements for the periods prior to
acquisition is not significant and, thus, is not presented herein.
3. Securities
The amortized costs and estimated market values of investment securities
(carried at amortized cost) and securities available for sale (carried at
market value) are as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Investment securities:
U.S. treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 279 $ 279
Obligations of states and political
subdivisions....................... 8,942 $122 9,064
Mortgage backed securities issued or
guaranteed by U.S. government
agencies........................... 10,395 13 $ 13 10,395
-------- ---- ------ --------
Totals............................ $ 19,616 $135 $ 13 $ 19,738
======== ==== ====== ========
Securities available for sale:
U.S. treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 99,167 $3,447 $ 95,720
Obligations of states and political
subdivisions....................... 24,909 $ 4 370 24,543
Mortgage backed securities issued or
guaranteed by U.S. government
agencies........................... 202,646 6,071 196,575
Equity securities................... 8,675 6 8,669
-------- ---- ------ --------
Totals............................ $335,397 $ 4 $9,894 $325,507
======== ==== ====== ========
</TABLE>
F-11
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Investment securities:
U.S. treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 3,394 $ 21 $ 3,415
Obligations of states and political
subdivisions....................... 9,673 414 10,087
Mortgage-backed securities issued or
guaranteed by U.S. government
agencies........................... 21,588 143 $ 19 21,712
-------- ------ ---- --------
Totals............................ $ 34,655 $ 578 $ 19 $ 35,214
======== ====== ==== ========
Securities available for sale:
U.S. treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 94,754 $ 429 $473 $ 94,710
Obligations of states and political
subdivisions....................... 25,659 735 17 26,377
Mortgage-backed securities issued or
guaranteed by U.S. government
agencies........................... 160,589 1,116 263 161,442
Equity securities................... 7,090 61 7,029
-------- ------ ---- --------
Totals............................ $288,092 $2,280 $814 $289,558
======== ====== ==== ========
</TABLE>
Maturities of securities at December 31, 1999 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Investment
Securities Available for Sale
------------------- -------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due in one year or less............ $ 570 $ 571 $ 8,640 $ 8,632
Due after one year through five
years............................. 5,755 5,827 66,788 64,988
Due after five years through ten
years............................. 2,628 2,675 45,462 43,701
Due after ten years................ 268 270 3,186 2,942
Mortgage-backed securities......... 10,395 10,395 202,646 196,575
Equity securities.................. 8,675 8,669
------- ------- -------- --------
Totals........................... $19,616 $19,738 $335,397 $325,507
======= ======= ======== ========
</TABLE>
During 1999, gross gains of $190,000 were realized on the sale of securities
and there were no gross realized losses.
During 1998, gross gains of $174,000 were realized on the sale of securities
and there were no gross realized losses.
During 1997, gross gains of $12,000 and gross losses of $14,000 were
realized on the sale of securities.
Equity securities are comprised primarily of Federal Home Loan Bank and
Federal Reserve Bank stock; these holdings are required under regulatory
guidelines.
F-12
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Loans and Other Real Estate
Major classification of loans at December 31, 1999 and 1998 are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Commercial, financial, and agricultural.............. $ 257,047 $ 257,409
Real estate.......................................... 878,897 659,320
Consumer............................................. 73,388 77,187
Other................................................ 111,913 94,509
---------- ----------
Gross loans.......................................... 1,321,245 1,088,425
Less unearned income................................. (1,085) (1,398)
---------- ----------
Loans, net of unearned income........................ 1,320,160 1,087,027
Less allowance for loan losses....................... (18,068) (16,540)
---------- ----------
Net loans............................................ $1,302,092 $1,070,487
========== ==========
</TABLE>
In the normal course of business, loans are made to directors, officers,
and their affiliates. Such loans are made on substantially the same terms as
to other customers of the banks. The aggregate of such loans was $50,992,000
and $43,672,000 at December 31, 1999 and 1998, respectively. During 1999 and
1998, new loans of $32,517,000 and $38,163,000 were funded and repayments
totaled $25,197,000 and $30,675,000, respectively.
Loans on which the accrual of interest has been discontinued or reduced
amounted to approximately $4,146,000 and $4,357,000 at December 31, 1999 and
1998, respectively. If the loans of the Company had been current throughout
their terms, gross interest income for the years ended December 31, 1999 and
1998, respectively, would have increased by approximately $392,000 and
$384,000.
Other real estate at December 31, 1999 and 1998 totaled $687,000 and
$1,234,000, respectively.
At December 31, 1999 and 1998, the recorded investment in loans for which
impairment has been recognized totaled $4,573,000 and $4,843,000,
respectively, and these loans had a corresponding valuation allowance of
$202,000 and $270,000. The Company recognized no interest on impaired loans
during the portion of the year that they were impaired. The impaired loans at
December 31, 1999 and 1998 were measured for impairment primarily using the
fair value of the collateral.
The Company grants real estate, commercial, and consumer loans to customers
primarily in Alabama, Georgia, and Florida. Although the Company has a
diversified loan portfolio, significant concentrations include loans
collateralized by improved and undeveloped commercial and residential real
estate.
5. Allowance for Loan Losses
A summary of the allowance for loan losses for the years ended December 31,
1999, 1998, and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Balance, beginning of year........................ $16,540 $14,844 $12,633
Provision charged to operations................... 1,954 1,796 3,421
------- ------- -------
18,494 16,640 16,054
------- ------- -------
Loans charged off................................. (1,277) (1,864) (2,927)
Recoveries........................................ 851 1,764 1,717
------- ------- -------
Net charge-offs................................... (426) (100) (1,210)
------- ------- -------
Balance, end of year.............................. $18,068 $16,540 $14,844
======= ======= =======
</TABLE>
F-13
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Property, Equipment, and Leasehold Improvements
Major classifications of property, equipment, and leasehold improvements at
December 31, 1999 and 1998 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Land........................................................ $10,493 $ 8,779
Buildings and improvements.................................. 28,166 23,775
Leasehold improvements...................................... 6,066 4,842
Furniture, equipment, and vault............................. 22,054 18,827
Construction in progress.................................... 2,117 1,803
------- -------
68,896 58,026
Less accumulated depreciation and amortization.............. 25,041 19,151
------- -------
Property, equipment, and leasehold improvements, net........ $43,855 $38,875
======= =======
</TABLE>
7. Deposits
Deposits at December 31, 1999 and 1998 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Demand deposit accounts............................... $ 210,185 $ 232,450
NOW accounts.......................................... 217,883 187,481
Savings and money market accounts..................... 296,723 298,817
Time deposits less than $100,000...................... 492,328 403,156
Time deposits of $100,000 or more..................... 225,036 153,271
---------- ----------
Total deposits........................................ $1,442,155 $1,275,175
========== ==========
</TABLE>
Certain directors of the Company, including their families and affiliated
companies, are deposit customers. Total deposits of these persons at December
31, 1999 and 1998 were approximately $26,696,000 and $24,048,000,
respectively.
8. Short and Long-Term Borrowings
Short-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Note payable to third-party bank under secured master note
agreement; rate varies with LIBOR and was 7.2113% and
6.3191% at December 31, 1999 and 1998, respectively;
collateralized by the Company's stock in subsidiary
banks..................................................... $16,389 $11,500
FHLB debt due January 31, 1999; interest at fixed rate of
5.24%; collateralized by FHLB stock and certain first
mortgage loans............................................ 1,000
FHLB debt due May 24, 1999; rate varies with LIBOR and was
5.2875% at December 31, 1998; collateralized by FHLB stock
and certain first mortgage loans.......................... 9,200
FHLB open ended notes payable, rate varies daily based on
the FHLB Daily Rate Credit interest price and was 4.55% at
December 31, 1999; collateralized by FHLB stock and
certain first mortgage loans.............................. 2,000
------- -------
Total short-term borrowings................................ $18,389 $21,700
======= =======
</TABLE>
F-14
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
FHLB debt due October 21, 2003; interest at fixed rate of
4.30%; convertible at the option of the FHLB on October
21, 2000 to a three month LIBOR advance; collateralized
by FHLB stock and certain first mortgage loans.......... $ 10,000 $10,000
FHLB debt due April 23, 2004; rate varies with LIBOR and
was 5.9425% at December 31, 1999; rate changes to 5.02%
from April 23, 2001 to April 23, 2004; convertible at
the option of the FHLB on April 23, 2001 to a three
month LIBOR advance; collateralized by FHLB stock and
certain first mortgage loans............................ 13,700
FHLB debt due March 26, 2008; interest at fixed rate of
5.51%; convertible at the option of the FHLB on March
26, 2003 to a three month LIBOR advance; collateralized
by FHLB stock and certain first mortgage loans.......... 5,000 5,000
FHLB debt due July 25, 2001; interest at fixed rate of
6.40%; collateralized by FHLB stock and pledged
available for sale securities with a carrying value of
$2,431,000 and $2,504,000 at December 31, 1999 and 1998,
respectively............................................ 2,000 2,000
FHLB debt due June 18, 2003; interest at fixed rate of
5.40%; convertible at the option of the FHLB on June 18,
2000 to a three month LIBOR advance; collateralized by
FHLB stock and certain first mortgage loans............. 5,000 5,000
FHLB debt due November 5, 2003; interest at fixed rate of
4.74%; convertible at the option of the FHLB on November
5, 2001 to a three month LIBOR advance; collateralized
by FHLB stock and certain first mortgage loans.......... 5,000 5,000
FHLB debt due August 7, 2009; interest at a fixed rate of
4.95%; convertible at the option of the FHLB on February
7, 2000 and any payment date thereafter; collateralized
by FHLB stock and certain first mortgage loans.......... 25,000
FHLB debt due July 11, 2002; interest at fixed rate of
5.78%; convertible at the option of the FHLB on July 12,
1999 to a three month LIBOR advance; collateralized by
FHLB stock and certain first mortgage loans............. 5,000
FHLB debt due July 30, 2004; interest at a fixed rate of
5.715%; convertible at the option of the FHLB on July
30, 2001 to a three-month LIBOR advance; collateralized
by FHLB stock and certain first mortgage loans.......... 5,000
FHLB debt due December 2, 2009; interest at a fixed rate
of 5.29%; convertible in whole at the option of the FHLB
on June 2, 2000; collateralized by FHLB stock, certain
first mortgage loans, and pledged available for sale
securities with a carrying value of $3,851,000 at
December 31, 1999....................................... 43,000
Capital leases payable................................... 266 328
-------- -------
Total long-term debt..................................... $124,005 $32,328
======== =======
</TABLE>
FHLB debt due October 12, 2001; interest rate varies with
LIBOR and reprices monthly; rate at December 31, 1999
was 6.05125%; collateralized by FHLB stock and certain
first mortgage loans.................................... 10,000
Various notes payable.................................... 39
F-15
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Aggregate maturities of long-term debt are as follows for fiscal years:
<TABLE>
<CAPTION>
<S> <C>
2000............................................................. $ 79
2001............................................................. 12,071
2002............................................................. 54
2003............................................................. 20,054
2004............................................................. 18,738
Thereafter....................................................... 73,009
--------
$124,005
========
</TABLE>
The note payable to a third-party bank at December 31, 1999 is payable in
full on May 31, 2000. Maximum borrowing under the secured master note
agreement is $20,000,000 and interest is payable quarterly. Total interest
expense paid on the note was $817,000 in 1999, $870,000 in 1998, and
$1,156,000 in 1997.
At December 31, 1999, the Company has $97,248,000 of available credit with
the FHLB in addition to the $125,700,000 above, $3,611,000 of available credit
with a regional financial institution, and federal funds lines of $162,100,000
with various correspondent banks, of which $103,525,000 remains available.
The Company has also pledged approximately $216,000,000 in loans to the
Federal Reserve Bank of Atlanta as collateral for a discount window credit
facility. At December 31, 1999, the Company had access to approximately
$170,000,000 under this facility, and had no outstanding borrowings.
The FHLB has a blanket lien on the Company's 1-4 family mortgage loans in
the amount of the outstanding debt.
Additional details regarding short-term debt are shown below (in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Average amount outstanding during the year........ $23,125 $22,697 $43,236
Maximum amount outstanding at any month end....... $58,922 $48,147 $50,600
Weighted average interest rate:
During year..................................... 5.65% 6.42% 6.16%
End of year..................................... 6.92% 5.83% 6.27%
</TABLE>
9. Leases
One of the Company's subsidiary banks leases its main office building from
a partnership, which includes a director and a stockholder of the Company,
under a noncancelable operating lease expiring in 2013. Leases classified as
capital leases include branch offices with a net book value of approximately
$196,000 at December 31, 1999. Additionally, several subsidiary banks lease
branch offices and equipment under operating leases.
F-16
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Minimum future rental payments for the capital and operating leases are as
follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
2000....................................................... $ 90 $ 1,439
2001....................................................... 75 1,480
2002....................................................... 54 1,475
2003....................................................... 54 1,476
2004....................................................... 41 1,435
Thereafter................................................. 10 10,747
---- -------
Total minimum payments..................................... 324 $18,052
=======
Less amount representing interest.......................... 59
----
Net capital lease obligation............................... $265
====
</TABLE>
Rent expense charged to operations under operating lease agreements for the
years ended December 31, 1999, 1998, and 1997 were approximately $1,268,000,
$1,342,000, and $1,350,000, respectively, of which $958,000, $968,000, and
$942,000, respectively, during 1999, 1998, and 1997 relate to leases with
related parties.
10. Commitments and Contingencies
In the normal course of business, the Company makes commitments to meet the
financing needs of its customers. These commitments include commitments to
extend credit and standby letters of credit. These instruments include, to
varying degrees, elements of credit risk in excess of the amount recognized in
the consolidated statements of condition. The Company's exposure to credit
risk is the extent of nonperformance by the counterparty to the financial
instrument for commitments to extend credit and standby letters of credit and
is represented by the contractual amount of those instruments. The Company
uses the same credit policies and procedures in making commitments and
conditional obligations as it does for loans.
At December 31, 1999 and 1998, unused commitments under lines of credit
aggregated approximately $426,779,000 and $276,877,000, of which $20,912,000
and $21,132,000 pertained to related parties, respectively. The Company
evaluates each customer's credit worthiness on an individual basis. The amount
of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable, inventory,
property, plant, and equipment, residential real estate and income-producing
commercial properties.
The Company had approximately $14,431,000 and $8,814,000 in irrevocable
standby letters of credit outstanding at December 31, 1999 and 1998, of which
$121,000 and $204,000 at December 31, 1999 and 1998, respectively, pertained
to related parties. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The collateral varies but may include accounts receivable,
inventory, property, plant, and equipment, and residential real estate for
those commitments for which collateral is deemed necessary.
The Company, in the normal course of business, is subject to various
pending and threatened litigation. Based on legal counsel's opinion,
management does not anticipate that the ultimate liability, if any, resulting
from such litigation will have a material adverse effect on the Company's
financial condition or results of operations.
11. Employee Benefit Plans
One of the subsidiary banks, National Bank of Commerce (NBC), has a defined
benefit pension plan covering substantially all employees of NBC. Effective
December 31, 1999, the Company ceased further benefit
F-17
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
accruals under the plan, resulting in a curtailment of the plan. The effect of
the curtailment was a $1,522,000 reduction in the projected benefit
obligation, which was offset by the recognition of a previously unrecognized
prior service cost of $13,000 and a portion of the unrecognized net loss of
$690,000. The net result of the curtailment was a recorded curtailment gain of
$819,000.
Benefits are based on years of service and the average monthly earnings for
the last sixty months of employment. The Company's policy is to use the
"projected unit credit" actuarial method for financial reporting purposes and
the "frozen entry age" actuarial method for funding purposes. The components
of net pension expense (income) for the years ended December 31, 1999, 1998,
and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Service cost............................................... $ 659 $ 505 $ 412
Interest cost.............................................. 334 261 210
Expected return on assets.................................. (360) (297) (209)
Amortization of transition (asset)/obligation.............. 2 (2) (2)
Amortization of prior service cost......................... (2) 2 2
Recognized net actuarial (gain)/loss....................... 54 23 12
----- ----- -----
Net periodic pension cost.................................. 687 492 425
----- ----- -----
Gain on curtailment........................................ (819)
----- ----- -----
Pension (income) expense................................... $(132) $ 492 $ 425
===== ===== =====
</TABLE>
The reconciliation of the beginning and ending balances of the projected
benefit obligation and plan assets, as well as disclosure of the plan's funded
status for the years ended December 31, 1999 and 1998, is as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Change in benefit obligation
Projected benefit obligation at end of prior year........... $ 4,975 $ 3,774
Service cost.............................................. 659 505
Interest cost............................................. 334 261
Actuarial (gain) loss..................................... (829) 464
Benefits paid............................................. (100) (29)
Curtailment............................................... (1,522)
------- -------
Projected benefit obligation at end of year................. $ 3,517 $ 4,975
======= =======
Change in plan assets
Fair value of plan assets at end of prior year.............. $ 3,737 $ 3,041
Actual return on plan assets.............................. (342) 303
Employer contributions.................................... 410 422
Benefits paid............................................. (100) (29)
------- -------
Fair value of plan assets at end of year.................... $ 3,705 $ 3,737
======= =======
Funded status
Plan assets less than (in excess of) projected benefit
obligation................................................. $ (188) $ 1,238
Unrecognized net loss....................................... (324) (1,195)
Unrecognized prior service cost............................. (15)
Unrecognized net asset at date of initial application....... 9 11
------- -------
Accrued pension liability (asset)........................... $ (503) $ 39
======= =======
</TABLE>
F-18
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Primary assumptions used to actuarially determine net pension expense are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Settlement (discount rate).................................... 7.50% 7.00% 7.50%
Expected long-term rate of return on plan assets.............. 9.00% 9.00% 9.00%
Salary increase rate.......................................... 4.25% 4.25% 4.25%
</TABLE>
The Company has a qualified employee benefit plan under Section 401(k) of
the Internal Revenue Code covering substantially all employees. Employees can
contribute up to 10% of their salary to the plan on a pre-tax basis and the
Company matches participants' contributions up to the first 2% of each
participant's salary. The Company's matching contribution charged to
operations related to this plan, as well as other plans of merged banks, was
$507,000, $431,000, and $375,000 for the years ended December 31, 1999, 1998,
and 1997, respectively.
The Company and certain subsidiary banks have deferred compensation plans
for the benefit of the Company's former chief executive officer. Payments
under the plans commence March 15, 1997 and March 15, 2002, or at his death,
if earlier, and continue for a period of 15 years. In connection with the
plans, the banks purchased single premium life insurance policies on the life
of the officer. At December 31, 1999, the cash surrender value of the policies
was $2,285,000. Additionally, the Company and several of its subsidiary banks
own life insurance policies to provide for the payment of death benefits
related to existing deferred compensation and supplemental income plans
maintained for the benefit of certain presidents, employees and directors of
such banks. The total cash surrender value of such policies at December 31,
1999 was $2,355,000.
The Company sponsors a Performance Share Plan (the PSP) to offer long-term
incentives in addition to current compensation to key executives. The criteria
for payment of performance share awards is based upon a comparison of the
Company's average return on average equity for an award period to that of a
comparison group of bank holding companies. If the Company's results are below
the median of the comparison group, no portion of the award is earned. If the
Company's results are at or above the 90th percentile, the award maximum is
earned. The vesting period for awards is four years. Under the plan, 400,000
shares have been reserved for issuances.
A base grant of 14,150 shares was made in each of the three years ended
December 31, 1999, 1998 and 1997. The market value per share was $26.75,
$26.38 and $19.25 at each grant date for the years ended December 31, 1999,
1998 and 1997, respectively. At December 31, 1999 and 1998, outstanding awards
of expected and maximum payouts were 87,446 and 94,945 shares, respectively.
Expense recorded for the PSP was $466,000, $411,000 and $105,000 in 1999, 1998
and 1997, respectively.
During 1997, the Company adopted a separate Performance Share Plan to
provide long-term incentives to non-employee directors of a subsidiary bank
(the Subsidiary PSP) and granted approximately 20,000 shares, with a market
value per share of $25.13, in 1997 to vest over a sixty-three month period.
The actual number of shares to be distributed in fiscal 2002 will depend on
the subsidiary bank's performance as well as certain conditions to be met by
the directors. At December 31, 1999, the expected and maximum payout was
18,261 shares, net of forfeitures. Expense recorded for the Subsidiary PSP was
$77,000, $96,000, and $24,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
During 1999, the Company adopted the 1999 Long Term Incentive Plan (the
Plan) which provides for the award of incentive and non-qualified stock
options, stock appreciation rights, restricted stock and performance awards to
eligible employees of the Company. The total number of shares of common stock
reserved and available for distribution under the Plan shall be 300,000
shares. Any awards under the Plan will be in addition to awards made under the
PSP. No awards have been made under the Plan as of December 31, 1999.
F-19
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with the 1998 and 1997 business combinations, the Company
assumed fixed stock option plans of the merged banks. Additionally, the
Company had fixed stock option plans with outstanding options granted prior to
1997. A summary of the status of the Company's fixed stock options as of
December 31, 1999, 1998 and 1997 and changes during each of the three years
then ended is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of year................ 330,057 $ 9.43 487,146 $ 7.98 585,777 $ 8.05
Granted................. 3,518 26.78 11,258 23.54 41,771 15.61
Exercised............... (94,204) 7.83 (168,347) 6.19 (140,402) (10.68)
------- ------ -------- ------ -------- -------
Outstanding, end of
year................... 239,371 $10.31 330,057 $ 9.43 487,146 $ 8.09
======= ====== ======== ====== ======== =======
Options exercisable, end
of year................ 231,913 258,785 260,509
======= ======== ========
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------
Remaining
Exercise Number Contractual Options
Price Outstanding Life Exercisable
-------- ----------- -------------- -----------
<S> <C> <C> <C>
$ 5.03.............................. 5,631 March 2004 5,631
$ 5.97.............................. 3,518 March 2005 3,518
$ 6.39.............................. 80,848 October 2002 80,848
$ 9.39.............................. 32,790 August 2006 25,332
$10.00.............................. 38,333 November 2004 38,333
$10.10.............................. 14,848 October 2004 14,848
$11.37.............................. 3,518 March 2006 3,518
$13.00.............................. 6,833 November 2005 6,833
$14.64.............................. 4,949 February 2006 4,949
$14.92.............................. 3,518 September 2006 3,518
$15.29.............................. 3,518 March 2007 3,518
$15.56.............................. 26,995 March 2007 26,995
$17.42.............................. 3,518 September 2006 3,518
$20.60.............................. 3,518 March 2008 3,518
$26.78.............................. 3,518 September 2006 3,518
$30.02.............................. 3,518 September 2006 3,518
------- -------
239,371 231,913
======= =======
</TABLE>
The per share weighted-average fair value of stock options granted during
1999, 1998 and 1997 was $6.17, $5.91 and $7.92, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions: 1999--expected volatility 25.0%, expected dividend yield
3.0%, risk-free interest rate of 6.0%, and an expected life of 7 years; 1998--
expected volatility .05%, expected dividend yield 1.0%, risk-free interest
rate of 5.0%, and an expected life of 7 years; and 1997--expected volatility
11.0%, expected dividend yield 0%, risk-free interest rate of 6.3%, and an
expected life of 9 years. Total compensation
F-20
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
expense recorded for the fixed stock option plans was $53,000, $90,000 and
$396,000 for the years ended December 31, 1999, 1998, and 1997, respectively.
As of December 31, 1999, the Company had 64,979 restricted shares of stock
outstanding pursuant to a Restricted Stock Agreement (RSA) which originated in
1994. As of August 31, 1999, the restrictions on the RSA stock lapsed and the
shares became fully transferable. The RSA provided for employees covered by
the plan to elect a cash award equal to an amount of personal income tax
liability resulting from the award. No dividends were permitted and the sale
or transfer of shares was restricted for five years. Shares awarded to
participants that left the Company prior to the completion of five years of
service following the award were required to be surrendered and were ratably
awarded to remaining participants. During the years ended December 31, 1998
and 1997, total expense for the RSA was $92,000 and $93,000, respectively.
Additionally, the Company and two of its subsidiary banks maintain deferral
of compensation plans for certain directors who are not employees of the
Company. Under the plans, a non-employee director may choose to have all or
part of the cash and/or stock equivalents he would normally receive as
compensation deferred for future payments at such time and in such manner as
the director specifies at the time of the election, so long as any annuity
payment period does not exceed ten years. The cash portion of the deferral of
compensation account earns interest at a rate which approximates the Company's
short-term borrowing rate. Dividends earned on stock equivalent portions are
credited to the deferral of compensation account in the form of additional
stock equivalents. At December 31, 1999 and 1998, the amount payable under the
terms of these plans totaled $875,000 and $457,000, respectively. For the
years ending December 31, 1999, 1998 and 1997, approximately $418,000,
$300,000 and $136,000, respectively, was expensed under these plans.
One of the Company's subsidiary banks has a deferred compensation plan
whereby directors may elect to have all or a portion of their compensation
deferred. Expense recognized under the plan was $18,000, $23,000 and $18,000
in 1999, 1998 and 1997, respectively. At December 31, 1999, amounts payable
under the plan totaled $81,000.
During 1999, the Company completed the termination of a merged bank's
leveraged employee stock ownership plan as a portion of the ESOP's unallocated
shares were sold on the open market in order to satisfy the ESOP's debt with
the remaining shares allocated to the participants. Compensation expense
related to the ESOP was not material to the Company for 1999, 1998 or 1997.
12. Income Taxes
The components of the provision for income taxes consist of the following
for the years ended December 31, 1999, 1998, and 1997 (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Current:
Federal.............................................. $10,722 $7,989 $6,482
State................................................ 1,085 760 796
------- ------ ------
Total current expense.................................. 11,807 8,749 7,278
Deferred:
Federal.............................................. (1,485) (655) (681)
State................................................ (85) 119 (99)
------- ------ ------
Total deferred benefit................................. (1,570) (536) (780)
Change in valuation allowance.......................... -- (59) (412)
------- ------ ------
Total provision for income taxes....................... $10,237 $8,154 $6,086
======= ====== ======
</TABLE>
F-21
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Temporary differences and carryforwards which give rise to a significant
portion of the Company's deferred tax assets and liabilities for the years
ended December 31, 1999 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Loan loss reserve.............................................. $5,762 $3,422
Other real estate owned basis difference....................... 7 28
Net operating loss............................................. 40 171
Deferred compensation.......................................... 1,630 931
Loan fees...................................................... 527 285
Unrealized loss on securities.................................. 3,424
Other.......................................................... 138 373
------ ------
Total deferred tax asset......................................... 11,528 5,210
Deferred tax liabilities:
Depreciation and basis difference.............................. 2,908 2,381
Unrealized gains on securities................................. 617
Other.......................................................... 251 14
Core deposits.................................................. 193 179
------ ------
Total deferred tax liabilities................................... 3,352 3,191
------ ------
Net deferred tax asset........................................... $8,176 $2,019
====== ======
</TABLE>
Total provision for income taxes differs from the amount which would be
provided by applying the statutory federal income tax rate to pretax earnings
as illustrated below for the years ended December 31, 1999, 1998, and 1997 (in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Provision for income taxes at statutory federal
income tax rate................................. $11,396 $8,687 $6,897
Increase (decrease) resulting from:
State income taxes, net of federal income tax
benefit....................................... 645 541 446
Change in valuation allowance.................. (59) (412)
Tax free interest income....................... (1,283) (677) (689)
Nondeductible meals and entertainment.......... 77 92 108
Disallowed interest expense deduction.......... 97 87 85
Goodwill and core deposit amortization......... 134 103 105
General business and other credits............. (830) (706) (614)
Net operating losses........................... (55) (61)
Other, net..................................... 141 221
------- ------ ------
Total provision for income taxes................. $10,236 $8,154 $6,086
======= ====== ======
</TABLE>
For Federal income tax purposes, one of the Company's subsidiaries has net
operating loss carryforwards totaling $488,000 and $504,000 at December 31,
1999 and 1998, respectively, which will expire beginning in 2006. For state
income tax purposes, two of the Company's subsidiaries have net operating loss
carryforwards and tax credits totaling $817,000 and $3,815,000 at December 31,
1999 and 1998, respectively.
F-22
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Noninterest Expense
The following table sets forth, for the years ended December 31, 1999,
1998, and 1997, the principal components of noninterest expense (in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Salaries and employee benefits...................... $37,452 $36,021 $29,992
Net occupancy expense............................... 7,265 6,724 6,623
Amortization of goodwill............................ 387 302 298
Advertising......................................... 1,028 976 1,445
Banking assessments................................. 482 473 441
Data processing expenses............................ 1,442 2,435 2,151
Legal and professional fees......................... 2,911 3,609 1,947
Noncredit losses (recoveries)....................... 206 129 283
Other............................................... 11,282 10,485 9,638
------- ------- -------
Total noninterest expense........................... $62,455 $61,154 $52,818
======= ======= =======
</TABLE>
14. Earnings Per Share
The following table reflects the reconciliation, after adjusting for stock
splits, of the basic EPS computation to the diluted EPS computation (in
thousands, except per share data):
<TABLE>
<CAPTION>
Per Share
Income Shares Amount
------- ------ ---------
<S> <C> <C> <C>
1999
Basic EPS net income................................ $22,271 11,079 $2.01
=====
Effect of dilutive securities options............... 194
------- ------
Diluted EPS......................................... $22,271 11,273 $1.98
======= ====== =====
1998
Basic EPS net income................................ $17,372 10,804 $1.61
=====
Effect of dilutive securities options............... 369
------- ------
Diluted EPS......................................... $17,372 11,173 $1.55
======= ====== =====
1997
Basic EPS net income................................ $14,116 10,552 $1.34
=====
Effect of dilutive securities options............... 447
------- ------
Diluted EPS......................................... $14,116 10,999 $1.28
======= ====== =====
</TABLE>
15. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
Cash, Due From Banks, Interest-Bearing Cash Balances, and Federal Funds
Sold--The carrying amount is a reasonable estimate of fair value.
Investment, Available for Sale, and Trading Securities--Fair value is based
on quoted market prices or dealer quotes.
F-23
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Loans--The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
Deposits--The fair value of demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated using
the rates currently offered for deposits of similar remaining maturities.
Federal Funds Purchased, Short-Term Borrowings, and Long-Term Debt--The
carrying amount is a reasonable estimate of fair value.
Commitments to Extend Credit and Standby Letters of Credit--All commitments
to extend credit and standby letters of credit have original terms, at their
issuance, of one year or less; therefore, the fair value of these instruments
does not materially differ from their stated value.
The estimated fair values of financial instruments at December 31, 1999 and
1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks.......... $ 73,125 $ 73,125 $ 70,813 $ 70,813
Interest-bearing deposits in
other banks..................... 6,768 6,768 225 225
Federal funds sold and securities
purchased under agreements to
resell.......................... 33,568 33,568 57,076 57,076
Investment securities and securi-
ties available for sale......... 345,123 345,245 324,213 324,772
Trading securities............... 2,701 2,701 5,534 5,534
Loans............................ 1,328,775 1,326,628 1,106,074 1,133,460
Financial liabilities:
Deposits......................... 1,442,155 1,440,919 1,275,175 1,284,915
Federal funds purchased;
securities sold under agreements
to resell; and treasury, tax,
and loan account................ 138,077 138,077 164,139 164,139
Short-term borrowings............ 18,389 18,389 21,700 21,700
Long-term debt................... 124,005 113,697 32,328 34,088
</TABLE>
F-24
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Parent Company
The condensed financial information of the parent company only for the
years ended December 31, 1999, 1998, and 1997 is presented as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Balance Sheets
Assets:
Cash..................................................... $ 3,964 $ 2,482
Securities available for sale............................ 81 337
Investments in subsidiaries.............................. 147,994 139,386
Intangibles.............................................. 6,466 6,669
Other assets............................................. 1,251 1,360
-------- --------
Total assets............................................... $159,756 $150,234
======== ========
Liabilities and stockholders' equity:
Accounts payable......................................... $ 4,899 $ 7,601
Accrued interest payable................................. 213 140
Short and long-term debt................................. 16,389 11,500
-------- --------
Total liabilities.......................................... 21,501 19,241
-------- --------
Stockholders' equity:
Common stock............................................. 11,187 10,972
Additional paid-in capital............................... 81,939 78,570
Retained earnings........................................ 54,897 40,584
Treasury stock........................................... (3,226)
Unearned ESOP............................................ (75)
Accumulated other comprehensive (loss) income, net of
taxes................................................... (6,542) 942
-------- --------
Total stockholders' equity................................. 138,255 130,993
-------- --------
Total liabilities and stockholders' equity................. $159,756 $150,234
======== ========
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
Statements of Income
<S> <C> <C> <C>
Income:
Dividends from subsidiaries......................... $11,909 $ 7,496 $10,421
Securities gains.................................... 148 139
Other............................................... 36 41 34
------- ------- -------
12,093 7,676 10,455
======= ======= =======
Expenses:
Interest expense.................................... 816 870 1,165
Other expenses...................................... 2,771 3,797 1,940
------- ------- -------
Total expenses........................................ 3,587 4,667 3,105
------- ------- -------
Income before equity in undistributed earnings of
subsidiaries......................................... 8,506 3,009 7,350
Equity in undistributed earnings of subsidiaries...... 12,578 13,059 5,816
------- ------- -------
Income before income taxes............................ 21,084 16,068 13,166
Income tax benefit.................................... 1,187 1,304 950
------- ------- -------
Net income............................................ $22,271 $17,372 $14,116
======= ======= =======
</TABLE>
F-25
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Statements of Cash Flows
Cash flows from operating activities:
Net income.......................................... $22,271 $17,372 $14,116
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of investment in consolidated
subsidiaries in excess of net assets acquired and
core deposits.................................... 338 334 369
Equity in undistributed earnings of subsidiaries.. (12,578) (13,059) (5,816)
Deferred tax (benefit) expense.................... (87) (474) 99
Other............................................. 285 222 285
Increase in other assets and liabilities.......... (2,620) 4,147 1,097
------- ------- -------
Net cash provided by operating activities....... 7,609 8,542 10,150
------- ------- -------
Cash flows from investing activities:
Additional investment in subsidiaries............... (1,500) (3,014)
Decrease (increase) in securities available for
sale............................................... 256 62 (194)
------- ------- -------
Net cash used in investing activities........... 256 (1,438) (3,208)
------- ------- -------
Cash flows from financing activities:
Dividends on common stock........................... (7,958) (5,626) (3,342)
Change in other liabilities......................... (303) (438)
Exercise of stock options........................... 215 1,858 82
Distribution for fractional shares.................. (14)
Net (decrease) increase in borrowings............... 4,889 (3,837) (1,763)
Stock acquired for purchase business combination.... (3,226)
------- ------- -------
Net cash used in financing activities........... (6,383) (7,605) (5,475)
------- ------- -------
Net (decrease) increase in cash................. 1,482 (501) 1,467
Cash, beginning of year............................. 2,482 2,983 1,516
------- ------- -------
Cash, end of year................................... $ 3,964 $ 2,482 $ 2,983
======= ======= =======
</TABLE>
17. Regulatory
The subsidiary banks are required by law to maintain reserves in cash or
deposits with the Federal Reserve Bank or other banks. At December 31, 1999,
the required reserves totaled $17,998,000.
At December 31, 1999 and 1998, securities with carrying values of
$178,398,000 and $176,794,000, respectively, were pledged to secure U.S.
government deposits and other public funds and for purposes as required or
permitted by law.
The Company has a policy of collecting amounts from its subsidiaries
sufficient to cover expenses of the Company and to service Company debt. Such
amounts have been received in the form of dividends declared by the
subsidiaries. Payment of dividends is subject to the financial condition of
the subsidiaries and the Company's judgment as to the desirability of
utilizing alternative sources of funds. The payment of dividends by the
subsidiary banks is also subject to various regulatory requirements. At
December 31, 1999, $40,137,000 of the retained earnings of the subsidiary
banks are available for payment of dividends to the Company under the various
regulatory requirements, without special approval from the applicable
regulators.
F-26
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory--and possibly additional
discretionary--actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Company's
capital amounts and classification are also subject to qualitative judgments
by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company maintain minimum amounts and ratios (set forth in the
table below) of total qualifying capital and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1999, that the Company meets all capital adequacy requirements to which it
is subject.
As of December 31, 1999, the most recent notification from the Federal
Reserve Bank categorized the Company as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized
the Company must maintain minimum total risk-based, Tier I risk-based, and
Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category.
The actual capital amounts and ratios of the Company are presented in the
table below (in thousands):
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
Corrective
For Capital Action
Actual Adequacy Purposes Provisions
-------------- ------------------- --------------
Amount Ratio Amount Ratio Amount Ratio
-------- ----- ---------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total qualifying capital
(to risk-weighted
assets).................. $152,790 10.62% $ 115,096 8.00% $143,870 10.00%
Tier I capital (to risk-
weighted assets)......... $134,922 9.38% $ 57,536 4.00% $ 86,304 6.00%
Tier I capital (to average
assets).................. $134,922 7.18% $ 75,165 4.00% $ 93,957 5.00%
As of December 31, 1998:
Total qualifying capital
(to risk-weighted
assets).................. $138,028 11.28% $ 97,891 8.00% $122,364 10.00%
Tier I capital (to risk-
weighted assets)......... $122,732 10.03% $ 48,946 4.00% $ 73,418 6.00%
Tier I capital (to average
assets).................. $122,732 7.41% $ 66,250 4.00% $ 82,813 5.00%
</TABLE>
F-27
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The actual capital amounts and ratios of National Bank of Commerce, the
Company's most significant subsidiary, are presented in the table below (in
thousands):
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
For Capital Corrective
Adequacy Action
Actual Purposes Provisions
------------- ------------- -------------
Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total qualifying capital (to
risk-weighted assets)........... $71,854 10.01% $57,426 8.00% $71,782 10.00%
Tier I capital (to risk-weighted
assets)......................... $63,454 8.84% $28,712 4.00% $43,068 6.00%
Tier I capital (to average as-
sets)........................... $63,454 7.26% $34,961 4.00% $43,701 5.00%
As of December 31, 1998:
Total qualifying capital (to
risk-weighted assets)........... $64,397 10.90% $47,278 8.00% $59,097 10.00%
Tier I capital (to risk-weighted
assets)......................... $57,010 9.65% $23,639 4.00% $35,458 6.00%
Tier I capital (to average as-
sets)........................... $57,010 7.33% $31,092 4.00% $38,866 5.00%
</TABLE>
18. Related Party Transactions
In addition to the previously disclosed related party transactions, the
Company received trust fees of approximately $629,000 in 1999, $700,000 in
1998, and $589,000 in 1997 from related parties.
19. Segment Reporting
In addition to traditional commercial and consumer retail banking products,
the Company offers trust services, mortgage lending services, investment
services and insurance services to its customers. The trust division manages
the assets of both corporate and individual customers located primarily in the
Birmingham, Alabama market. The mortgage lending division makes home loans to
individuals throughout the state of Alabama. The majority of the loans made
are sold to corporate investors, who also service the loans. The investment
services division sells fixed income and equity securities trading services to
both individual and corporate customers. The insurance division offers a full
line of insurance products including life, property and casualty insurance to
individual and corporate customers primarily in the state of Alabama. These
four divisions, along with the commercial and retail banking division, are
considered the Company's reportable segments for financial disclosure
purposes.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies except that certain overhead
expenses are not allocated among the segments. Additionally, the fixed assets
utilized by the various divisions are not separately identified by management.
Accordingly, the results of operations for the trust, mortgage lending,
investment banking, and insurance segments are not indicative of the results
which would be achieved if each of the segments were a separate company.
Intersegment transactions are accounted for at fair market value.
F-28
<PAGE>
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's reportable segments represent the distinct major product
lines the Company offers and are viewed separately for strategic planning
purposes by management. The following table is a reconciliation of the
reportable segment revenues, expenses, and profit to the Company's
consolidated totals (in thousands):
<TABLE>
<CAPTION>
Investment Mortgage Retail and
Services Trust Lending Insurance Commercial Corporate Elimination
Division Division Division(2) Division Banking Overhead(1) Entries Total
---------- -------- ----------- --------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31,
1999:
Interest income......... $ 2,531 $ 527 $ 16 $123,426 $ (93) $(739) $125,668
Interest expense........ 955 348 9 $ 57,894 816 (739) 59,283
------- ------ ----- -------- ------- ----- --------
Net interest income..... 1,576 179 7 65,532 (909) -- 66,385
Provision for loan
losses................. 1,954 1,954
Noninterest income...... 10,331 $2,190 4,240 1,068 12,544 184 30,557
Noninterest expense..... 10,238 1,149 3,043 875 44,472 $ 2,678 62,455
------- ------ ------ ----- -------- ------- ----- --------
Net income before
provision for income
taxes and minority
interest............... $ 1,669 $1,041 $1,376 $ 200 $ 31,650 $(3,403) $ -- $ 32,533
======= ====== ====== ===== ======== ======= ===== ========
Year ended December 31,
1998:
Interest income......... $ 1,564 $ 649 $114,381 $ (94) $(796) $115,704
Interest expense........ 401 395 55,685 870 (796) 58,555
------- ------ -------- ------- ----- --------
Net interest income..... 1,163 254 58,696 (964) -- 59,149
Provision for loan
losses................. 1,796 1,796
Noninterest income...... 11,754 $2,101 4,405 10,911 179 29,350
Noninterest expense..... 10,500 1,169 2,666 43,117 3,702 61,154
------- ------ ------ -------- ------- ----- --------
Net income before
provision for income
taxes and minority
interest............... $ 2,417 $ 932 $1,993 $ 24,694 $(4,487) $ -- $ 25,549
======= ====== ====== ======== ======= ===== ========
Year ended December 31,
1997:
Interest income......... $ 713 $ 545 $103,615 $ (116) $(249) $104,508
Interest expense........ 110 139 47,223 1,156 (249) 48,379
------- ------ -------- ------- ----- --------
Net interest income..... 603 405 56,392 (1,272) -- 56,129
Provision for loan
losses................. 3,421 3,421
Noninterest income...... 8,760 $1,779 1,644 8,078 13 20,294
Noninterest expense..... 8,369 1,105 1,504 40,004 $ 1,806 52,788
------- ------ ------ -------- ------- ----- --------
Net income before
provision for income
taxes and minority
interest............... $ 994 $ 694 $ 546 $ 21,045 $(3,065) $ -- $ 20,214
======= ====== ====== ======== ======= ===== ========
</TABLE>
- --------
(1) Corporate overhead is comprised of compensation and benefits for certain
members of management, merger related costs, interest expense, and the
amortization of intangibles.
(2) Mortgage lending includes allocated intercompany income totaling $247,000
and $102,000 at December 31, 1999 and 1998, respectively.
F-29
<PAGE>
Exhibit 10.6
------------
NATIONAL BANK OF COMMERCE PENSION PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I: DEFINITIONS.................................................. 1
Section 1.01. Accrued Benefit..................................... 1
Section 1.02. Act or ERISA........................................ 1
Section 1.03. Actuarial Equivalent................................ 1
Section 1.04. Actuary............................................. 2
Section 1.05. Affiliated Employer or Affiliate.................... 3
Section 1.06. Annual Compensation................................. 3
Section 1.07. Average Monthly Earnings............................ 6
Section 1.08. Board of Directors.................................. 7
Section 1.09. Break in Service.................................... 7
Section 1.10. Code................................................ 7
Section 1.11. Claimant............................................ 7
Section 1.12. Continuous Service.................................. 7
Section 1.13. Covered Service..................................... 9
Section 1.14. Deferred Retirement Date............................ 9
Section 1.15. Earliest Retirement Age and Early Retirement Date... 9
Section 1.16. Effective Date...................................... 9
Section 1.17. Employee............................................ 9
Section 1.18. Employer............................................ 9
Section 1.19. First Gulf Plan..................................... 10
Section 1.20. Former Participant.................................. 10
Section 1.21. Highly Compensated Employee, Highly Compensated
Former Employee, and Highly Compensated Participant. 10
Section 1.22. Hour of Service..................................... 12
Section 1.23. Investment Manager.................................. 12
Section 1.24. Key Employee........................................ 13
Section 1.25. Leased Employee..................................... 13
Section 1.26. Monthly Earnings.................................... 13
Section 1.27. Monthly Retirement Income........................... 14
Section 1.28. Named Fiduciary..................................... 14
Section 1.29. Non-Highly Compensated Participant.................. 14
Section 1.30. Non-Key Employee.................................... 14
Section 1.31. Normal Retirement Date.............................. 14
Section 1.32. Participant......................................... 14
Section 1.33. PBGC................................................ 14
Section 1.34. Plan................................................ 14
Section 1.35. Plan Administrator.................................. 14
Section 1.36. Plan Year........................................... 15
Section 1.37. Pre-retirement Survivor Annuity..................... 15
Section 1.38. Regulation.......................................... 15
Section 1.39. Required Beginning Date............................. 15
Section 1.40. Retired Participant................................. 15
Section 1.41. Service Year or Year of Service..................... 15
Section 1.42. Terminated Participant.............................. 16
Section 1.43. Top Heavy Plan...................................... 16
Section 1.44. Top Heavy Plan Year................................. 16
Section 1.45. Total and Permanent Disability...................... 16
Section 1.46. Trust Agreement..................................... 17
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 1.47. Trustee............................................. 17
Section 1.48 Trust Fund.......................................... 17
Section 1.49 USERRA.............................................. 17
Section 1.50. Vested.............................................. 17
ARTICLE II: PLAN ADMINISTRATION......................................... 17
Section 2.01. Named Fiduciary..................................... 17
Section 2.02. Allocation Of Fiduciary Responsibilities;
Designation Of A Plan Administrator................. 17
Section 2.03. Powers And Responsibilities Of The Employer......... 18
Section 2.04. Powers And Duties Of The Plan Administrator......... 19
Section 2.05. Powers And Duties Of The Trustee.................... 21
Section 2.06. Powers And Duties Of The Actuary.................... 21
Section 2.07. Claims For Benefits................................. 21
Section 2.08. Completion Of Forms And Submission Of Proof By
Participants........................................ 22
Section 2.09. Payment Of Expenses................................. 22
ARTICLE III: BENEFITS.................................................... 22
Section 3.01. Normal Retirement................................... 22
Section 3.02. Deferred Retirement................................. 24
Section 3.03. Early Retirement.................................... 24
Section 3.04. Total And Permanent Disability...................... 24
Section 3.05. Benefit Distribution................................ 25
Section 3.06. Distribution Of Benefits Upon Death................. 28
Section 3.07. Determination Of Accrued Benefits Upon Termination.. 32
Section 3.08. Lump Sum Distributions.............................. 33
Section 3.09. Maximum Benefit Payment Date........................ 36
Section 3.10. Suspension Of Benefits Upon Re-Employment Or
Continued Employment................................ 36
Section 3.11. Direct Rollover..................................... 38
Section 3.12. Appointment Of Guardian For Beneficiary............. 38
ARTICLE IV: CONTRIBUTION AND VALUATION.................................. 39
Section 4.01. Deposit Of Funds.................................... 39
Section 4.02. Payment Of Expenses................................. 39
Section 4.03. Periodic Actuarial Valuation........................ 39
Section 4.04. Funding Standard Account............................ 39
Section 4.05. Contributions By Mistake Of Fact.................... 39
Section 4.06. Contributions Conditioned On Deductibility.......... 39
ARTICLE V: TRUST FUND AND TRUST AGREEMENT.............................. 39
Section 5.01. Trust Fund.......................................... 39
Section 5.02. Trust Agreement..................................... 40
ARTICLE VI: MAXIMUM BENEFIT LIMITATIONS................................. 40
Section 6.01. General............................................. 40
Section 6.02. Annual Additions.................................... 42
Section 6.03. Annual Benefit...................................... 42
Section 6.04. Compensation........................................ 42
Section 6.05. Current Accrued Benefit............................. 43
Section 6.06. Defined Benefit Dollar Limitation................... 43
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 6.07. Defined Benefit Fraction............................ 43
Section 6.08. Defined Contribution Fraction....................... 44
Section 6.09. Employer............................................ 44
Section 6.10. Highest Average Compensation........................ 44
Section 6.11. Limitation Year..................................... 44
Section 6.12. Maximum Permissible Amount.......................... 45
Section 6.13. Projected Annual Benefit............................ 45
Section 6.14. Social Security Retirement Age...................... 46
Section 6.15. Year of Participation............................... 46
ARTICLE VII: TOP HEAVY PROVISIONS....................................... 46
Section 7.01. General............................................. 46
Section 7.02. Key Employee........................................ 46
Section 7.03. Top Heavy Plan...................................... 47
Section 7.04. Top Heavy Ratio..................................... 47
Section 7.05. Permissive Aggregation Group........................ 48
Section 7.06. Required Aggregation Group.......................... 48
Section 7.07. Determination Date.................................. 48
Section 7.08. Valuation Date...................................... 49
Section 7.09. Present Value....................................... 49
Section 7.10. Minimum Accrued Benefit............................. 49
Section 7.11. Vesting............................................. 49
ARTICLE VIII: AMENDMENT, MERGER, CONSOLIDATION OR TRANSFER OF
ASSETS..................................................... 50
Section 8.01. Plan Amendment...................................... 50
Section 8.02. Merger, Consolidation Or Transfer Of Assets......... 51
ARTICLE IX: PLAN TERMINATION........................................... 53
Section 9.01. Termination Of Plan................................. 53
Section 9.02. Limitation Of Benefits On Termination............... 55
ARTICLE X: MISCELLANEOUS PROVISIONS..................................... 57
Section 10.01. Headings And Subheadings Contained In Plan.......... 57
Section 10.02. Illegality Of Plan Provisions....................... 57
Section 10.03. Correction Of Misstatements......................... 57
Section 10.04. Singular And Plural Terms........................... 57
Section 10.05. Governing Law....................................... 57
Section 10.06. Voluntary Continuance Of The Plan By The Employer... 57
Section 10.07. Source Of Payment Of Benefits....................... 57
Section 10.08. Suspension Of Contributions By The Employer......... 57
Section 10.09. No Employment Rights Under Plan..................... 57
Section 10.10. Alienation Of Benefits Disallowed................... 57
Section 10.11. Indemnification By Employer......................... 58
Section 10.12. Bonding Of Fiduciaries.............................. 58
</TABLE>
-iii-
<PAGE>
NATIONAL BANK OF COMMERCE PENSION PLAN
WHEREAS, National Bank of Commerce of Birmingham, a national banking
association having its principal place of business in Birmingham, Alabama,
established the National Bank of Commerce Pension Plan effective January 1, 1982
to provide retirement benefits for eligible employees; and
WHEREAS, the National Bank of Commerce Pension Plan was amended and
restated effective January 1, 1984 and was again amended and restated, generally
effective January 1, 1989; and
WHEREAS, there have been four (4) amendments to the National Bank of
Commerce Pension Plan since it was amended and restated, generally effective
January 1, 1989; and
WHEREAS, as a result of changes in applicable tax laws, it is necessary to
amend and restate the National Bank of Commerce Pension Plan.
NOW, THEREFORE, the National Bank of Commerce Pension Plan is hereby
amended and restated effective as of January 1, 1997 with certain provisions
effective as of earlier or later dates as expressly set forth herein.
ARTICLE I: DEFINITIONS
-----------------------
As used in the Plan, the following words and phrases shall have the
meanings specified below, unless a different meaning is plainly required by the
context:
Section 1.01. Accrued Benefit. "Accrued Benefit," as of any date, shall
---------------
mean a Participant's benefit earned as of that date. The Participant's Accrued
Benefit shall be calculated in accordance with Section 1.27 (Monthly Retirement
Income). Effective December 31, 1999, the Plan shall be frozen, and no
Participant shall accrue any benefits under the Plan after said date.
Section 1.02. Act or ERISA. "Act" or "ERISA" means the Employee
------------
Retirement Income Security Act of 1974, as amended from time to time.
Section 1.03. Actuarial Equivalent. "Actuarial Equivalent" shall mean
--------------------
equality in the value of the aggregate amounts expected to be received under
different forms of payment as set forth below.
(a) For Plan Years beginning prior to January 1, 2000, for the lump sum
distributions as described in Section 3.08, the Actuarial Equivalent amount
payable to the Participant shall be calculated using the PBGC immediate or, if
applicable, deferred annuity factors for males as in effect on January 1 of the
year in which the lump sum distribution is paid.
For Plan Years beginning on or after January 1, 2000, the Actuarial
Equivalent for the lump sum distributions as described in Section 3.08 shall be
determined as set forth below:
(i) Interest Assumption. The applicable interest rate used for the
-------------------
purpose of computing a lump sum distribution as described in Section
3.08 and for the purpose of computing the present value of a benefit
payable under the Plan is the annual rate of interest on 30-Year
Treasury Securities determined as of the second calendar month
preceding the first day of the Plan Year during which the payment is
made.
(ii) Mortality Assumption. The applicable mortality table used for
--------------------
the purpose of computing lump sum distributions as described in
Section 3.08 and for the purpose of computing the present value of a
benefit payable under the Plan is the table prescribed by the
Secretary of the Treasury. Such table shall
Page 1 of 58
<PAGE>
be based on the prevailing commissioner's standard table (described in
Code Section 807(d)(5)(A)) used to determine reserves for group
annuity contracts issued on the date as of which present value is
being determined (without regard to any other subparagraph of Code
Section 807(d)(5)).
(b) For an annuity which is payable for the life of the Participant with a
fifty percent (50%) survivor annuity for the life of the spouse, the Actuarial
Equivalent amount payable to the Participant shall be equal to the single life
annuity multiplied by eighty-eight percent (88%). Notwithstanding the above, if
the birth dates of the Participant and spouse are more than five (5) years
apart, the eighty-eight percent (88%) factor shall be
(1) decreased, if the Participant is older, or
(2) increased, if the spouse is older, as follows:
(i) one percent (1%), multiplied by
(ii) the survivor annuity percentage (50%), multiplied by
(iii) the number of full years, up to a maximum of twenty (20),
by which the difference in birth dates exceeds five (5) years.
If the assumptions described in this Section 1.03(b) change, the Actuarial
Equivalent of the Accrued Benefit on or after the date of such change shall be
the greater of the Actuarial Equivalent of the Accrued Benefit as of such date
computed using the assumptions in effect immediately before such change or the
Actuarial Equivalent of the Accrued Benefit computed using the assumptions in
effect after such change.
(c) For an annuity which is payable for the life of the Participant with a
one hundred percent (100%) survivor annuity for the life of the spouse, the
Actuarial Equivalent amount payable to the Participant shall be equal to the
single life annuity multiplied by seventy-nine percent (79%). Notwithstanding
the above, if the birth dates of the Participant and spouse are more than five
(5) years apart, the seventy-nine percent (79%) factor shall be
(1) decreased, if the Participant is older, or
(2) increased, if the spouse is older, as follows:
(i) one percent (1%), multiplied by
(ii) the number of full years, up to a maximum of twenty (20),
by which the difference in birth dates exceeds five (5) years.
If the assumptions described in this Section 1.03(c) change, the Actuarial
Equivalent of the Accrued Benefit on or after the date of such change shall be
the greater of the Actuarial Equivalent of the Accrued Benefit as of such date
computed using the assumptions in effect immediately before such change or the
Actuarial Equivalent of the Accrued Benefit computed using the assumptions in
effect after such change.
(d) For all other purposes, the Actuarial Equivalent amount payable to the
Participant shall be calculated using annuities derived from the 1971 Group
Annuity Mortality Table for males, with a five-year age set-back for
Beneficiaries and six percent (6%) interest per annum.
Section 1.04. Actuary. "Actuary" shall mean a Fellow of the Society of
-------
Actuaries who has been enrolled by the Joint Board for the Enrollment of
Actuaries under ERISA Section 3042 or a firm of actuaries, at least one of
Page 2 of 58
<PAGE>
whose members is a Fellow of the Society of Actuaries who has been so enrolled.
The Actuary shall be designated by the Employer.
Section 1.05. Affiliated Employer or Affiliate. An "Affiliated Employer"
--------------------------------
or "Affiliate" is any corporation which is a member of a controlled group of
corporations (as defined in Code Section 414(b)) which includes the following:
(a) the Employer; (b) any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
(c) any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and (d) any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
Section 1.06. Annual Compensation.
-------------------
(a) Definition Of Annual Compensation Effective On And After January 1,
-------------------------------------------------------------------
1994. Notwithstanding the immediately following paragraphs (b) and (c), on and
- ----
after January 1, 1994 "Annual Compensation" shall mean, with respect to any
Participant, wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Annual
Compensation must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
(1) Annual Compensation determined according to Section 1.06(a) shall
not include (even if includible in gross income) reimbursements or other
expense allowances, fringe benefits (cash or noncash), moving expenses,
deferred compensation, and welfare benefits.
(2) Annual Compensation determined according to Section 1.06(a) shall
include amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income of the
Participant under Code Section 125, 402(e)(3), 402(h), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2) that are treated
as Employer contributions.
(b) Definition Of Annual Compensation Effective On And After January 1,
-------------------------------------------------------------------
1984 But Prior To January 1, 1994. On and after January 1, 1984 but prior to
- ---------------------------------
January 1, 1994, "Annual Compensation" shall mean all of a Participant's
earnings from the Employer for the Plan Year which are (a) actually paid within
such Plan Year, and (b) subject to tax under Code Section 3101(a) without the
dollar limitation of Code Section 3121(a), but not including deferred
compensation other than contributions, if any, through a salary reduction
agreement to a cash or deferred plan under Code Section 401(k) or to a tax-
deferred annuity under Code Section 403(b). Only for purposes of the foregoing
provisions of this Section 1.06(b), Section 1.07, and Section 1.26, the
"Employer" shall be deemed to refer to MetroBank prior to the sale of its stock
to National Commerce Corporation.
Effective as of January 1, 1991, with respect to the persons retiring
after December 31, 1990 or whose employment otherwise terminates after December
31, 1990, Annual Compensation shall be determined without regard to any deemed
or imputed compensation from Employer-provided life insurance, moving expenses,
mileage or other reimbursements or other imputed income non-cash items which may
be counted for purposes of Code Section 3101. Notwithstanding the foregoing, the
minimum Accrued Benefit (expressed as a monthly annuity for life beginning at
the Normal Retirement Date) of each person who was a Participant in the Plan on
December 31, 1990 shall be determined using Continuous Service of such
Participant through December 31, 1990 and based upon the Average Monthly
Earnings of the Participant determined at December 31, 1990 (that is, without
regard to the foregoing change in the definition of Annual Compensation and
without regard to any amount of compensation paid on and after January 1, 1991).
Page 3 of 58
<PAGE>
(c) Definition Of Annual Compensation Effective On And Before December 31,
----------------------------------------------------------------------
1983. On and before December 31, 1983, "Annual Compensation" shall mean the
- ----
total of a Participant's Annual Compensation from the Employer, including
salary, overtime, and bonuses.
(d) Limitations On Annual Compensation Taken Into Account In Determining
--------------------------------------------------------------------
Benefits. For Plan Years after December 31, 1988 and prior to January 1, 1994,
- --------
the Annual Compensation (sometimes referred to in this Section 1.06(d) as
"compensation") taken into account for determining all benefits provided under
this Plan for any Plan Year shall not exceed $200,000, as adjusted. This
limitation shall be automatically adjusted to the amounts fixed by the Secretary
of the Treasury from time to time under Code Section 415(d) except that the
dollar increase in effect on January 1 of any calendar year is effective for
Plan Years beginning on July 1 in such calendar year and the first adjustment to
the $200,000 limitation is effective on January 1, 1990.
In addition to the other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding twelve (12) months,
over which compensation is determined ("determination period") beginning in such
calendar year.
For plan years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If compensation is determined on a period of time that contains less than
twelve (12) calendar months (in the case of a short plan year), then the
compensation limit is an amount equal to the compensation limit for the calendar
year in which the compensation period begins multiplied by the ratio obtained by
dividing the number of full months in the period by twelve (12).
If compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
compensation for that prior determination period is subject to the applicable
annual compensation limit in effect for that prior determination period. For
this purpose, in determining benefits in Plan Years beginning on or after
January 1, 1989, the annual compensation limit in effect for determination
periods beginning before that date is $200,000. In addition, in determining
benefits for determination periods beginning on or after January 1, 1994, the
annual compensation limit in effect for determination periods beginning before
that date is $150,000.
For Plan Years beginning prior to January 1, 1997, in determining the
compensation of a Participant for purposes of this limitation, the rules of
Section 414(q)(6) of the Code shall apply, except in applying such rules, the
term "family" shall include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19 before the close of
the year. If, as a result of the application of such rules the adjusted annual
compensation limitation is exceeded, then (except for purposes of determining
the portion of compensation up to the integration level if this Plan provides
for permitted disparity) the limitation shall be pro rated among the affected
individuals in proportion to each such individual's compensation as determined
under the Plan prior to the application of this limitation.
Unless otherwise provided under the Plan, each Section 401(a)(17)
employee's accrued benefit under this Plan will be the greater of the accrued
benefit determined for the employee under (a) or (b) below:
(a) the employee's accrued benefit determined with respect to the benefit
formula applicable for the Plan Year beginning on or after January 1, 1994, as
applied to the employee's total years of service taken into account under the
Plan for the purposes of benefit accruals, or
Page 4 of 58
<PAGE>
(b) the sum of:
(1) the employee's accrued benefit as of the last day of the last
Plan Year beginning before January 1, 1994, calculated by applying the 1993
indexed limitation retroactively to all years before 1994, frozen in
accordance with Section 1.401(a)(4)-13 of the regulations, and
(2) the employee's accrued benefit determined under the benefit
formula applicable for the Plan Year beginning on or after January 1, 1994,
as applied to the employee's years of service credited to the employee for
Plan Years beginning on or after January 1, 1994, for purposes of benefit
accruals.
A Section 401(a)(17) employee means an employee whose current accrued
benefit as of a date on or after the first day of the first Plan Year
beginning on or after January 1, 1994, is based on compensation for a year
beginning prior to the first day of the first Plan Year beginning on or
after January 1, 1994, that exceeded $150,000.
If the Plan satisfies the requirements of Section 1.401(a)(4)-13(d) of the
Regulations for a fresh-start as of the last day of the last Plan Year beginning
before January 1, 1994, then, notwithstanding any other provisions of the Plan,
any Section 401(a)(17) employee's Accrued Benefit, frozen in accordance with
Section 1.401(a)(4)-13 of the Regulations as of a fresh-start date, is adjusted
to reflect increases in the employee's compensation after the fresh-start date.
However, this adjustment may be made only if the adjustment will not cause the
Plan to fail to satisfy the consistency requirement of Section 1.401(a)(4)-
13(c), as modified by Section 1.401(a)(17)-1(e) of the proposed Regulations.
In determining a Section 401(a)(17) employee's Accrued Benefit in any Plan
Year beginning on or after January 1, 1994, the portion of the employee's frozen
Accrued Benefit attributable to Plan Years beginning before January 1, 1994,
will be determined in accordance with Method A for statutory Section 401(a)(17)
employees and Method B for Section 401(a)(17) employees other than statutory
Section 401(a)(17) employees.
A statutory Section 401(a)(17) employee means an employee whose current
Accrued Benefit as of a date on or after the first day of the first Plan Year
beginning on or after January 1, 1994, is based on compensation for a year
beginning prior to the first day of the first Plan Year beginning on or after
January 1, 1989, that exceeded $200,000.
A Section 401(a)(17) employee means an employee whose current Accrued
Benefit as of a date on or after the first day of the first Plan Year beginning
on or after January 1, 1994, is based on compensation for a year beginning prior
to the first day of the first Plan Year beginning on or after January 1, 1994,
that exceeded $150,000.
METHOD A (statutory Section 401(a)(17) employees):
STEP 1: Determine each statutory Section 401(a)(17) employee's Accrued
Benefit as of the last day of the last Plan Year beginning before
January 1, 1989, frozen in accordance with Section 1.401(a)(4)-13
of the Regulations.
STEP 2: Adjust the amount in Step 1 up through the last day of the last
Plan Year beginning before the first Plan Year beginning on or
after January 1, 1994, under the method provided under the Plan
for increasing the amount in Step 1 to take into account increases
in compensation in Plan Years beginning on or after January 1,
1989. However, if the Plan does not provide for such increases,
the amount in Step 2 shall be equal to the amount in Step 1.
STEP 3: Determine the statutory Section 401(a)(17) employee's Accrued
Benefit as of the last day of the last Plan Year beginning before
January 1, 1994, frozen in accordance with
Page 5 of 58
<PAGE>
Section 1.401(a)(4)-13 of the Regulations.
STEP 4: Subtract the amount determined Step 2 from the amount determined
in Step 3.
STEP 5: Adjust the amount in Step 4 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
statutory Section 401(a)(17) employee's average compensation
determined for the current year (as limited by Section
401(a)(17)), using the same definition and compensation formula in
effect as of the last day of the last Plan Year beginning before
January 1, 1994. The denominator of the fraction is the employee's
average compensation for the last day of the last Plan Year
beginning before January 1, 1994, using the definition and
compensation formula in effect as of the last day of the last Plan
Year beginning before January 1, 1994.
STEP 6: Adjust the amount in Step 1 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
statutory Section 401(a)(17) employee's average compensation for
the current year (as limited by Section 401(a)(17)), using the
same definition and compensation formula in effect as of the last
day of the last Plan Year beginning before January 1, 1989. The
denominator of the fraction is the employee's average compensation
for the last day of the last Plan Year beginning before January 1,
1989, using the definition and compensation formula in effect as
of the last day of the last Plan Year beginning before January 1,
1989.
STEP 7: Add the amounts determined in Step 5, and the greater of Steps 6
or 2.
METHOD B (Section 401(a)(17) employees other than statutory Section
401(a)(17) employees):
STEP 1: Determine the Accrued Benefit of each Section 401(a)(17) employee
other than statutory Section 401(a)(17) employees as of the last
day of the Plan Year beginning before January 1, 1994, frozen in
accordance with Section 1.401(a)(4)-13 of the Regulations.
STEP 2: Adjust the amount in Step 1 by multiplying it by the following
fraction (not less than 1). The numerator of the fraction is the
average compensation of the Section 401(a)(17) employee who is not
a statutory Section 401(a)(17) employee determined for the current
year (as limited by Section 401(a)(17)), using the same definition
and compensation formula in effect as of the last day of the last
Plan Year beginning before January 1, 1994. The denominator of the
fraction is the employee's average compensation for the last day
of the last Plan Year beginning before January 1, 1994, using the
definition and compensation formula in effect as of the last day
of the last Plan Year beginning before January 1, 1994.
Section 1.07. Average Monthly Earnings. "Average Monthly Earnings" shall
------------------------
mean the average of Monthly Earnings (as defined in Section 1.26) for the sixty
(60) months immediately preceding a Participant's Normal Retirement Date.
(a) If a Participant has fewer than sixty (60) months of continuous
employment, "Average Monthly Earnings" shall be the average of Monthly Earnings
for all months of continuous employment.
(b) If immediately prior to calculation of Average Monthly Earnings an
Employee shall have been absent from work for one (1) or more calendar months
for which he or she did not receive his or her monthly salary from the Employer,
the sixty (60) months used in determining his or her Average Monthly Earnings
shall be the last sixty (60) calendar months during which compensation was paid
to the Employee by the Employer.
Page 6 of 58
<PAGE>
Section 1.08. Board of Directors. "Board of Directors" shall mean the
------------------
Board of Directors of the Employer.
Section 1.09. Break in Service. "Break in Service" shall mean a Plan Year
----------------
in which a Participant completes 500 or fewer Hours of Service.
Section 1.10. Code. "Code" shall mean the Internal Revenue Code of 1986,
----
as amended or replaced from time to time.
Section 1.11. Claimant. "Claimant," for the purposes of Section 2.07,
--------
shall mean Participants, former Employees claiming to be Participants, surviving
spouses, or any other persons claiming a benefit under the Plan.
Section 1.12. Continuous Service. Prior to January 1, 1988, the term
------------------
"Continuous Service" meant service with the Employer prior to the attainment of
age sixty-five (65) calculated from the later of the Employee's last hiring date
or January 1, 1980. Notwithstanding the foregoing, for Participants who are
credited with at least one (1) Hour of Service after December 31, 1987,
"Continuous Service" shall mean service with the Employer calculated from the
later of the Employee's last hiring date or January 1, 1980. The calculation of
Continuous Service shall be subject to the following rules and conditions:
(a) Length of Continuous Service shall be computed in whole months from
the date the Employee has been continuously employed in the service of the
Employer as an Employee as defined in Section 1.17, determined by the practices
in effect at the date of such employment, or re-employment, after a Break in
Continuous Service. Continuous Service shall be broken by the following events:
(1) Discharge from the employment of the Employer;
(2) Voluntarily quitting the employment of the Employer;
(3) Absence due to disability continuing for more than two (2) years,
provided that the Employee may accumulate up to six (6) months Continuous
Service during any such absence; and further provided, however, that an
Employee absent because of compensable injury or sickness under applicable
Workers Compensation laws shall accumulate Continuous Service until the
termination of the period for which such compensation is payable, if he or
she applies for return to work, and does return to work, within fifteen
(15) days next following the last payment of such compensation to him or
her; or
(4) Failure to report for work after a layoff within five (5)
regularly scheduled work days of the mailing by the Employer by registered
or certified mail to the Employee's latest address appearing on the
Employer's records of a notice to return to work or declining the work
offered or at the hours stipulated. It is the individual Employee's duty to
keep the Employer informed of any changes in the Employee's address.
(i) Continuous Service shall not be broken because of
absence due to service in the Armed Forces or Merchant Marine
Service of the United States, for which the Employee has re-
employment rights under the law and complies with the
requirements of the law as to re-employment and is re-employed.
(ii) Employees whose employment with the Employer and all
Affiliates terminated on or after January 1, 1982 and before
January 1, 1985 shall lose all prior Continuous Service in
accordance with the foregoing rules of Continuous Service in
Section 1.12 if rehired by the Employer or any Affiliate, unless,
the foregoing provisions of Section 1.12 to the contrary
notwithstanding:
Page 7 of 58
<PAGE>
(A) they were Vested in their Accrued Benefit at the time
of termination, or
(B) they were not Vested in any portion of their Accrued
Benefit at the time of termination and the number of consecutive
Breaks in Service is less than the aggregate number of Plan Years
in which Continuous Service was earned prior to the Break in
Service.
In the event Continuous Service is preserved for an Employee under the
terms of the foregoing provisions of Section 1.12(a) and consistent
with Section 1.12(b), one Accrued Benefit shall be calculated under
the terms of the Plan as in effect at the time of such calculation
using all years of Continuous Service.
(iii) With respect to terminations of employment occurring on or
after January 1, 1985, an Employee will be credited on rehire with all
years of Continuous Service credited prior to his or her termination
unless, with respect to an Employee who does not have any
nonforfeitable right to an Accrued Benefit hereunder, the number of
consecutive one-year Breaks in Service equals or exceeds the greater
of
(A) five (5), or
(B) the aggregate number of Plan Years in which Continuous
Service was earned prior to the first one-year Break in Service.
In the event Continuous Service is so preserved, the provisions of the
last paragraph of Section 1.12(a)(4)(ii) will be applied.
(b) In determining length of service, there shall be deducted all time
lost in excess of thirty (30) days, for which monthly salary is not paid by the
Employer, due to leave of absence, suspension, or non-compensable disability
except to the extent credit for such periods of absence specifically is granted
under the terms of the Plan.
(c) Anything herein to the contrary notwithstanding, the minimum
Continuous Service credit for purposes of calculating the Accrued Benefit of an
Employee shall be based upon the number of Hours of Service (determined under
Section 1.22 but only while the Employee is an Employee within the meaning of
Section 1.17) in a Plan Year on the basis of the following proration:
(1) 1000-1149 Hours - 6 months
(2) 1150-1299 Hours - 7 months
(3) 1300-1449 Hours - 8 months
(4) 1450-1599 Hours - 9 months
(5) 1600-1749 Hours - 10 months
(6) 1750-1899 Hours - 11 months
(7) 1900 or more - 12 months
(d) Section 1.12(c) and any other provision of the Plan to the contrary
notwithstanding, with respect to Participants who were employees of MetroBank
prior to the purchase of its stock by National Commerce Corporation, Continuous
Service shall only include service for the Employer after the time of such sale
and, with respect to the remainder of 1985 after the said sale of stock,
Employees not previously covered by the Plan shall accrue Continuous Service on
the basis of one month for each calendar month in which they work at least one
Hour of Service for the Employer on or after September 1, 1985.
(e) Effective December 31, 1999, the Plan shall be frozen, and no
Participant shall accrue any additional
Page 8 of 58
<PAGE>
Continuous Service after said date.
Section 1.13. Covered Service. "Covered Service" shall mean service
---------------
covered by ERISA Section 203(a)(3)(B).
Section 1.14. Deferred Retirement Date. Deferred Retirement Date is a
------------------------
Participant's date of termination of employment or, if earlier, a Participant's
date of death, after remaining in service beyond his or her Normal Retirement
Date, whether continuing employment through his or her Normal Retirement Date or
being reemployed after such date.
Section 1.15. Earliest Retirement Age and Early Retirement Date.
-------------------------------------------------
"Earliest Retirement Age" shall mean attainment of age sixty (60) and completion
of seven (7) years of Continuous Service. "Early Retirement Date" shall mean
the first day of the month coincident with or next following the date on which
an eligible Participant elects to retire early.
Section 1.16. Effective Date. The "Effective Date" of the Plan is January
--------------
1, 1982 which is the original effective date of the Plan. The general effective
date of this amendment and restatement is January 1, 1997.
Section 1.17. Employee. "Employee" shall mean any person in the
--------
employment of the Employer. Employees of Affiliates other than the Employer are
not to be considered to be "Employees" for any purpose of the Plan except that
(a) Hours of Service for vesting will be credited for employment with
other members of an affiliated service group (under Code Section 414(m)), a
controlled group of corporations (under Code Section 414(b)), or a group of
trades or businesses under common control (under Code Section 414(c)), of which
the Employer is a member, and
(b) Hours of Service for vesting will also be credited for any individual
considered an Employee for purposes of the Plan under Section 1.25 (Leased
Employee).
Section 1.18. Employer. "Employer" shall mean National Bank of Commerce
--------
of Birmingham, National Commerce Corporation of Birmingham and their successors
and assigns. The Employer shall not, except as otherwise provided in Section
1.06, be deemed to refer to MetroBank prior to the time of the sale of its stock
to National Commerce Corporation.
Effective May 15, 1995, "Employer" shall also mean any Affiliated Employer
which shall adopt this Plan with the approval of the Board of Directors of
National Bank of Commerce of Birmingham. Such adopting Affiliated Employers
shall be "Participating Employers" in the Plan. The following rules shall apply
with regard to Participating Employers:
(a) The Trustee shall commingle, hold and invest as one Trust Fund all
contributions made by the Employer and Participating Employers, as well as all
increments thereof. The assets of the Plan shall, on an ongoing basis, be
available to pay benefits to all Participants and beneficiaries under the Plan
without regard to the Employer or Participating Employer who contributed such
assets.
(b) The transfer of any Participant from or to an Employer participating
in this Plan, whether he is an Employee of the Employer or a Participating
Employer, shall not affect such Participant's rights under the Plan, and the
Participant's Accrued Benefit as well as his accumulated service time with the
transferor or predecessor and his length of participation in the Plan, shall
continue to his credit.
(c) Each Participating Employer shall be deemed to be a party to this
Plan; provided, however, that with respect to all of its relations with the
Trustee and Administrator for purposes of this Plan, each Participating Employer
Page 9 of 58
<PAGE>
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word "Employer"
shall be deemed to include each Participating Employer as related to its
adoption of the Plan. However, with regard to provisions of the Plan under which
the "Employer" is authorized to act (such as, by way of example and not
limitation, amending or terminating the Plan, removing the Trustee, determining
claims, etc.), such action must be taken by the Employer, and the Participating
Employers shall have no power or authority to take such actions.
Section 1.19. First Gulf Plan. The First Gulf Bancorp Retirement Plan.
---------------
See Section 1.41(b)(2) (Service Year or Year of Service).
Section 1.20. Former Participant. "Former Participant" shall mean any
------------------
Employee of the Employer who has been a Participant, but who has ceased to be a
Participant for any reason.
Section 1.21. Highly Compensated Employee, Highly Compensated Former
------------------------------------------------------
Employee, and Highly Compensated Participant.
- --------------------------------------------
(a) "Highly Compensated Employee" shall mean, for Plan Years beginning
after December 31, 1996, an Employee described in Code Section 414(q) and the
Regulations thereunder, and generally means an Employee who performed services
for the Employer during the "determination year" and is in one or more of the
following groups:
(1) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners." See Section 7.02.
(2) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $80,000.
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately
preceding twelve-month period.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in
the gross income of the Participant under Code Section 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in
Code Section 414(h)(2) that are treated as Employer contributions.
Additionally, the dollar threshold amounts specified in (a)(2) above shall
be adjusted at such time and in such manner as is provided under Code
Section 415(d), accept that the base period shall be the calendar year
ending September 30, 1996. In the case of such an adjustment, the dollar
limits which shall be applied are those for the calendar year in which the
"determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who
are non-resident aliens and who received no earned income (within the
meaning of Code Section 911(d)(2)) from the Employer constituting United
States source income within the meaning of Code Section 861(a)(3) shall not
be treated as Employees. Additionally, all Affiliated Employers shall be
taken into account as a single employer and Leased Employees within the
meaning of Code Section 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in
Code Section 414(n)(5) and are not covered in any qualified plan maintained
by the Employer. The exclusion of Leased Employees for this purpose shall
be applied on a uniform and consistent basis for all of the Employer's
retirement plans. Highly Compensated Former Employees shall be treated as
Highly Compensated Employees without regard to whether they performed
services during the "determination year."
(b) "Highly Compensated Former Employee" shall mean a former Employee who
had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
Page 10 of 58
<PAGE>
"determination year" after attaining age 55. Notwithstanding the foregoing, an
Employee who separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the Employee attains age 55 (or
the last year ending before the Employee's 55th birthday), the Employee either
received "415 Compensation" in excess of $50,000 or was a "five percent owner."
For purposes of this Section, "determination year," "415 Compensation" and "five
percent owner" shall be determined in accordance with Section 1.21(a). Highly
Compensated Former Employees shall be treated as Highly Compensated Employees.
The method set forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and consistent basis
for all purposes for which the Code Section 414(q) definition is applicable.
(c) "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
Page 11 of 58
<PAGE>
Section 1.22. Hour of Service.
---------------
(a) "Hour of Service" shall mean:
(1) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. Hours of Service will be
credited to the Employee for the computation period in which the duties are
performed; and
(2) Each Hour of Service for which an Employee is paid, or entitled
to payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave-of-absence. No more
than 501 Hours of Service will be credited under this paragraph for a
single continuous period (whether or not the period occurs in a single
period). Hours of Service under this paragraph will be calculated and
credited pursuant to Section 2530.200b-2 of the Department of Labor
Regulations which is incorporated herein by this reference; and
(3) Each Hour of Service for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the Employer. The
same Hours of Service shall not be credited both under the immediately
preceding paragraph (1) or the immediately preceding paragraph (2), as the
case may be, and under this paragraph (3). These Hours of Service will be
credited to the Employee for the computation period or periods to which the
award or agreement pertains rather than the computation period in which the
award, agreement, or payment is made.
(b) Hours of Service will be credited for employment with other members of
an affiliated service group (under Code Section 414(m)), a controlled group of
corporations (under Code Section 414(b)), or a group of trades or businesses
under common control (under Code Section 414(c)), of which the Employer is a
member, and any other entity required to be aggregated with the Employer
pursuant to Code Section 414(o).
(c) Hours of Service also will be credited for any individual who is
considered to be an employee for purposes of the Plan under Code Sections 414(n)
or 414(o).
(d) Solely for purposes of determining whether a Break in Service (as
defined in Section 1.09 for participation and vesting purposes) has occurred in
a computation period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or in any
case in which such hours cannot be determined, eight (8) Hours of Service per
day of such absence. An absence from work for maternity or paternity reasons
means an absence (i) by reason of the pregnancy of the individual, (ii) by
reason of a birth of a child of the individual, (iii) by reason of the
placement of a child with the individual in connection with the adoption of such
child by such individual, or (iv) for purposes of carrying for such child for a
period beginning immediately following such birth or placement. Hours of
Service shall be credited (A) in the computation period in which the absence
begins if the crediting is necessary to prevent a Break in Service in that
period, or (B) in all other cases, in the following computation period.
(e) Employees who are exempt from the Fair Labor Standards Act shall be
credited, for all purposes hereof, with forty-five (45) Hours of Service for
each calendar week in which an Employee worked, or was paid or entitled to
payment for, at least one Hour of Service for the Employer. Employees who are
not exempt from the Fair Labor Standards Act shall be credited, for all purposes
hereof, with Hours of Service in an amount equal to the actual number of hours
worked.
Section 1.23. Investment Manager. "Investment Manager" shall mean an
------------------
entity appointed by the Employer as provided in Section 2.03(b) who
Page 12 of 58
<PAGE>
(a) has the power to manage, acquire, or dispose of any Plan asset;
(b) acknowledges fiduciary responsibility to the Plan in writing;
(c) has been designated as a "Qualified Plan Asset Manager" and/or
"Qualified Professional Asset Manager" so that the Investment Manager may
successfully pursue and obtain a QPAM exemption; and
(d) falls within at least one of the following categories:
(1) A registered investment adviser under the Investment Advisers Act
of 1940 (15 U.S.C. Section 80a-1 et seq.);
(2) A bank (as defined in the Investment Advisers Act of 1940);
(3) A savings and loan association whose accounts are insured by the
Federal Savings and Loan Insurance Corporation and that has made
application for and been granted trust powers to manage, acquire, or
dispose of plan assets by a state or federal authority having supervision
over savings and loan associations; or
(4) An insurance company qualified to perform asset management,
acquisition, and disposition services under the laws of more than one
state.
Section 1.24. Key Employee. See Section 7.02.
------------
Section 1.25. Leased Employee. A "Leased Employee" means, for Plan Years
---------------
beginning after December 31, 1996, any person (other than an Employee of the
Employer) who pursuant to an agreement between the Employer and any other person
("leasing organization") has performed services for the Employer (or for the
Employer and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are performed under primary direction or control by the
Employer. Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the Employer shall
be treated as provided by the Employer. A Leased Employee shall be considered
an Employee of the Employer, unless:
(a) Such Leased Employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at least 10% of
compensation, as defined in Code Section 415(c)(3), but including amounts,
if any, which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3), 402(h), 403(b) or 457, and
Employee contributions, if any, described in Code Section 414(h)(2) that
are treated as Employer contributions;
(2) immediate participation; and
(3) full and immediate vesting; and
(b) Leased Employees do not constitute more than 20% of the Employer's
non-highly compensated work force.
Section 1.26. Monthly Earnings. "Monthly Earnings" shall mean the total
----------------
of a Participant's Annual Compensation, as defined in Section 1.06, from the
Employer, as averaged on a monthly basis.
Page 13 of 58
<PAGE>
Section 1.27. Monthly Retirement Income. A Participant's "Monthly
-------------------------
Retirement Income" commencing at his or her Normal Retirement Date shall be
calculated pursuant to Section 3.01 on the basis of the following assumptions:
(a) That the Participant's Average Monthly Earnings at date of calculation
would have been his or her Average Monthly Earnings at his or her Normal
Retirement Date, and
(b) That his or her Continuous Service would have continued uninterrupted
until his or her Normal Retirement Date.
The amount determined in accordance with this Section 1.27 shall be multiplied
by a fraction, the numerator of which shall be the Participant's Continuous
Service as of the calculation date and the denominator of which shall be the
Continuous Service the Participant would have accumulated had he or she
continued until his or her Normal Retirement Date without interruption of his or
her service.
Section 1.28. Named Fiduciary. See Section 2.01.
---------------
Section 1.29. Non-Highly Compensated Participant. "Non-Highly Compensated
----------------------------------
Participant" shall mean any Participant who is not a Highly Compensated Employee
and, for Plan Years beginning prior to January 1, 1997, is not a "family member"
under Code Section 414(q)(6)(B).
Section 1.30. Non-Key Employee. A "Non-Key Employee" shall mean any
----------------
Employee or former Employee (and his or her beneficiaries) who is not a Key
Employee.
Section 1.31. Normal Retirement Date.
----------------------
(a) "Normal Retirement Date" shall mean the first day of the month
coincident with or immediately preceding a Participant's sixty-fifth (65th)
birthday.
(b) With respect to persons whose first Hour of Service with the Employer
is on or after January 1, 1989, Normal Retirement Date shall mean, if later than
attainment of age sixty-five (65), the first day of the month coinciding with or
next following the completion of five (5) years of Continuous Service (or, if
earlier, five (5) Service Years).
Section 1.32. Participant.
-----------
(a) "Participant" shall mean any Employee of the Employer who was employed
by the Employer on January 1, 1982 (provided that at such time the Employee was
under the age of 65) or is thereafter hired by the Employer. Provided, however,
that any Employee who had been a Participant and is rehired shall be a
Participant as of his or her date of rehire. Any employee of MetroBank at the
time of the sale of its stock to National Commerce Corporation shall become a
Participant if employed by the Employer on or after such time, but no benefits
shall be accrued under the Plan with respect to any service prior to such time.
(b) Leased Employees shall not be eligible to participate in the Plan.
Section 1.33. PBGC. "PBGC" shall mean the Pension Benefit Guaranty
----
Corporation.
Section 1.34. Plan. "Plan" refers to the National Bank of Commerce
----
Pension Plan.
Section 1.35. Plan Administrator. The Employer shall be the "Plan
------------------
Administrator" within the
Page 14 of 58
<PAGE>
meaning of ERISA, unless the Employer, pursuant to Section 2.02(b), designates
another person or entity to administer the Plan on behalf of the Employer.
Section 1.36. Plan Year. "Plan Year" shall mean each twelve (12) month
---------
period which begins on January 1. Plan Years will be the vesting computation
and accrual computation periods for purposes of the Plan.
Section 1.37. Pre-retirement Survivor Annuity. "Pre-retirement Survivor
-------------------------------
Annuity" shall mean an immediate annuity form of payment for the life of the
surviving spouse of a Participant who dies prior to his or her annuity starting
date.
Section 1.38. Regulation. "Regulation" shall mean Income Tax Regulations
----------
as promulgated by the Secretary of the Treasury or his or her delegate, and as
amended from time to time and/or Department of Labor Regulations under the Act
promulgated by the Department of Labor, as amended from time to time.
Section 1.39. Required Beginning Date. The Required Beginning Date for an
-----------------------
active and inactive Participant is April 1 following the calendar year in which
he or she reaches age 70 1/2. However, the Required Beginning Date for an
active Participant who reached age 70 1/2 before 1988, and who was not a 5-
percent owner, is his or her actual retirement date. A Participant will be
treated as a 5-percent owner if he or she owns or owned at least 5 percent of
any Employer at any time during the Plan Year ending within the calendar year in
which he or she reaches age 66 1/2 or any subsequent Plan Year. See also
Sections 3.05, 3.06 and 3.09.
Section 1.40. Retired Participant. A "Retired Participant" is a person
-------------------
who has been a Participant, but who has become entitled to retirement benefits
under the Plan.
Section 1.41. Service Year or Year of Service. "Service Year" or "Year of
-------------------------------
Service," for vesting purposes only, shall mean
(a) With respect to calendar years 1980 and 1981, the number of full years
(and monthly fractions) of Continuous Service determined pursuant to Section
1.12, and
(b) With respect to Plan Years after 1981, a Plan Year during which an
Employee has completed 1,000 or more Hours of Service. Provided, however, that
for any Plan Year in which an Employee is not entitled to credit for a Service
Year, he or she shall receive as a Service Year the number of months of
Continuous Service determined for such Plan Year under Section 1.12.
(1) The calculations under the immediately preceding paragraph (b)
shall include periods of time before and after any absences or Breaks in
Service, except as follows:
(i) Service Years of an Employee who does not have any Vested
interest pursuant to the provisions of the Plan at the time of his or
her termination prior to January 1, 1985 will be eliminated if he or
she incurs a number of consecutive Breaks in Service equal to or
exceeding his or her aggregate number of Service Years at the time of
his or her return to employment prior to January 1, 1985.
(ii) With respect to resumptions of employment occurring on or
after January 1, 1985, an Employee will be credited or rehire with all
Service Years credited prior to his or her termination unless, with
respect to an Employee who does not have any nonforfeitable right to
an Accrued Benefit hereunder, the number of consecutive Breaks in
Service equals or exceeds the greater of
(A) five (5), or
(B) the aggregate number of Service Years prior to the
first Break in Service.
Page 15 of 58
<PAGE>
(iii) If any Service Years of an Employee are not required to be
taken into account by reason of the provisions of the immediately
preceding subparagraphs (i) and (ii), then those Service Years
referred to in (i) and (ii) are not required to be taken into account
if there is a subsequent separation from service and rehire of the
Employee. Provided, however, that application of the immediately
foregoing provision shall not cause the elimination of any Service
Years for Employees who were active on January 1, 1982.
(2) Participants who, prior to becoming Participants in the Plan,
were participants in the First Gulf Plan or employees eligible to
participate thereunder shall have that number of "Service Years" through
1985 counted for the purposes of vesting in the Plan to which they were
entitled through December 31, 1985 under the provisions of the First Gulf
Plan in effect upon the date of sale of MetroBank stock to National
Commerce Corporation, as if employed by MetroBank through December 31,
1985. The Plan Administrator shall obtain and preserve in the Plan's
records the determination of vesting credit under the First Gulf Plan.
(3) Effective April 15, 1994, those employees of First American Bank
of Pelham ("FAB") who became employees of the Employer effective as of
April 15, 1994 shall have their number of "Service Years" with FAB through
April 15, 1994 counted according to the provisions of Section 1.41 for
purposes of vesting in the Plan. Service with FAB shall not be counted for
purposes of determining Continuous Service. The Plan Administrator shall
examine those records of FAB needed to determine, under Section 1.41, the
vesting credit of each of the aforementioned employees due to employment by
FAB, and the Plan Administrator shall preserve in the Plan's records his or
her determination of said vesting credit.
(4) Former employees of St. Clair Federal Savings Bank, effectively
employees of National Bank of Commerce of Birmingham as of October 17,
1996, shall receive service credit for purposes of vesting hereunder for
the ten and one-half (10 1/2) months that both St. Clair Federal Savings
Bank and National Bank of Commerce reported to Alabama National
BanCorporation.
Section 1.42. Terminated Participant. A "Terminated Participant" is a
----------------------
person who has been a Participant, but whose employment has been terminated
other than by death, Total and Permanent Disability, or retirement.
Section 1.43. Top Heavy Plan. See Section 7.03.
--------------
Section 1.44. Top Heavy Plan Year. "Top Heavy Plan Year" means a Plan
-------------------
Year during which the Plan is a Top Heavy Plan.
Section 1.45. Total and Permanent Disability. "Total and Permanent
------------------------------
Disability" shall mean disability resulting from bodily injury or disease so as
to prevent an Employee from engaging in any occupation or employment with the
Employer for remuneration or profit, provided that said disability shall have
continued for a period of six (6) consecutive months and, in the opinion of a
qualified physician chosen by the Employer, will be permanent and continuous
during the remainder of the Employee's life, but shall exclude a disability:
(a) Contracted, suffered or incurred while the Employee was engaged in, or
resulted from his or her having engaged in, a criminal enterprise;
(b) The result of his or her habitual drunkenness or addiction to or use
of narcotics;
(c) The result of a self-inflicted injury; or
(d) The result of future service in the Armed Forces of the United States
which prevents him or her from returning to the employment of the Company, and
for which he or she receives a military pension.
Page 16 of 58
<PAGE>
Section 1.46. Trust Agreement. "Trust Agreement" shall mean the Trust
---------------
Agreement entered into by the Employer with the Trustee to hold the funds
necessary to provide the benefits as set forth in the Plan.
Section 1.47. Trustee. "Trustee" shall mean the bank from time to time
-------
designated by the Employer to serve in such capacity with respect to the Plan.
The Trustee shall at all times be a banking corporation organized and doing
business under the laws of the United States of America or any state therein,
authorized under such laws to execute corporate trust powers and subject to
supervision or examination by Federal or State authority.
Section 1.48 Trust Fund. "Trust Fund" shall mean all cash, securities,
----------
real estate, or any other property held by the Trustee pursuant to the terms of
the Trust Agreement, together with income therefrom. As used herein "Trust
Fund" shall only refer to the allocable interest of the Plan as shown on the
records in and to a portion of the total assets and income administered by the
Trustee under the Trust Agreement with contributions furnished by the
corporation separately for purposes of each Plan whose assets are so commingled.
Section 1.49 USERRA. "USERRA" means the Uniformed Services Employment
------
and Reemployment Rights Act of 1994. Notwithstanding any provision of this Plan
to the contrary, effective December 12, 1994, contributions, benefits and
service credit with respect to qualified military service will be provided in
accordance Code Section 414(u).
Section 1.50. Vested. "Vested" shall mean the portion of a Participant's
------
benefits under the Plan which is not forfeitable.
ARTICLE II: PLAN ADMINISTRATION
--------------------------------
Section 2.01. Named Fiduciary.
---------------
(a) The Employer shall be the Named Fiduciary of the Plan within the
meaning of ERISA Section 402 and shall have authority to control and manage the
operation and administration of the Plan, unless the Board of Directors shall
appoint in writing and communicate to Participants another person, firm or
corporation to serve as Named Fiduciary.
(b) The following shall also be Named Fiduciaries of the Plan:
(1) The Board of Directors;
(2) The Trustee;
(3) Any entity designated as an Investment Manager or Named Fiduciary
pursuant to a resolution of the Board of Directors of the Employer for the
purpose of directing the Trustee in the investment or reinvestment of all
or a part of the assets of the Trust, which resolution shall specify the
portion, class or classes or dollar amount of the assets of the Trust with
respect to which the Investment Manager or Named Fiduciary shall have
investment discretion at the time of such appointment;
(4) Plan Administrator(s), if any, designated by the Employer
pursuant to Section 2.02; and
(5) Any Affiliate whose employees are Participants in the Plan.
Section 2.02. Allocation Of Fiduciary Responsibilities; Designation Of A
----------------------------------------------------------
Plan Administrator.
- -------------------
(a) The Employer shall have the power to delegate and allocate specific
fiduciary responsibilities (other than
Page 17 of 58
<PAGE>
those of the Trustee with respect to the control of the assets of the Plan),
including without limitation, to a Plan Administrator. Delegations of specific
fiduciary responsibilities may be to officers or employees of the Employer or to
other individuals, persons, firms or corporations, all of whom shall serve at
the pleasure of the Employer and, if full-time employees of the Employer,
without additional compensation by virtue of such duties. Vacancies created by
resignation, death or other cause may be filled by the Employer or the assigned
responsibilities may be reabsorbed or redelegated by the Employer. No person
shall be appointed by the Employer in violation of Section 411 of the Act.
(b) The Employer may designate a Plan Administrator to exercise the
powers, fulfill the responsibilities, and perform the duties enumerated in
Section 2.04. Any Plan Administrator so appointed shall signify acceptance of
such appointment by filing a written acceptance with the Employer.
(1) In the event the Employer does not exercise its power to
designate a Plan Administrator, then the Employer, in addition to its
responsibilities and duties under the Plan as Employer, shall serve in the
capacity of Plan Administrator and shall exercise the powers, fulfill the
responsibilities and perform the duties set forth in Section 2.04.
(2) If more than one Plan Administrator is appointed by the Employer,
the responsibilities of each Plan Administrator may be specified by the
Employer and accepted in writing by each Plan Administrator. In the event
that no such specification of responsibilities is made by the Employer, the
Plan Administrators may allocate the responsibilities among themselves, in
which event the Plan Administrators shall notify the Employer and the
Trustee in writing of such action and specify the responsibilities of each
Plan Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Plan Administrator until such time as
the Employer or the Plan Administrators file with the Trustee a written
revocation of such designation. In the event there is more than one Plan
Administrator and there has been no allocation and delegation of
administrative authority among the Plan Administrators, then the Plan
Administrators shall act by a majority of their number, but may authorize
one or more of them to sign all papers on their behalf.
(3) A Plan Administrator may resign by delivering a written
resignation to the Employer or be removed by the Employer by delivery of a
written notice of removal, to take effect at a date specified therein or
upon delivery to the Plan Administrator if no date is specified. The
Employer, upon the resignation or removal of a Plan Administrator, shall
promptly designate in writing a successor. If the Employer does not appoint
a Plan Administrator, the Employer shall function as the Plan
Administrator.
(c) The Employer and those persons to whom the Employer has delegated
fiduciary duties shall keep a record of all of their proceedings and actions and
shall maintain all such books of account, records and other data as shall be
necessary for the proper administration of the Plan and to meet the disclosure
and reporting requirements of the Act.
Section 2.03. Powers And Responsibilities Of The Employer.
-------------------------------------------
(a) The Employer shall be empowered to appoint and remove the Trustee and
appoint and remove the Plan Administrator as the Employer deems necessary for
the proper administration of the Plan to assure that the Plan is being operated
for the exclusive benefit of the Participants and their beneficiaries in
accordance with the terms of the Plan, the Code, and the Act.
(b) The Employer shall select, employ, and compensate from time to time
such pension consultants, actuaries, accountants, attorneys, advisers,
specialists and other agents and employees as the Employer may deem necessary or
advisable in the proper and efficient operation of the Plan. Any agent or
employee so selected by the Employer may be a person or firm then, theretofore,
or thereafter serving the Employer in any capacity. The Employer may, in its
discretion, appoint one or more Investment Managers to manage all or a
designated portion of the assets of the Plan. In such event, the Trustee, as
provided in Section 2.05(a), shall follow the directives of the Investment
Manger(s) in investing the assets of the Plan managed by the Investment
Manager(s).
(c) The Employer shall establish a "funding policy and method" (i.e., it
shall determine whether the Plan
Page 18 of 58
<PAGE>
has a short run need for liquidity (e.g., to pay benefits) or whether liquidity
is a long run goal and investment growth (and stability of same) is a more
current need, or shall appoint a qualified person to do so. The Employer or its
delegate shall communicate such needs and goals to the Trustee, who shall
coordinate such Plan needs with its investment policy. The communication of such
a "funding policy and method" shall not, however, constitute a directive to the
Trustee as to the investment of the Trust Fund. Such "funding policy and method"
shall be consistent with the objectives of the Plan and the requirements of
Title I of the Act.
(d) The Employer shall periodically review the performance of any
fiduciary or other person to whom duties have been delegated or allocated by the
Employer under the provisions of the Plan or pursuant to procedures established
by the Plan. This requirement may be satisfied by formal periodic review by the
Employer or a qualified person specifically designated by the Employer, through
day-to-day contact and evaluation, or through other appropriate means.
(e) To enable the Plan Administrator to perform his or her functions, the
Employer shall supply full and timely information to the Plan Administrator on
all matters relating to the compensation of all Participants, their Hours of
Service, their Service Years, their Continuous Service, their retirement, death,
disability, or termination of employment, and such other pertinent facts as the
Plan Administrator may require.
(f) Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by the Board of Directors.
Section 2.04. Powers And Duties Of The Plan Administrator.
-------------------------------------------
(a) The primary responsibility of the Plan Administrator is to administer
the Plan for the exclusive benefit of the Participants and their beneficiaries,
subject to the specific terms of the Plan.
(b) The Plan Administrator shall administer the Plan in accordance with
its terms and shall have
(1) full and exclusive authority to determine all questions of
coverage and eligibility arising under the Plan, and
(2) full power to construe the provisions of the Plan.
The Plan Administrator shall have final, conclusive, discretionary
authority to construe all of the terms, provisions, conditions, and limitations
of the Plan. The Plan Administrator shall have final, conclusive, discretionary
authority to make determinations regarding the eligibility of Members for
benefits under the Plan. The aforementioned determinations and decisions of the
Plan Administrator shall be conclusive and binding upon all persons.
(c) The Plan Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable to carry out the purpose
of the Plan; provided, however, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Plan Administrator shall have all
powers necessary or appropriate to accomplish the Plan Administrator's duties
under the Plan.
(d) The Plan Administrator shall be charged with the general
administration of the Plan, including, but not limited to, the following:
(1) Determining all questions relating to the eligibility of
Employees to become Participants, to remain
Page 19 of 58
<PAGE>
Participants in the Plan, and to receive benefits under the Plan. See
Section 2.04(b).
(2) Interpreting the provisions of the Plan and making and publishing
rules and regulations for the administration of the Plan that are
consistent with the terms and provisions of the Plan and the Trust
Agreement. See Section 2.04(b).
(3) Selecting, employing and compensating from time to time such
pension consultants, actuaries, accountants, attorneys, advisers,
specialists and other agents and employees as the Plan Administrator may
deem necessary or advisable in the proper and efficient administration of
the Plan, subject to prior approval by the Employer. Any agent or employee
so selected by the Plan Administrator may be a person or firm then,
theretofore, or thereafter serving the Employer in any capacity.
(4) Selecting from time to time the issuing company or companies from
which annuity contracts may be purchased as provided herein, and
determining the form, type and kind of such contracts.
(5) Making all determinations and computations concerning the
benefits, credits, and debits to which any Participant or beneficiary may
be entitled under the Plan. See Section 2.04(b).
(6) Authorizing and directing the Trustee to pay from the Trust Fund
as an administrative expense all costs and expenses incurred by the Plan
Administrator in the administration of the Plan not paid directly by the
Employer.
(7) Computing, certifying, and directing the Trustee with respect to
the amount and the kind of benefits to which a Participant shall be
entitled under the Plan.
(8) Authorizing and directing the Trustee with regard to all
nondiscretionary or otherwise directed disbursements from the Trust.
(9) Keeping a record of all actions taken and to keeping all other
books of account, records, and other data as may be necessary for the
proper administration of the Plan and being responsible for supplying all
information and reports to the Internal Revenue Service, Department of
Labor, Participants, beneficiaries and others as required by law.
(10) Computing and certifying to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed to
the Plan.
(11) Consulting with the Employer and the Trustee regarding the short
and the long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives.
(12) Preparing and distributing any required notices and distribution
forms, including but not limited to, notices concerning annuity
distributions, as required by the Act and the Regulations thereunder.
(13) Assisting any Participant regarding his or her rights, benefits,
or elections available under the Plan.
(14) Determining whether a Participant is disabled for the purposes of
Section 3.04.
(e) The Plan Administrator may rely upon the information furnished to the
Plan Administrator by the Employer under Section 2.03(e) and shall have no duty
or responsibility to verify such information. The Plan Administrator shall
advise the Trustee of such information provided by the Employer as may be
pertinent to the Trustee's duties under the Plan.
Page 20 of 58
<PAGE>
Section 2.05. Powers And Duties Of The Trustee.
--------------------------------
(a) The Trustee shall have such powers to hold, invest, reinvest, control,
and disburse funds as at that time shall be set forth in the Trust Agreement.
The Trustee shall exercise the aforementioned powers consistent with the
"funding method" and "funding standards" referred to in Article IV and subject
to the direction of one or more Investment Managers as to all or a portion of
the assets of the Plan, if the Employer should appoint such Investment
Manager(s) as provided in Section 2.03(b).
(b) The Employer may remove the Trustee at any time upon notice required
by the terms of the Trust Agreement, and upon such removal or upon the
resignation of the Trustee, the Board of Directors shall designate and appoint a
successor Trustee.
Section 2.06. Powers And Duties Of The Actuary.
--------------------------------
(a) The Actuary employed by the Employer shall make all actuarial
calculations and perform all duties required of the Actuary and/or necessary in
the administration of the Plan. Neither the Employer nor the Trustee shall be
liable for the actuarial correctness of any determination made by the Actuary.
(b) In making an actuarial valuation of the Plan and Trust from time to
time, the Actuary may rely upon the written statement of the Trustee concerning
the assets in the Trust and shall not be required to make any independent
calculations with respect thereto. The Actuary shall certify to the Employer in
writing the results of the calculations required of the Actuary and the
Employer, Plan Administrator, and the Trustee may rely thereon. In making all
calculations hereunder, the Actuary shall use such actuarial tables as the
Actuary deems appropriate, but the Actuary shall use the same tables in making
calculations during a specified period; provided, however, the Actuary, with the
consent of the Employer, may from time to time change the actuarial tables and
other assumptions used by him or her hereunder.
(c) The Employer, Plan Administrator, and the Trustee shall furnish the
Actuary such information concerning Employees, payrolls, and other related data
as the Actuary may require from time to time. The Actuary may rely upon any
information furnished to the Actuary by the Employer, Plan Administrator, or the
Trustee.
Section 2.07. Claims For Benefits.
-------------------
(a) A Claimant must make a claim in writing to the Plan Administrator for
any benefit under the provisions of the Plan.
(b) The Plan Administrator shall, within ninety (90) days of receipt of
such claim, provide to the Claimant written notice of the disposition of the
claim. If the Plan Administrator denies in whole or in part a claim for
benefits, write a letter to the Claimant setting forth the reasons for denial in
language calculated to be understood by the Claimant, with specific reference to
applicable Plan provisions and an explanation of the necessary steps to be taken
by the Claimant to perfect the claim. The Claimant shall also be furnished an
explanation of the Plan's review procedure. Even if the Claimant does not
receive such notice within such period, he or she shall have the right to
proceed under paragraph (c), below, as in the case of receipt of a denial on the
90th day after filing.
(c) Any Claimant for a benefit (or, as applicable, his or her estate or
other representative or beneficiary) who has been denied a benefit by decision
of the Plan Administrator pursuant to the immediately preceding paragraph (b)
may, within sixty (60) days after receipt of the letter, referred to in the
immediately preceding paragraph (b), appeal to the Plan Administrator and
request a review of the denial of benefits with the opportunity to appear in
person or, at the Claimant's option, to submit his or her position in writing.
In the event a hearing is held, the Claimant may be represented by an attorney
or other representative of his or her choosing and shall have the opportunity to
submit written or oral evidence and arguments in support of his or her claim.
At the hearing (or prior thereto upon five (5)
Page 21 of 58
<PAGE>
business days written notice to the Plan Administrator) the Claimant or his or
her representative shall have an opportunity to review all documents in the
possession of the Plan Administrator that are pertinent to the claim at issue
and to disallowance of the claim. Either the Claimant or the Plan Administrator
may cause a court reporter to attend the hearing and record the proceedings, and
in such event a complete written transcript of the proceedings shall be
furnished to both parties by the court reporter. The full expense of any such
court reporter and such transcripts shall be borne by the party causing the
court reporter to attend the hearing.
The Plan Administrator, not later than sixty (60) days after receipt
of the request for review (or one hundred and twenty (120)) days, if a hearing
is held) after the request for review referred to in the foregoing provision of
this paragraph (c) is received, shall render a written decision written in a
manner calculated to be understood by the Claimant and mail the decision to the
Claimant at the Claimant's last address known to the Employer specifying by
reference to the Plan the reasons for the denial of such part or all of the
claimed benefits.
(d) The Plan Administrator shall cause to be paid promptly any part or all
of a benefit determined on review to be proper and otherwise due to be paid or,
if the claim related to a matter of record rather than payment, cause such
records to be properly changed.
(e) For purposes hereof, any calculation of Service Years, Continuous
Service, Vested interest or Accrued Benefits which is required or permitted to
be disclosed to any person with respect to the Plan shall be considered to have
been a "benefit claimed" if written challenge thereto or disagreement therewith
is filed by the recipient thereof with the Plan Administrator, and, in such
event, the foregoing provisions of this Section 2.07 shall apply.
Section 2.08. Completion Of Forms And Submission Of Proof By Participants.
-----------------------------------------------------------
Each Participant entitled to receive benefits under the Plan shall complete such
forms and furnish such proofs as shall be required by the Plan Administrator.
Section 2.09. Payment Of Expenses. All expenses of administration may be
-------------------
paid out of the Trust Fund unless paid by the Employer. Such expenses shall
include any expenses incident to the functioning of the Plan Administrator,
including, but not limited to, fees of pension consultants, actuaries,
accountants, attorneys, advisers, and other specialists and their agents, and
other costs of administering the Plan, including, to the extent provided in the
Trust Agreement, expenses incurred by the Trustee in performing its duties.
Until paid, the expenses shall constitute a liability of the Trust Fund.
ARTICLE III: BENEFITS
----------------------
Section 3.01. Normal Retirement.
-----------------
(a) When a Participant continues his or her employment with the Employer
to his or her Normal Retirement Date, he or she shall have a nonforfeitable
(Vested) right to a Monthly Retirement Income for life, in an amount calculated
by the Actuary and certified to the Trustee by the Employer. Upon termination of
services for the Employer on a Participant's Normal Retirement Date, the
Participant shall be entitled to receive payment of a Monthly Retirement Income.
(b) The amount of a Participant's Monthly Retirement Income payable on his
or her Normal Retirement Date shall be One and Three-Tenths percent (1.3%) of
the Participant's Average Monthly Earnings multiplied by his or her years of
Continuous Service.
(c) In no event shall a Participant receive a Monthly Retirement Income at
his or her Normal Retirement Date which is in excess of Fifty Percent (50%) of
his or her Monthly Earnings averaged during the twelve (12) months immediately
prior to his or her Normal Retirement Date, nor one which is less than the
largest periodic benefit that would have been payable to the Participant upon
separation from service at or prior to the Normal Retirement
Page 22 of 58
<PAGE>
Date under the Plan.
(d) For purposes of comparing periodic benefits in the same form,
commencing prior to and at Normal Retirement Date, the greater benefit is
determined by converting the benefit payable prior to the Participant's Normal
Retirement Date into the same form of annuity benefit payable at the Normal
Retirement Date and comparing the amount of such annuity payments.
(e) No Retired Participant shall receive less than Fifty Dollars ($50.00)
per month; however, this Section 3.01(e) shall not apply to any Participant who
first performs an Hour of Service after December 31, 1988, or to any Participant
to whom Sections 3.01 or 3.02 do not apply.
Page 23 of 58
<PAGE>
Section 3.02. Deferred Retirement.
-------------------
(a) A Participant whose employment terminates, for any reason other than
death, on the Deferred Retirement Date and before his or her Required Beginning
Date shall be entitled to receive a retirement benefit equal to his or her
Accrued Benefit as of his or her Deferred Retirement Date.
(b) A Participant who continues employment after his or her Normal
Retirement Date shall receive a Suspension of Benefits Notice pursuant to
Section 3.02(e) below.
(c) A Participant who continues employment after his or her Required
Beginning Date shall be entitled to receive a retirement benefit as described in
Article III.
(d) The annuity commencement date of any Participant who is to receive his
or her benefit pursuant to Section 3.02(a) shall be the first day of the month
coinciding with or next following his or her Deferred Retirement Date.
(e) Upon the reemployment, or continued employment, of a Participant after
his or her Normal Retirement Date, retirement benefits in pay status shall be
suspended only in accordance with the applicable provisions of Section 3.10.
Section 3.03. Early Retirement. A Participant whose employment with the
----------------
Employer is terminated except by death or Total and Permanent Disability may
retire from the employ of the Employer upon attainment of age sixty (60), and
the completion of at least seven (7) years of Continuous Service. The amount of
the pension shall be computed in the same manner as a pension payable under
Section 3.01 except that it shall be based on Continuous Service and/or Average
Monthly Earnings to date of early retirement. If a retiring or terminating
Participant has complied with the applicable requirements for early retirement
at the time his or her employment ceases, he or she may elect one of the
following benefits, subject to the provisions of Article III pertaining to the
distribution of benefits:
(a) A deferred pension at the age of sixty-five (65) in the full amount as
set forth in the Plan, but based on Continuous Service and/or Average Monthly
Earnings to date of early retirement; or
(b) An immediate pension, for Participants who are not receiving early
retirement benefits as of January 1, 1989, commencing at early retirement equal
to the Vested Accrued Benefit at the time of termination of active employment
but reduced by one-half percent (0.5%) for each month from Normal Retirement
Date to Early Retirement Date (subject to the receipt of all necessary consents
pursuant to Article III).
Section 3.04. Total And Permanent Disability.
------------------------------
(a) If and when the Plan Administrator in his or her sole discretion and
based upon proper medical authority certified to by a physician of its choosing
and other information shall find a Participant with at least seven (7) years of
Continuous Service to be, at the time of the Participant's separation from
service, Totally and Permanently Disabled (see Section 1.45) and shall certify
such fact to the Trustee, then such disabled Participant shall be entitled to
receive the greater of the amount of Monthly Retirement Income the Participant
would have received under Section 3.01, or $100.00 per month.
(b) If the disabled Participant recovers prior to Normal Retirement Date,
the Plan Administrator shall immediately direct the Trustee to discontinue the
disability payments.
(c) If the disabled Participant recovers prior to Normal Retirement Date
and returns to the employ of the Employer within a period of time after recovery
which the Plan Administrator deems reasonable, he or she shall on
Page 24 of 58
<PAGE>
actual return to employment again become an active Participant in the Plan and
shall be entitled to the benefits provided hereunder as if he or she had never
been Totally and Permanently Disabled; provided, however, that the benefits to
which he or she may become entitled hereunder shall be reduced by the Actuarial
Equivalent of the disability payments received, as certified to the Plan
Administrator by the Actuary.
(d) The Plan Administrator shall have the right from time to time to have
a medical examination or examinations made by a duly licensed physician or
physicians to determine whether total disability is continuing, and to ascertain
from the disabled Participant by warranties or otherwise the extent to which he
or she has had his or her earning ability restored, and upon such findings to
discontinue payments accordingly. If the disabled Participant refuses to submit
to such medical examinations, or to submit any other information requested, the
Plan Administrator shall have the power to suspend or withhold the payment of
any benefit until the Participant does so submit. Should a Participant falsify
any such statement, his or her benefit shall immediately terminate. Based upon
such examination and statement of the Participant, the Plan Administrator shall
determine whether the Participant is totally disabled, the extent of recovery
attained, or whether such disability has fully ceased. In the event a
Participant receives any benefit payments under the Plan because of a
misrepresentation regarding his or her recovery, or failure to disclose
recovery, the Plan Administrator will seek to obtain recovery of all such
payments, by offsetting subsequent retirement payments or by any other
reasonable means, to the extent that the Plan Administrator determines that the
amount involved warrants recovery efforts.
Section 3.05. Benefit Distribution.
--------------------
(a) General Application. Subject to the provisions of the
-------------------
Section 3.05(b)-(k) and Section 3.06 and notwithstanding any other provision of
the Plan, the form of an early, normal, or deferred retirement benefit or
disability retirement benefit (only if disabled Employee met the requirements of
Section 3.03 as well) under the Plan to a married Participant shall be a joint
and survivor annuity under which such Retired Participant will receive the
Actuarial Equivalent of his or her retirement benefit otherwise calculated
pursuant to the terms of the Plan during his or her lifetime following actual
retirement, and after his or her death one-half of such monthly income payable
to him or her shall be payable to his or her spouse for the lifetime of his or
her spouse.
(1) The provisions of Section 3.05(b)-(k) shall apply to any
Participant who is credited with at least one Hour of Service with the
Employer on or after August 23, 1984.
(2) On and after January 1, 1985, the provisions of Section 3.05(b)-
(k) shall take precedence over any conflicting provision in the Plan, but
shall not be construed so as to grant a benefit to any person, unless and
only to the extent that by Plan provisions other than Section 3.05(b)-(k),
the subject Participant or Former Participant would have, if living on the
date of his or her death, a nonforfeitable right to any portion of his or
her Accrued Benefit.
(b) Qualified Joint And Survivor Annuity; Immediate Life Annuity. Unless
------------------------------------------------------------
otherwise elected by a Participant pursuant to a qualified election, as provided
below, a married Participant's Vested Accrued Benefit shall be paid in the form
of a qualified joint and survivor annuity. An unmarried Participant's Vested
Accrued Benefit shall be paid in the form of an immediate life annuity.
(1) A qualified joint and survivor annuity is an annuity payable
during the joint lives of the Participant and the Participant's spouse that
commences immediately and which shall be the Actuarial Equivalent of an
immediate life annuity, or, if greater, any optional form of benefit. Such
joint and survivor benefits following the Participant's death shall
continue to the spouse during the spouse's lifetime at a rate equal to
fifty percent (50%) of the rate at which such benefits were payable to the
Participant. This joint and 50% survivor annuity shall be considered the
designated qualified joint and survivor annuity and automatic form of
payment for the purposes of the Plan. However, the Participant may elect to
receive a smaller annuity
Page 25 of 58
<PAGE>
benefit with continuation of payments to the Participant's spouse at the
rate of one hundred percent (100%) of the rate payable to a Participant
during his or her lifetime, which alternative joint and survivor annuity
shall be the Actuarial Equivalent of the automatic joint and 50% survivor
annuity.
(2) The joint and survivor annuity and the immediate life annuity
forms of distribution shall be the Actuarial Equivalent of the benefits due
the Participant.
(3) A Participant may elect to have the annuity applicable to him or
her under Section 3.05(b) distributed upon attainment of the Earliest
Retirement Age under the Plan.
(c) Spouse. "Spouse," for the purposes of this Section 3.05, shall mean
------
the spouse of a Participant; provided, however, that a former spouse will be
treated as the Participant's spouse (and a current spouse will not be treated as
the Participant's spouse) to the extent provided under a qualified domestic
relations order as described in Code Section 414(p).
(1) Notwithstanding the provisions of this Section 3.05 or other Plan
provisions, a person will not be treated as the spouse of a Participant or
Former Participant unless the Participant and such person had been married
through the one-year period ending on the earlier of
(i) the Participant's annuity starting date, or
(ii) the date of the Participant's death.
(2) For the purposes of this Section 3.05, if
(i) a Participant marries within one year before the annuity
starting date, and
(ii) the Participant and his or her spouse in such marriage have
been married for at least a one-year period ending on or before the
date of his or her death,
the Participant and such spouse shall be treated as having been married
throughout the one-year period ending on his or her annuity starting date.
(d) Annuity Starting Date. The annuity starting date is the first day of
---------------------
the first period for which an amount is paid as an annuity, or, in the case of a
benefit not payable in the form of an annuity, the first day on which all events
have occurred which entitle the Participant to such benefit.
(1) The annuity starting date for disability benefits shall be the
date such benefits commence, if the disability benefit is not an auxiliary
benefit.
(2) An auxiliary benefit is a disability benefit which does not
reduce the benefit payable at the Normal Retirement Date.
(e) Qualified Election. A qualified election is a waiver of a qualified
------------------
joint and survivor annuity or the immediate life annuity.
(1) Any election to waive the joint and survivor annuity must be made
by the Participant in writing during the election period and be consented
to by the Participant's spouse. If the spouse is legally incompetent to
give consent, the spouse's legal guardian, even if such guardian is the
Participant, may give consent. Such election shall designate a (1)
beneficiary (including any class of beneficiaries or any
Page 26 of 58
<PAGE>
contingent beneficiaries) that may not be changed without spousal consent
(unless the consent of the spouse expressly permits designations by the
Participant without the requirement of further consent by the spouse) and
(2) a form of benefits, that may not be changed without spousal consent
(unless the consent of the spouse expressly permits designations by the
Participant without the requirement of further consent by the spouse). Such
spouse's consent shall be irrevocable and must acknowledge the effect of
such election and be witnessed by a Plan representative or a notary public.
Such consent shall not be required if it is established to the satisfaction
of the Plan Administrator that the required consent cannot be obtained
because there is no spouse, the spouse cannot be located, or other
circumstances that may be prescribed by the Regulations. The election made
by the Participant and consented to by his or her spouse may be revoked by
the Participant in writing without the consent of the spouse at any time
during the election period. The number of revocations shall not be limited.
Any new election must comply with the requirements of this paragraph (e). A
former spouse's waiver shall not be binding on a new spouse.
(2) An unmarried Participant may elect in writing to waive the
immediate life annuity. The election must comply with the provisions of
this Section 3.05(e) as if it were an election to waive the joint and
survivor annuity by a married Participant, but without the spousal consent
requirement.
(f) Election Period. The election period to waive the joint and survivor
---------------
annuity shall be the ninety-day period ending on the "annuity starting date."
(g) Notice To Be Provided To Participants. With regard to the qualified
-------------------------------------
election, the Plan Administrator shall provide to the Participant, no less than
thirty (30) days and no more than ninety (90) days before the annuity starting
date, a written explanation of the following:
(1) The terms and conditions of the joint and survivor annuity, and
(2) The Participant's right to make, and the effect of, an election
to waive the joint and survivor annuity, and
(3) The right of the Participant's spouse to consent to any election
to waive the joint and survivor annuity, and
(4) The right of the Participant to revoke such election, and the
effect of such revocation, and
(5) The relative values of the various optional forms of benefit
under the Plan.
(i) Notwithstanding the other requirements of Section 3.05, the
respective notices prescribed by Section 3.05(g) need not be given to
a Participant if
(A) the Plan "fully subsidizes" the costs of a qualified
joint and survivor annuity, and
(B) the Plan does not allow the Participant to waive the
qualified joint and survivor annuity and does not allow a married
Participant to designate a non-spouse beneficiary.
(ii) For purposes of this Section 3.05(g), the Plan fully
subsidizes the costs of a benefit if under the Plan no increase in
cost or decrease in benefits to the Participant may result from the
Participant's failure to elect another benefit.
(h) Lump Sum Distribution Option. In the event a married Participant duly
----------------------------
elects pursuant to the immediately preceding paragraph (e) not to receive
benefits in the form of a joint and survivor annuity, or if such
Page 27 of 58
<PAGE>
Participant is not married, in the form of an immediate life annuity, the Plan
Administrator, pursuant to the election of the Participant, shall direct that
the Participant's benefits be distributed in accordance with the provisions of
Section 3.08.
(i) Distribution Limitations. Notwithstanding any provision in the Plan
------------------------
to the contrary, the distribution of a Participant's benefits made on or after
January 1, 1985 shall be made in accordance with the following requirements and
shall otherwise comply with Code Section 401(a)(9) and the Regulations
thereunder (including Regulation 1.401(a)(9)-2), the provisions of which are
incorporated herein by reference:
(1) A Participant's benefits shall be distributed to him or her not
later than April 1st of the calendar year following the later of (i) the
calendar year in which the Participant attains age 70 1/2 or (ii) the
calendar year in which the Participant retires, provided, however, that
this clause (ii) shall not apply in the case of a Participant who is a
"five (5) percent owner" at any time during the five (5) Plan Year period
ending in the calendar year in which he or she attains age 70 1/2 or, in
the case of a Participant who becomes a "five (5) percent owner" during any
subsequent Plan Year, clause (ii) shall no longer apply and the required
beginning date shall be the April 1st of the calendar year following the
calendar year in which such subsequent Plan Year ends. Alternatively,
distributions to a Participant must begin no later than the applicable
April 1st as determined under the preceding sentence and must be made over
the life of the Participant (or the lives of the Participant and the
Participant's designated beneficiary) or the life expectancy of the
Participant (or the life expectancies of the Participant and his or her
designated beneficiary) in accordance with Regulations. Notwithstanding
the foregoing, clause (ii) above shall not apply to any Participant unless
the Participant had attained age 70 1/2 before January 1, 1988 and was not
a "five (5) percent owner" at any time during the Plan Year ending with or
within the calendar year in which the Participant attained age 66 1/2 or
any subsequent Plan Year.
(2) Distributions to a Participant and his or her Beneficiaries shall
only be made in accordance with the incidental death benefit requirements
of Code Section 401(a)(9)(G) and the Regulations thereunder. Additionally,
for calendar years beginning before 1989, distributions may also be made
under an alternative method which provides that the then present value of
the payments to be made over the period of the Participant's life
expectancy exceeds fifty percent (50%) of the then present value of the
total payments to be made to the Participant and his or her Beneficiaries.
(j) Calculation Of Life Expectancy. Life expectancy and joint and last
------------------------------
survivor expectancy shall be computed using the return multiples in Tables V and
VI of Regulation 1.72-9. For purposes of this Section 3.05, the life expectancy
of a Participant and a Participant's spouse (other than in the case of a life
annuity) shall not be subject to recalculation.
(k) Transitional Rule. Subject to the spouse's right of consent afforded
-----------------
under the Plan, the restrictions imposed by this Section 3.05 shall not apply if
a Participant has, prior to January 1, 1984, made a written designation to have
his or her retirement benefit paid in an alternative method acceptable under
Code Section 401(a) as in effect prior to the enactment of the Tax Equity and
Fiscal Responsibility Act of 1982.
Section 3.06. Distribution Of Benefits Upon Death.
-----------------------------------
(a) General Application. The provisions of Section 3.06 shall apply to
-------------------
any Participant who is credited with at least one Hour of Service with the
Employer on or after August 23, 1984. Under the provisions of Section 3.06, a
married Participant in active employment may elect to provide for the payment of
monthly benefits to his or her surviving spouse in the event of his or her death
while he or she is actively employed. On and after January 1, 1985, the
provisions of Section 3.06 shall take precedence over any conflicting provision
in the Plan, but shall not be construed so as to grant a benefit to any person,
unless and only to the extent that by Plan provisions other than Section 3.06,
the subject Participant or Former Participant would have, if living on the date
of his or her death, a
Page 28 of 58
<PAGE>
nonforfeitable right to any portion of his or her Accrued Benefit.
(1) After January 1, 1985, certain Former Participants of the Plan,
as provided in Article III, may elect to provide for the payment of monthly
benefits to a surviving spouse in the event of the Participant's death
while the Participant is actively employed.
(2) Prior to December 31, 1984, regardless of a Participant's
election or failure to elect to provide for the payment of monthly benefits
to the Participant's surviving spouse in the event of the Participant's
death while the Participant was actively employed and regardless of the
Participant's designation of a beneficiary, if a Participant remained
employed past the Participant's Normal Retirement Date and died prior to
termination of service with the Employer, the Participant's surviving
spouse was entitled to receive a fifty percent (50%) survivor annuity as if
the deceased Participant had retired on the day prior to the Participant's
date of death and had been entitled under Section 3.05 to a qualified
annuity with a fifty percent (50%) survivor benefit, which qualified
annuity was the Actuarial Equivalent of the then value of the Participant's
deferred payment account, provided that the Participant's surviving spouse
had been married to the Participant throughout the one-year period ending
on the Participant's date of death. Otherwise, if a Participant died after
the Participant's Normal Retirement Date while still in the employ of the
Employer under the Deferred Retirement provisions of the Plan, the
Participant's surviving spouse, or if none, the Participant's beneficiary
designated in a writing filed with the Employer (otherwise, the
Participant's estate), was entitled to receive as a death benefit one-half
of the value of the Participant's deferred payment account. The payment of
the death benefit was made by the Trustee from the Trust Fund at such time,
and in such form, as directed by the Employer.
As used in the foregoing provisions of this Section 3.06(a)(2),
"deferred payment account" refers to the single sum actuarial value of the
Participant's Monthly Retirement Income as of the Participant's Normal
Retirement Date, as calculated by the Actuary and certified to the Employer
by the Actuary. In calculating the assets and the liabilities of the Plan,
the Actuary carried the Participant's deferred payment account as a
liability of the Plan.
(b) Qualified Pre-retirement Survivor Annuity.
-----------------------------------------
(1) Unless an optional form of benefit is selected within the
election period pursuant to a qualified election,
(i) if a Participant dies after the Earliest Retirement Age, and
(ii) thus would have been, if living, Vested in a benefit,
the Participant's surviving spouse (if any) will receive the same benefit
that would be payable if the Participant had retired with an immediate
qualified joint and survivor annuity, unless an optional form of benefit is
selected within the election period pursuant to a qualified election. The
surviving spouse may direct that payment under the annuity commence within
a reasonable period after the Participant's death. If the surviving spouse
does not so direct, payment of such benefit will commence at the time the
Participant would have attained the later of his or her Normal Retirement
Date or age 62. However, the surviving spouse may elect a later
commencement date, subject to the rules specified in Section 3.06(i). The
actuarial value of benefits which commence later than the date on which
payments would have been made to the surviving spouse under a qualified
joint and survivor annuity in accordance with this provision shall be
adjusted to reflect the delayed payment.
(2) Unless an optional form of benefit is selected within the
election period pursuant to a qualified election, if a Participant whose
Accrued Benefits are Vested under the terms of the Plan dies on or before
Page 29 of 58
<PAGE>
the Earliest Retirement Age, the Participant's surviving spouse (if any)
will receive the same benefit that would be payable if the Participant had:
(i) separated from service on the earlier of the actual time of
separation or the date of his or her death,
(ii) survived to the Earliest Retirement Age,
(iii) retired with an immediate joint and survivor annuity at the
Earliest Retirement Age based on his or her Vested Accrued Benefit on
his or her date of death, and
(iv) died on the day after the day on which said Participant
would have attained the Earliest Retirement Age.
(c) Surviving Spouse. "Surviving spouse," as used in this Section 3.06,
----------------
shall mean the surviving spouse of a Participant; provided, however, that a
former spouse will be treated as the Participant's surviving spouse (and a
current spouse will not be treated as the Participant's surviving spouse) to the
extent provided under a qualified domestic relations order as described in Code
Section 414(p).
(1) Notwithstanding the provisions of this Section 3.06 or other Plan
provisions, a person will not be treated as the surviving spouse of a
Participant or Former Participant unless the Participant and such person
had been married through the one-year period ending on the earlier of
(i) the Participant's annuity starting date, or
(ii) the date of the Participant's death.
(2) For the purposes of this Section 3.06, if
(i) a Participant marries within one year before the annuity
starting date, and
(ii) the Participant and his or her spouse in such marriage have
been married for at least a one-year period ending on or before the
date of his or her death,
the Participant and such spouse shall be treated as having been married
throughout the one-year period ending on his or her annuity starting date.
(d) Annuity Starting Date. Annuity starting date shall have the meaning
---------------------
set forth in Section 3.05(d).
(e) Qualified Election. A qualified election is a waiver of the Pre-
------------------
retirement Survivor Annuity. Any election to waive the Pre-Retirement Survivor
Annuity before the Participant's death must be made by the Participant in
writing during the election period and shall require the spouse's irrevocable
consent in the same manner provided for in Section 3.05(e)(1). Further, the
spouse's consent must acknowledge the specific nonspouse beneficiary.
Notwithstanding the foregoing, the nonspouse beneficiary need not be
acknowledged, provided the consent of the spouse acknowledges that the spouse
has the right to limit consent only to a specific beneficiary and that the
spouse voluntarily elects to relinquish such right.
(f) Election Period. The election period to waive the Pre-Retirement
---------------
Survivor Annuity shall begin on the first day of the Plan Year in which the
Participant attains age 35 and end on the date of the Participant's death. An
earlier waiver (with spousal consent) may be made provided (1) a written
explanation of the Pre-Retirement Survivor Annuity, which contains comparable
information to that required by Section 3.05(g), is given to the Participant and
Page 30 of 58
<PAGE>
(2) such waiver becomes invalid at the beginning of the Plan Year in which the
Participant turns age 35, with any subsequent waiver being subject to the full
requirements of this Section 3.06. In the event a Vested Participant separates
from service prior to the beginning of the election period, the election period
shall begin on the date of such separation from service.
(g) Notice To Be Provided To Participants. With regard to the qualified
-------------------------------------
election, the Plan Administrator shall provide each Participant within the
applicable period, with respect to such Participant (and consistent with
Regulations), a written explanation of the Pre-Retirement Survivor Annuity
containing comparable information to that required pursuant to Section 3.05(g).
For the purposes of this Section 3.06(g), the term "applicable period" means,
with respect to a Participant, whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35;
(2) A reasonable period after the individual becomes a Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retirement Survivor Annuity with respect to
the Participant;
(4) A reasonable period ending after Code Section 401(a)(11) applies
to the Participant; or
(5) A reasonable period after separation from service in the case of
a Participant who separates before attaining age 35. For this purpose, the
Plan Administrator must provide the explanation beginning one year before
the separation from service and ending one year after such separation. If
such a Participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
For purposes of applying this Section 3.06(g), a reasonable period ending
after the enumerated events described in the immediately preceding paragraphs
(2), (3) and (4) is the end of the two year period beginning one year prior to
the date the applicable event occurs, and ending one year after that date.
(i) Notwithstanding the other requirements of Section 3.06, the
respective notices prescribed by Section 3.06 need not be given to a
Participant if
(A) the Plan "fully subsidizes" the costs of a qualified
Pre-retirement Survivor Annuity, and
(B) the Plan does not allow the Participant to waive the
qualified Pre-retirement Survivor Annuity and does not allow a married
Participant to designate a non-spouse beneficiary.
(ii) For purposes of this Section 3.06, the Plan fully subsidizes
the costs of a benefit if under the Plan no increase in cost or
decrease in benefits to the Participant may result from the
Participant's failure to elect another benefit.
(h) Lump Sum Distribution Option. In the event the death benefit is not
----------------------------
distributed in the form of a Pre-Retirement Survivor Annuity, it shall be
distributed in accordance with the provisions of Section 3.08.
(i) Distribution Limitations. Notwithstanding any provision in the Plan
------------------------
to the contrary, distributions upon the death of a Participant made on or after
January 1, 1985 shall be made in accordance with the following requirements and
shall otherwise comply with Code Section 401(a)(9) and the Regulations
thereunder. Distributions to the Participant's surviving spouse must commence
on or before the later of: (1) December 31st of the calendar year immediately
following the calendar year in which the Participant died; or (2) December
31st of the calendar year in
Page 31 of 58
<PAGE>
which the Participant would have attained age 70 1/2. If it is determined
pursuant to Regulations that the distribution of a Participant's interest has
begun and the Participant dies before his or her entire interest has been
distributed to him or her, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of distribution selected
pursuant to Section 3.05 as of his or her date of death.
However, the 5-year distribution requirement of the immediately preceding
paragraph shall not apply to any portion of the deceased Participant's interest
which is payable to or for the benefit of a designated beneficiary. In such
event, such portion may, at the election of the Participant (or the
Participant's designated beneficiary), be distributed over the life of such
designated beneficiary (or over a period not extending beyond the life
expectancy of such designated beneficiary) provided such distribution begins not
later than December 31st of the calendar year immediately following the calendar
year in which the Participant died. However, in the event the Participant's
surviving spouse is his or her beneficiary, the requirement that distributions
commence within one year of a Participant's death shall not apply. In lieu
thereof, distributions must commence on or before the later of: (1) December
31st of the calendar year immediately following the calendar year in which the
Participant died; or (2) December 31st of the calendar year in which the
Participant would have attained age 70 1/2. If the surviving spouse dies before
distributions to such spouse begin, then the 5-year distribution requirement of
this Section shall apply as if the spouse was the Participant.
For purposes of Section 3.05(i), the election by a designated beneficiary
to be excepted from the 5-year distribution requirement must be made no later
than December 31st of the calendar year following the calendar year of the
Participant's death. Except, however, with respect to a designated beneficiary
who is the Participant's surviving spouse, the election must be made by the
earlier of: (1) December 31st of the calendar year immediately following the
calendar year in which the Participant died or, if later, the calendar year in
which the Participant would have attained age 70 1/2; or (2) December 31st of
the calendar year which contains the fifth anniversary of the date of the
Participant's death. An election by a designated beneficiary must be in writing
and shall be irrevocable as of the last day of the election period stated
herein. In the absence of an election by the Participant or a designated
beneficiary, the 5-year distribution requirement shall apply.
(j) Calculation Of Life Expectancy. Life expectancy and joint and last
------------------------------
survivor expectancy shall be computed using the return multiples in Tables V and
VI of Regulation 1.72-9. For purposes of this Section 3.06, the life expectancy
of a Participant and a Participant's spouse (other than in the case of a life
annuity) shall not be subject to recalculation.
(k) Transitional Rule. Subject to the spouse's right of consent afforded
-----------------
under the Plan, the restrictions imposed by this Section shall not apply if a
Participant has, prior to January 1, 1984, made a written designation to have
his or her death benefits paid in an alternative method acceptable under Code
Section 401(a) as in effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
Section 3.07. Determination Of Accrued Benefits Upon Termination.
---------------------------------------------------
(a) When the employment of a Participant by the Employer shall be
terminated for any reason other than death or retirement (including disability
retirement, early retirement, or deferred retirement), such Participant shall
cease to be an active Participant in the Plan, and the Accrued Benefit of such
Participant shall be determined as follows:
(1) With respect to Employees who have at least one Hour of Service
on or after January 1, 1989: If at the time of termination as an Employee
(or if employed thereafter by the Employer in any capacity or by an
Affiliate, at the time of termination of service for the Employer and all
Affiliates) the Employee is a Participant with either seven (7) years of
Continuous Service or five (5) Service Years, the Accrued Benefit under the
Plan shall be Vested and payable at Normal Retirement Age in accordance
with the benefit distribution provisions contained in Article III (and
nonforfeitable except in the event of death prior to
Page 32 of 58
<PAGE>
Normal Retirement Date without a surviving spouse); or
(2) With respect to Employees who do not have at least one Hour of
Service on or after January 1, 1989: If at the time of termination as an
Employee (or if employed thereafter by the Employer in any capacity or by
an Affiliate, at the time of termination of service for the Employer and
all Affiliates) he or she was credited with at least ten (10) Service Years
or at least seven (7) years of Continuous Service, such Employee shall be
entitled to receive at his or her Normal Retirement Date a Monthly
Retirement Income equal to his or her Accrued Benefit at date of
termination as an Employee covered hereby.
(b) In lieu of the benefits provided by the immediately preceding Section
3.07(a), a Participant with at least ten (10) Service Years or at least seven
(7) years of Continuous Service who is no longer employed by any Employer or
Affiliate may at any time after attainment of age sixty (60) apply for an
immediate Monthly Retirement Income for life (subject to the benefit
distribution provisions of Article III) equal to the Actuarial Equivalent of the
benefit due at Normal Retirement Date under 3.07(a) above. If such a person
dies prior to the commencement of benefits, no death benefit shall be payable
under the Plan.
Section 3.08. Lump Sum Distributions.
-----------------------
(a) Cash-Out Of Vested Accrued Benefits.
-----------------------------------
(1) Notwithstanding the other provisions of the Plan, if after
December 31, 1984
(i) the Actuarial Value of a terminated or retiring
Participant's Vested Accrued Benefit as calculated at his or her date
of severance is $5,000 ($3,500 for Plan Years beginning prior to
January 1, 2000) or less, determined not pursuant to the immediately
following paragraph (A), but in accordance with the applicable PBGC
annuity factor for males in effect at the beginning of the Plan Year,
or
(ii) the Participant agrees in writing regardless of the amount
of such Actuarial Value, but subject to the benefit distribution
provisions of Article III, including but not limited to Section
3.07(a),
the Employer may, but need not, direct that the Actuarial Value of his or
her Vested Accrued Benefits as calculated at his or her date of severance
be paid in a lump sum to such Terminated Participant, with interest at the
rate specified in the immediately following paragraph (A), from the date as
of which the said value was calculated to the date as of which it was paid.
(A) For the purposes of the immediately preceding
paragraph (1), "Actuarial Value" means equality in the value of
the aggregate amounts to be received under different forms of
payment based upon the 1971 Group Annuity Mortality Table for
males, with a five (5) year age setback for beneficiaries and
interest at six percent (6%) per annum, compounded annually for
other than lump sum payments, and for lump sum payments, interest
at the rate used by the PBGC to value immediate annuities
compounded annually, but not less than six percent (6%) per
annum. In the event the assumptions stated in the immediately
preceding sentence change, the Actuarial Value of the Accrued
Benefit on or after the date of the change is the greater of the
Actuarial Value of the Accrued Benefit as of the date of the
change computed on the old basis or the Actuarial Value of the
Accrued Benefit computed on the new basis.
(B) In the event benefits are paid as provided in the
immediately preceding paragraph (a), no other benefits of any
type shall be payable to a Former Participant, or to his or her
beneficiaries, receiving benefits as provided in the immediately
preceding paragraph (a).
(2) Notwithstanding the immediately preceding paragraph (1) or any
other Plan provision, including
Page 33 of 58
<PAGE>
without limitation the provisions of Article III pertaining to benefit
distribution, the Plan Administrator
(i) shall direct distributions in lump sum of the Actuarial
Equivalent of any Plan benefit due after January 1, 1989 which is
$5,000 ($3,500 for Plan Years beginning prior to January 1, 2000) or
less, and
(ii) shall not permit distributions in such form, even with the
written request of Participant and spouse, if the Actuarial Equivalent
is in excess of $25,000.
The lump sum distributions shall discharge all obligations of the Plan
with respect to the benefits so paid. If the Actuarial Equivalent of a
Participant's Vested Accrued Benefit is zero, the Participant is
deemed to have received a distribution of the Vested Accrued Benefit.
(b) Repayment Of Distribution Upon Re-employment.
--------------------------------------------
(1) If a terminated or retiring Participant is subsequently re-
employed and again becomes a Participant in the Plan, his or her Continuous
Service shall not include (for purposes of accrual of benefits only but not
for vesting) any periods of employment prior to his or her re-employment
date, unless prior to his or her having five (5) consecutive one-year
Breaks in Service the amount of such payment is repaid to the Trust Fund,
plus interest at five percent (5%) per annum between the date of payment
and the date of re-payment.
(i) Such five percent (5%) rate shall automatically be adjusted to
reflect any Regulation issued by the Secretary of Treasury changing
such interest rate for mandatory Employee contributions.
(ii) If such amount (plus interest) is repaid, the Participant's
Continuous Service shall be based on all periods of employment.
(iii) The provisions of the foregoing paragraph (b) have no effect
on Service Years for vesting purposes.
(2) Effective on and after January 1, 1987, only in the event that a
partial vesting rule is applicable, a Former Participant who had received a
lump sum pursuant to the Plan of a partially Vested interest shall have the
right to restore his or her Employer-derived Accrued Benefit (including all
optional forms of benefits and subsidies relating to such benefits) to the
extent forfeited upon the repayment to the Plan of the full amount of the
distribution plus interest, compounded annually from the date of
distribution at the rate of five percent (5%).
(i) The repayment to the Plan must be made before the earlier of
five (5) years after the first date on which the Participant is
subsequently reemployed by the Employer, or the date the Participant
incurs five (5) consecutive one-year Breaks in Service following the
date of distribution.
(ii) If a Terminated Participant or Retired Participant is
subsequently employed and becomes a Participant in the Plan and does
not repay the full amount of the prior distribution, plus interest,
within the time specified above, no Continuous Service shall be
restored.
(iii) For purposes of this Section, if the present value of a
Participant's Vested Accrued Benefit is zero, the Participant shall be
deemed to have received a distribution of such Vested Accrued Benefit.
(iv) If a Former Participant is deemed to receive a distribution
pursuant to this Section and the Participant resumes employment
covered under the Plan before the date the Participant incurs five (5)
Page 34 of 58
<PAGE>
consecutive one-year Breaks in Service, upon reemployment of such
Participant, the Employer-derived Accrued Benefit will be restored to
the amount of such Accrued Benefit on the date of the deemed
distribution.
(c) Qualified Joint And Survivor Annuity. Notwithstanding the foregoing
------------------------------------
provisions of this Section 3.08 and any other Plan provisions, the present value
of a Participant's joint and survivor annuity may not be paid without his or her
written consent if the present value exceeds, or has ever exceeded, $5,000
($3,500 for Plan Years beginning prior to January 1, 2000) at the time of any
prior distribution. Further, the spouse of a Participant must consent in writing
to any immediate distribution. If the present value of the Participant's benefit
does not exceed $5,000 ($3,500 for Plan Years beginning prior to January 1,
2000) and has never exceeded $5,000 ($3,500 for Plan Years beginning prior to
January 1, 2000) at the time of any prior distribution, the Plan Administrator
may immediately distribute such benefit without such Participant's consent. No
distribution may be made under the immediately preceding sentence after the
"annuity starting date," unless the Participant and his or her spouse consent in
writing to such distribution. Any written consent required under this paragraph
must be obtained not more than 90 days before commencement of the distribution
and shall be made in a manner consistent with Section 3.05(e).
Any distribution to a Participant who has a benefit which exceeds, or has
ever exceeded, $5,000 ($3,500 for Plan Years beginning prior to January 1, 2000)
at the time of any prior distribution shall require such Participant's consent
if such distribution commences prior to the later of his or her Normal
Retirement Date or age 62. With regard to this required consent:
(1) No consent shall be valid unless the Participant has received a
general description of the material features and an explanation of the
relative values of the optional forms of benefit available under the Plan
that would satisfy the notice requirements of Code Section 417.
(2) The Participant must be informed of his or her right to defer
receipt of the distribution. If a Participant fails to consent, it shall be
deemed an election to defer the commencement of payment of any benefit.
However, any election to defer the receipt of benefits shall not apply with
respect to distributions which are required under Section 3.05(i).
(3) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the "annuity
starting date."
(4) Written consent of the Participant to the distribution must not
be made before the Participant receives the notice and must not be made
more than 90 days before the "annuity starting date."
(5) No consent shall be valid if a significant detriment is imposed
under the Plan on any Participant who does not consent to the distribution.
(d) Qualified Pre-retirement Survivor Annuity. Notwithstanding the
-----------------------------------------
foregoing provisions of this Section 3.08 and any other Plan provisions, if the
present value of the Pre-retirement Survivor Annuity does not exceed $5,000
($3,500 for Plan Years beginning prior to January 1, 2000) and has never
exceeded $5,000 ($3,500 for Plan Years beginning prior to January 1, 2000) at
the time of any prior distribution, the Plan Administrator shall direct the
immediate distribution of such amount to the Participant's spouse. No
distribution may be made under the preceding sentence after the annuity starting
date unless the spouse consents in writing. If the value exceeds, or has ever
exceeded, $5,000 ($3,500 for Plan Years beginning prior to January 1, 2000) at
the time of any prior distribution, an immediate distribution of the entire
amount may be made to the surviving spouse, provided such surviving spouse
consents in writing to such distribution. Any written consent required under
this Paragraph must be obtained not more than 90 days before commencement of the
distribution and shall be made in a manner consistent with Section 3.05(e).
Page 35 of 58
<PAGE>
(e) Annuity Option For Lump Sum Distributions In Excess Of $5,000 ($3,500
---------------------------------------------------------------------
for Plan Years Beginning Prior to January 1, 2000). If an immediate lump sum
- --------------------------------------------------
distribution in excess of $5,000 ($3,500 for Plan Years beginning prior to
January 1, 2000) is to be made pursuant to the foregoing provisions of this
Section 3.08, then the recipient of such a distribution may instead elect to
receive the distribution in the form of an immediate life annuity, and notice of
the option to elect payment through the form of an immediate life annuity shall
be given by the Plan Administrator as required under the Code and applicable
Regulations.
Section 3.09. Maximum Benefit Payment Date.
----------------------------
(a) Unless a Participant otherwise elects in a writing filed with the
Employer stating the amount of payments and the date they are to begin, the
payment of benefits, if any, due under the terms of the Plan to a Participant
shall begin not later than the 60th day after the latest of the close of the
Plan Year in which:
(1) occurs the 65th birthday of the Participant,
(2) occurs the 10th anniversary of the time the Participant commenced
participation in the Plan, or
(3) the Participant terminates his or her service with the Employer
and all Affiliates.
(b) Notwithstanding the foregoing, in no event may benefits commence later
than the first day of April following the calendar year in which attainment of
age seventy and one-half (70 1/2) occurs.
(c) Notwithstanding the foregoing, the Accrued Benefit of a five percent
(5%) owner (as described in Code Section 416(i) determined with respect to the
Plan Year ending in the calendar year in which such individual attains age
seventy and one-half (70 1/2)) must be distributed, or commence to be
distributed, no later than the first day of April following the calendar year in
which such individual attains age seventy and one-half (70 1/2).
Section 3.10. Suspension Of Benefits Upon Re-Employment Or Continued
------------------------------------------------------
Employment.
- ----------
(a) No Suspension Of Benefits On And After January 1, 1994.
------------------------------------------------------
Notwithstanding the immediately following paragraph (b), on and after January 1,
1994 retirement benefits in pay status (1) shall not be suspended due to a
Participant's continued employment after his or her Normal Retirement Date and
(2) shall not be suspended as of a Retired Participant's date of rehire if the
Retired Participant is re-employed. However, the aforementioned Participant's
Accrued Benefit or Retired Participant's Accrued Benefit, calculated at the time
of the subsequent termination of employment by the said Participant or Retired
Participant, shall be actuarially reduced to reflect prior benefit payments,
including, but not limited to, the prior payment of benefits in the form of a
lump sum.
(b) Suspension Of Benefits On And Before December 31, 1993. On and before
------------------------------------------------------
December 31, 1993 and in accordance with the immediately following provisions of
this Section 3.10, the benefits of a Retired Participant will be suspended as of
the Retired Participant's date of rehire if the Retired Participant is re-
employed.
(1) Suspension of Benefits. Retirement benefits in pay status shall
----------------------
cease as of the date of rehire if the Retired Participant is re-employed
and will be suspended for each calendar month during which the Employee
completes at least forty (40) Hours of Service with the Employer in Covered
Service. The Actuarial Value of benefits which commence later than a
Participant's Normal Retirement Date will be computed without regard to
amounts which would have been suspended under the preceding sentence as if
the Employee had been receiving benefits since his or her Normal Retirement
Date.
(2) Resumption of Payment. If benefit payments have been suspended,
---------------------
payments shall resume no later than the first day of the third calendar
month after the calendar month in which the Employee ceases to be
Page 36 of 58
<PAGE>
employed in Covered Service. The initial payment upon resumption shall
include the payment scheduled to occur in the calendar month when payments
resume, and any amounts withheld during the period between the cessation of
Covered Service and the resumption of payments.
(3) Notification. The Plan Administrator will notify the Employee by
------------
personal delivery or first class mail during the first calendar month or
payroll period in which the Plan withholds payments that his or her
benefits are suspended. Such notifications shall contain a description of
the specific reasons why benefit payments are being suspended, a
description of the Plan provisions relating to the suspension of payments,
a copy of such provisions, and a statement to the effect that applicable
Department of Labor regulations may be found in Section 2530.203-3 of the
Code of Federal Regulations. In the event the Plan Administrator fails to
timely provide this notice to any Employee, his or her retirement benefit
will include an amount equal to the greater of an Actuarial Equivalent
increase for the period between the date when the notice was due and the
date when it is delivered, or continued accruals for that period.
(i) The notification shall inform the Employee of the Plan's
procedures for affording a review of the suspension of benefits.
(ii) Requests for reviews may be considered in accordance with
the claims procedure (see Section 2.07) adopted by the Plan pursuant
to Section 503 of ERISA and applicable regulations.
(4) Amount suspended.
----------------
(i) Life Annuity. In the case of benefits payable periodically
------------
on a monthly basis for as long as a life (or lives) continues, such as
a straight life annuity or a qualified joint and survivor annuity, an
amount equal to the portion of a monthly benefit payment derived from
Employer contributions.
(ii) Other Benefit Forms. In the case of a benefit payable in a
-------------------
form other than the form described in the immediately preceding
paragraph (1), above, an amount of the Employer-derived portion of
benefit payments for a calendar month in which the Employee is
employed in Covered Service, equal to the lesser of
(A) The amount of benefits which would have been payable to
the Employee if he or she had been receiving monthly benefits
under the Plan since actual retirement based on a single life
annuity commencing at actual retirement age; or
(B) The actual amount paid or scheduled to be paid to the
Employee for such month (payments which are scheduled to be paid
less frequently than monthly may be converted to monthly
payments).
(5) Effective January 1, 1987, only those foregoing provisions of
Section 3.10(b)(1)-(4) that are inconsistent with the following provisions
of this Section 3.10(b)(5) shall be superseded by the following provisions
of this Section 3.10(b)(5): Upon the continued employment or reemployment
of a Participant after his or her Normal Retirement Date, the Plan
Administrator shall provide such Participant with a written notice of
suspension of benefit payment by personal delivery or certified mail in the
month following his or her Normal Retirement Date. Such notice will
(i) state that the suspension of benefit payments is due to
employment after Normal Retirement Date,
(ii) include a copy of amended Article III of the Plan and a
statement that applicable Department of Labor Regulations may be found
at Section 2530.203-3 of the Code of Federal
Page 37 of 58
<PAGE>
Regulations, and
(iii) state that the Participant may request a review of the
suspension of his or her Plan benefit payments under the claim
provisions of Section 2.07.
Section 3.11. Direct Rollover.
----------------
(a) This Section 3.11 applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Section 3.11, a distributee
may elect, at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
(b) For the purposes of this Section 3.11, the following definitions shall
apply:
(1) An eligible rollover distribution is any distribution of all or
any portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include:
(i) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint lives
(or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or
more;
(ii) any distribution to the extent such distribution is
required under Code Section 401(a)(9);
(iii) the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities, if any);
and
(iv) any other distribution(s) that is reasonably expected to
total less than $200 during a year.
(2) An eligible retirement plan is
(i) an individual retirement account described in Code Section
408(a), an individual retirement annuity described in Code Section
408(b);
(ii) an annuity plan described in Code Section 403(a); or
(iii) a qualified plan described in Code Section 401(a), that
accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Code Section 414(p), are distributees with regard to the interest of the
spouse or former spouse.
(4) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
Section 3.12. Appointment Of Guardian For Beneficiary. In making any
---------------------------------------
distribution to or for the benefit of any minor or incompetent beneficiary, the
Plan Administrator, in his or her sole, absolute and uncontrolled
Page 38 of 58
<PAGE>
discretion may, but need not, order the Trustee to make such distribution to a
legal or natural guardian or other relative of such minor or court appointed
committee of incompetent temporarily or permanently resides, and any such
guardian, committee, relative or other person shall have full authority and
discretion to expend such distribution for the use and benefit of such minor or
incompetent, and the receipt of such guardian, committee, relative or other
person shall be a complete discharge to the Trustee, without any responsibility
on its part or on the part of the Employer or Plan Administrator to see to the
application thereof.
ARTICLE IV: CONTRIBUTION AND VALUATION
---------------------------------------
Section 4.01. Deposit Of Funds. The Employer shall deposit with the
----------------
Trustee from time to time the funds actuarially necessary to provide the
benefits under the Plan for Participants and Beneficiaries in a manner
consistent with the funding standards mandated by ERISA and the applicable
regulations issued thereunder.
Section 4.02. Payment Of Expenses. The Employer will pay, or cause to be
-------------------
paid from the Trust Fund, all expenses of administering the Plan and the Trust
as may be mutually agreed upon by the Employer, Plan Administrator and Trustee
from time to time that may arise in connection with the Plan and Trust.
Section 4.03. Periodic Actuarial Valuation. The Actuary shall perform
----------------------------
periodically an actuarial valuation of the Plan and Trust Fund and shall certify
to the Employer in writing the results of the valuation. The Actuary in his or
her actuarial valuation shall apply all gains arising in the operation of the
Plan, including but not limited to gains resulting from terminations of
employment of Participants prior to qualifying for benefits hereunder, to reduce
the contributions of the Employer pursuant to the funding method and actuarial
tables then in use.
Section 4.04. Funding Standard Account. A funding standard account shall
------------------------
be established and maintained so that it may be determined whether or not the
Employer has complied with minimum funding standards.
Section 4.05. Contributions By Mistake Of Fact. Notwithstanding Section
--------------------------------
5.01(b), in the case of contributions made by the Employer by reason of a
mistake of fact, such contributions (or the portion thereof made in mistake) may
be returned to the Employer within one year after its payment into the Plan. Any
such amount returned may not include any income, earnings or gains attributable
to such nondeductible amount but shall be reduced by the proportionate part of
any loss of the Trust Fund between the time of its deposit in trust and the time
of its withdrawal.
Section 4.06. Contributions Conditioned On Deductibility. Any
------------------------------------------
contribution by the Employer is conditioned upon its deductibility under
Sections 404 or 162 of the Code, as amended, and to the extent that any such
deduction may hereafter be disallowed, there shall be returned to the Employer
the portion of the contribution which is disallowed within one year of the
disallowance of the said deduction. Any such amount returned may not include any
income, earnings or gains attributable to such nondeductible amount but shall be
reduced by the proportionate part of any loss of the Trust Fund between the time
of its deposit in trust and the time of its withdrawal.
ARTICLE V: TRUST FUND AND TRUST AGREEMENT
------------------------------------------
Section 5.01. Trust Fund.
----------
(a) The assets of the Plan shall be received, held in Trust, and disbursed
by the Trustee in accordance with the provisions of the Trust Agreement and the
provisions of the Plan. See Section 2.05.
(b) No part of the Trust Fund shall be used for or diverted to purposes
other than for the exclusive benefit of Participants, Retired Participants,
Disabled Participants, or their beneficiaries or spouses under the Plan prior to
the satisfaction of all liabilities hereunder with respect to them. The assets
of the Plan shall be held for the exclusive purposes of providing benefits to
Participants of the Plan (and to their beneficiaries) and of defraying
reasonable
Page 39 of 58
<PAGE>
expenses of administering the Plan (including, without limitation, fees and
charges of the Trustee and Actuary) except that because of errors made in the
actuarial calculations of the liabilities of the Trust Fund, after all
liabilities and contingent liabilities to the Participants and their
beneficiaries as provided for herein have been fully satisfied, any remaining
balance may be returned to the Employer.
(c) No person shall have any interest in or right to the Trust Fund or any
part thereof, except as specifically provided for in the Plan and/or the Trust
Agreement.
Section 5.02. Trust Agreement. The Trust Agreement shall be deemed to
---------------
form a part of the Plan and all rights of Participants or others under the Plan
shall be subject to the provisions of the Trust Agreement.
ARTICLE VI: MAXIMUM BENEFIT LIMITATIONS
----------------------------------------
Section 6.01. General.
-------
(a) This Section 6.01(a), except for (2) below, applies regardless of
whether any Participant is or has ever been a participant in another qualified
plan maintained by the Employer. If any Participant is or has ever been a
participant in another qualified plan maintained by the Employer, or a welfare
benefit fund, as defined in Code Section 419(e), maintained by the Employer, or
an individual medical account, as defined in Code Section 415(l)(2), maintained
by the employer, or a simplified employee pension plan, as defined in Code
Section 408(k), maintained by the Employer, that provides an annual addition as
defined in Section 6.02, Section 6.01(b) is also applicable to that
Participant's benefits.
(1) The annual benefit otherwise payable to a Participant at any time
will not exceed the maximum permissible amount. If the benefit the
Participant would otherwise accrue in a limitation year would produce an
annual benefit in excess of the maximum permissible amount, the rate of
accrual will be reduced so that the annual benefit will equal the maximum
permissible amount.
(2) The limitation in the immediately preceding paragraph (1) is
deemed satisfied if the annual benefit payable to a Participant is not
more than $1,000 multiplied by the Participant's number of years of
service or parts thereof (not to exceed 10) with the Employer, and the
Employer has not at any time maintained a defined contribution plan, a
welfare benefit plan as defined in Code Section 419(e), or an individual
medical account as defined in Code Section 415(l)(2) in which such
Participant participated.
(b) This Section 6.01(b) applies if any Participant is covered, or has
ever been covered, by another plan maintained by the Employer, including a
qualified plan, or a welfare benefit fund, as defined in Code Section 419(e), or
an individual medical account, as defined in Code Section 415(l)(2), which
provides an annual addition as described in Section 6.02.
(1) If a Participant is, or has ever been, covered under more than
one defined benefit plan maintained by the Employer, the sum of the
Participant's annual benefits from all such plans may not exceed the
maximum permissible amount.
(2) For limitation years beginning prior to the first day of the
first limitation year beginning after December 31, 1999, if the Employer
maintains, or at any time maintained, one or more qualified defined
contribution plans covering any Participant in this Plan, a welfare benefit
fund, as defined in Code Section 419(e), an individual medical account as
defined in Code Section 415(l)(2), or a simplified employee pension the sum
of the Participant's defined contribution fraction and defined benefit
fraction (as each fraction is defined below) will not exceed 1.0 in any
limitation year and the annual benefit otherwise payable to the Participant
under this Plan will be reduced so that such limitation is not exceeded.
Such limitation shall be in lieu of any adjustment to annual additions
under the Employer's defined contribution plan, if any, required
Page 40 of 58
<PAGE>
by the provisions of Code Section 415 and the Regulations thereunder.
(3) In the case of an individual who was a Participant in one or more
defined benefit plans of the Employer as of the first day of the first
limitation year beginning after December 31, 1986, the application of the
limitations of this Section 6.01 shall not cause the maximum permissible
amount for such individual under all such defined benefit plans to be less
than the individual's current Accrued Benefit. The preceding sentence
applies only if such defined benefit plans met the requirements of Code
Section 415 for all limitation years beginning before January 1, 1987.
Page 41 of 58
<PAGE>
Section 6.02. Annual Additions.
----------------
(a) Annual additions are the sum of the following amounts credited to a
Participant's account for the limitation year:
(1) Employer contributions;
(2) Employee contributions;
(3) Forfeitures; and
(4) Amounts allocated after March 31, 1984 to an individual medical
account as defined in Code Section 415(l)(2) which is part of a pension or
annuity plan maintained by the Employer are treated as annual additions to
a defined contribution plan. Also, amounts derived from contributions paid
or accrued after December 31, 1985, in taxable years ending after such
date, that are attributable to post-retirement medical benefits allocated
to the separate account of a Key Employee, as defined in Code Section
419A(d)(3), under a welfare benefit fund, as defined in Code Section
419(e), are treated as annual additions to a defined contribution plan; and
(5) Allocations under a simplified employee pension.
Section 6.03. Annual Benefit. Annual benefit shall mean a retirement
--------------
benefit under the Plan which is payable annually in the form of a straight life
annuity. Except as provided below, a benefit payable in a form other than a
straight life annuity must be adjusted to an actuarially equivalent straight
life annuity before applying the limitations of this Section. The interest rate
assumption used to determine actuarial equivalence will be the greater of the
interest rate specified in Section 1.03 of this Plan or 5 percent. The annual
benefit does not include any benefits attributable to Employee contributions or
rollover contributions, or the assets transferred from a qualified plan that was
not maintained by the Employer. No actuarial adjustment to the benefit is
required for
(a) the value of a qualified joint and survivor annuity,
(b) the value of benefits that are not directly related to retirement
benefits (such as the qualified disability benefit, pre-retirement death
benefits, and post-retirement medical benefits), and
(c) the value of post-retirement cost-of-living increases made in
accordance with Code Section 415(d) and Section 1.415-3(c)(2)(iii) of the
Regulations.
Section 6.04. Compensation.
------------
(a) Compensation shall refer to wages, salaries, and fees for professional
services, and other amounts received (without regard to whether an amount is
paid in cash) for personal services actually rendered in the course of
employment with the Employer (to the extent that the amounts are includable in
gross income) including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or
other expense allowances under a nonaccountable plan (as described in 1.62-
2(c)).
(b) Compensation shall not include the following:
(1) Employer contributions to a deferred compensation plan which are
not included in the Employee's gross income for the taxable year in which
contributed or Employer contributions under a simplified employee pension
plan to the extent such contributions are deductible by the Participant, or
any distributions
Page 42 of 58
<PAGE>
from a plan of deferred compensation plan;
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Participant
either becomes freely transferable or is no longer subject to a substantial
risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity described in Code Section
403(b) (whether or not the amounts are actually excludable from the gross
income of the Participant).
(c) Compensation for a limitation year is the compensation actually paid
or made available during such limitation year.
Section 6.05. Current Accrued Benefit. Current accrued benefit shall mean
-----------------------
a Participant's Accrued Benefit under the Plan, determined as if the Participant
had separated from service as of the close of the last limitation year beginning
before January 1, 1987, when expressed as an annual benefit within the meaning
of Code Section 415(b)(2). In determining the amount of a Participant's current
Accrued Benefit, the following shall be disregarded:
(a) Any change in the terms and conditions of the Plan after May 5, 1986;
and
(b) Any cost of living adjustments occurring after May 5, 1986.
Section 6.06. Defined Benefit Dollar Limitation. The defined benefit
----------------------------------
dollar limitation shall be $90,000. Effective on January 1, 1988, and each
January thereafter, the $90,000 limitation above will be automatically adjusted
by multiplying such limit by the cost of living adjustment factor prescribed by
the Secretary of the Treasury under Code Section 415(d) in such manner as the
Secretary shall prescribe. The new limitation will apply to limitation years
ending within the calendar year of the date of the adjustment.
Section 6.07. Defined Benefit Fraction.
------------------------
(a) The defined benefit fraction is a fraction,
(1) the numerator of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer, and
(2) the denominator of which is the lesser of 125 percent of the
dollar limitation determined for the limitation year under Code Sections
415(b) and (d) and in accordance with Section 6.12(a) below or 140 percent
of the highest average compensation, including any adjustments under Code
Section 415(b).
(b) Notwithstanding the immediately preceding paragraph (a), if the
Participant was a Participant as of the first day of the first limitation year
beginning after December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on May 6, 1986, the
denominator of the defined benefit fraction will not be less than 125 percent of
the sum of the annual benefits under such plans which the Participant had
accrued as of the close of the last limitation year beginning before January 1,
1987, disregarding any changes in the terms and conditions of the plans after
May 5, 1986. The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Code Section 415
for all limitation years beginning before January 1, 1987.
Page 43 of 58
<PAGE>
Section 6.08. Defined Contribution Fraction.
-----------------------------
(a) The defined contribution fraction is a fraction,
(1) the numerator of which is the sum of the annual additions to the
Participant's account under all the defined contribution plans (whether or
not terminated) maintained by the Employer for the current and all prior
limitation years, (including the annual additions attributable to the
Participant's nondeductible Employee contributions to this and all other
defined benefit plans (whether or not terminated) maintained by the
Employer, and the annual additions attributable to all welfare benefit
funds, as defined in Code Section 419(e), or individual medical accounts,
as defined in Code Section 415(l)(2), and simplified employee pensions
maintained by the Employer), and
(2) the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of service with the
Employer (regardless of whether a defined contribution plan was maintained
by the Employer).
The maximum aggregate amount in any limitation year is the lesser of 125 percent
of the dollar limitation determined under Code Sections 415(b) and (d) in effect
under Code Section 415(c)(1)(A) or 35 percent of the Participant's compensation
for such year.
(b) If the Employee was a participant as of the first day of the first
limitation year beginning after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which were in existence on May 6,
1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the product of
(1) the excess of the sum of the fractions over 1.0 times
(2) the denominator of this fraction, will be permanently subtracted
from the numerator of this fraction.
The adjustment is calculated using the fractions as they would be computed as of
the end of the last limitation year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the Plan after May 5,
1986, but using the Code Section 415 limitation applicable to the first
limitation year beginning on or after January 1, 1987. The annual addition for
any limitation year beginning before January 1, 1987, shall not be recomputed to
treat all Employee contributions as annual additions.
Section 6.09. Employer. Employer, for the purposes of Section 6.01, shall
--------
mean the Employer and all members of a controlled group of corporations (as
defined in Code Section 414(b), as modified by Code Section 415(h)), all
commonly controlled trades or businesses (as defined in Code Section 414(c) as
modified by Code Section 415(h)), or affiliated service groups (as defined in
Code Section 414(m)) of which the Employer is a part, and any other entity
required to be aggregated with the Employer pursuant to Regulations under Code
Section 414(o).
Section 6.10. Highest Average Compensation. Highest average compensation
----------------------------
shall mean the average Compensation for the three (3) consecutive years of
service with the Employer that produces the highest average. A year of service
with the Employer is the twelve (12) consecutive month period corresponding to a
calendar year.
Section 6.11. Limitation Year. Limitation year shall mean a calendar
---------------
year. All qualified plans maintained by the Employer use the same limitation
year. If the limitation year is amended to a different twelve (12) consecutive
month period, the new limitation year must begin on a date within the limitation
year in which the amendment is made.
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<PAGE>
Section 6.12. Maximum Permissible Amount. Maximum permissible amount
--------------------------
shall mean the lesser of the defined benefit dollar limitation or 100 percent of
the Participant's highest average compensation.
(a) If the Participant has less than 10 years of participation with the
Employer, the defined benefit dollar limitation is reduced by one-tenth for each
year of Participation (or part thereof) less than ten. To the extent provided in
Regulations or in other guidance issued by the Internal Revenue Service, the
preceding sentence shall be applied separately with respect to each change in
the benefit structure of the Plan.
(1) If the Participant has less than 10 years of service with the
Employer, the compensation limitation is reduced by one-tenth for each year
of service (or part thereof) less than ten (10).
(2) The adjustments of under this Section 6.12 (a) shall be applied
in the denominator of the defined benefit fraction based upon years of
service. Years of service shall include future years occurring before the
Participant's normal retirement age. Such future years shall include the
year which contains the date the Participant reaches normal retirement age,
only if it can be reasonably anticipated that the Participant will receive
a year of service for such year.
(b) If the annual benefit of the Participant commences before the
Participant's social security retirement age, but on or after age sixty-two
(62), the defined benefit dollar limitation as reduced above, if necessary,
shall be determined as follows:
(1) If a Participant's social security retirement age is sixty (65),
the dollar limitation for benefits commencing on or after age sixty-two
(62) is determined by reducing the defined benefit dollar limitation by
five-ninths (5/9) of one percent for each month by which benefits commence
before the month in which the Participant attains age sixty-five (65).
(2) If a Participant's social security retirement age is greater than
sixty-five (65), the dollar limitation for benefits commencing on or after
age sixty-two (62) is determined by reducing the defined benefit dollar
limitation by five-ninths (5/9) of one percent for each of the first
thirty-six (36) months and five-twelfths (5/12) of one percent for each of
the additional months (up to twenty-four (24) months) by which benefits
commence before the month of the Participant's social security retirement
age.
(c) If the annual benefit of a Participant commences prior to age sixty-
two (62), the defined benefit dollar limitation shall be the actuarial
equivalent of an annual benefit beginning at age sixty-two (62), as determined
above, reduced for each month by which benefits commence before the month in
which the Participant attains age sixty-two (62). To determine actuarial
equivalence, the interest rate assumption is the greater of the rate specified
in Section 1.03 or 5 percent. Any decrease in the defined benefit dollar
limitation determined in accordance with this paragraph (c) shall not reflect
the mortality decrement to the extent that benefits will not be forfeited upon
the death of the Participant.
(d) If the annual benefit of a Participant commences after the
Participant's social security retirement age, the defined benefit dollar
limitation as reduced in the immediately preceding paragraph (a), if necessary,
shall be adjusted so that it is the actuarial equivalent of an annual benefit of
such dollar limitation beginning at the Participant's social security retirement
age. To determine actuarial equivalence, the interest rate assumption is the
lesser of the rate specified in Section 1.03 or 5 percent.
Section 6.13. Projected Annual Benefit. Projected annual benefit shall
------------------------
mean the annual benefit as defined in Section 6.03, to which the Participant
would be entitled under the terms of the Plan assuming the following:
Page 45 of 58
<PAGE>
(a) The Participant will continue employment until normal retirement age
under the Plan (or current age, if later), and
(b) The Participant's compensation for the current limitation year and all
other relevant factors used to determine benefits under the Plan will remain
constant for all future limitation years.
Section 6.14. Social Security Retirement Age. Social Security Retirement
------------------------------
Age means the age used as the retirement age under Section 216(l) of the Social
Security Act, except that such section shall be applied without regard to the
age increase factor and as if the early retirement age under Section 216(l)(2)
of such Act were 62.
Section 6.15. Year of Participation.
---------------------
(a) A year of participation (computed to fractional parts of a year) shall
be credited to Participants for each accrual computation period for which the
following conditions are met:
(1) The Participant is credited with at least the number of hours of
service for benefit accrual purposes required under the terms of the Plan
in order to accrue a benefit for the accrual computation period, and
(2) The Participant is included as a Participant under the
eligibility provisions of the Plan for at least one day of the accrual
computation period.
(b) If the conditions set forth in the immediately preceding paragraphs
(1) and (2) are met, the portion of a year of participation credited to the
Participant shall equal the amount of benefit accrual service credited to the
Participant for such accrual computation period.
(c) A Participant who is permanently and totally disabled within the
meaning of Code Section 415(c)(3)(C)(i) for an accrual computation period shall
receive a year of participation with respect to that period.
(d) For a Participant to receive a year of participation (or part thereof)
for an accrual computation period, the Plan must be established no later than
the last day of such accrual computation period.
(e) In no event will more than one year of participation be credited for
any 12-month period.
ARTICLE VII: TOP HEAVY PROVISIONS
----------------------------------
Section 7.01. General. If the Plan is or becomes top heavy in any Plan
-------
Year the provisions below will supersede any conflicting provisions in the Plan
for such Plan Year and each Plan Year thereafter.
Section 7.02. Key Employee. A Key Employee is any Employee or former
------------
Employee (and the beneficiaries of such Employee) who at any time during the
determination period was an officer of the Employer if such individual's annual
compensation exceeds fifty percent (50%) of the dollar limitation under Section
415(b)(1)(A) of the Code, an owner (or considered an owner under Section 318 of
the Code) of one of the ten largest interests in the Employer if such
individual's compensation exceeds 100 percent of the dollar limitation under
Code Section 415(c)(1)(A), a five percent (5%) owner of the Employer, or a 1-
percent owner of the Employer who has an annual compensation of more than
$150,000.
(a) Annual compensation means compensation as defined in Code Section
415(c)(3), but including amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludable from the Employee's gross income
under Code Sections 125, 402(e)(3), 402(h) or 403(b).
Page 46 of 58
<PAGE>
(b) The determination period is the Plan Year containing the determination
date and the 4 preceding Plan Years. The determination of who is a Key Employee
will be made in accordance with Section 416(i)(1) of the Code and the
Regulations thereunder.
Section 7.03. Top Heavy Plan. For any Plan Year beginning after December
--------------
31, 1983, this Plan is top heavy if any of the following conditions exist:
(a) If the top heavy ratio for this Plan exceeds sixty percent (60%) and
this Plan is not part of any required aggregation group or permissive
aggregation group of plans,
(b) If this Plan is a part of a required aggregation group of plans (but
which is not part of a permissive aggregation group) and the top heavy ratio for
the group of plans exceeds sixty percent (60%) percent, or
(c) If this Plan is a part of a required aggregation group of plans and
part of a permissive aggregation group and the top heavy ratio for the
permissive aggregation group exceeds sixty percent (60%) percent.
Section 7.04. Top Heavy Ratio.
---------------
(a) If the Employer maintains one or more defined benefit plans and the
Employer has not maintained any defined contribution plans (including any
simplified employee pension plan) which during the five-year period ending on
the determination date(s) has or has had account balances, the top heavy ratio
for this Plan alone or for the required or permissive aggregation group as
appropriate is a fraction,
(1) the numerator of which is the sum of the Present Values of
Accrued Benefits of all Key Employees as of the determination date(s)
(including any part of any Accrued Benefit distributed in the five-year
period ending on the determination date(s)), and
(2) the denominator of which is the sum of all Accrued Benefits
(including any part of any Accrued Benefit distributed in the five-year
period ending on the Determination Date(s)), determined in accordance with
Code Section 416 and the Regulations thereunder.
(b) If the Employer maintains one or more defined benefit plans and the
Employer maintains or has maintained one or more defined contribution plans
(including any simplified employee pension plan) which during the five-year
period ending on the Determination Date(s) has or has had any account balances,
the top heavy ratio for any required or permissive aggregation group as
appropriate is a fraction,
(1) the numerator of which is the sum of the present value of accrued
benefits under the aggregate defined benefit plan or plans for all Key
Employees, determined in accordance with (a) above, and
(2) the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees as of the determination
date(s), and the denominator of which is the sum of the present values of
accrued benefits under the aggregated defined benefit plan or plans,
determined in accordance with (a) above, for all Participants and the sum
of the account balances under the aggregated defined contribution plan or
plans for all Participants as of the determination date(s), all determined
in accordance with Code Section 416 and the Regulations thereunder.
The account balances under a defined contribution plan in both the numerator and
denominator of the top-heavy ratio are increased for any distribution of an
account balance made in the 5-year period ending on the determination date.
(c) For purposes of (a) and (b) above,
Page 47 of 58
<PAGE>
(1) the value of account balances and the present value of Accrued
Benefits will be determined as of the most recent Valuation Date that falls
within or ends with the 12-month period ending on the determination date
except as provided in Code Section 416 and the Regulations thereunder for
the first and second Plan Years of a defined benefit plan.
(2) The account balances are Accrued Benefits of a Participant
(i) who is not a Key Employee but who was a Key Employee in a
prior year, or
(ii) who has not been credited with at least one Hour of Service
with the Employer maintaining the Plan at any time during the 5-year
period ending on the determination date
will be disregarded.
(3) The calculation of the top heavy ratio, and the extent to which
distributions, rollovers, and transfers are taken into account will be made
in accordance with Code Section 416 and the Regulations thereunder.
Deductible Employee contributions will not be taken into account for
purposes of computing the top-heavy ratio. When aggregating plans, the
value of account balances and Accrued Benefits will be calculated with
reference to the determination dates that fall within the same calendar
year.
(4) The Accrued Benefit of a Participant, other than a Key Employee,
shall be determined under
(i) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Employer,
or
(ii) if there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under the
fractional rule of Code Section 411(b)(1)(C).
Section 7.05. Permissive Aggregation Group. The required aggregation
----------------------------
group of plans plus any other plan or plans of the Employer which, when
considered as a group with the required aggregation group, would continue to
satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
Section 7.06. Required Aggregation Group. The required aggregation group
--------------------------
shall consist of:
(a) Each qualified plan of the Employer in which at least one Key Employee
participates or participated at any time during the determination period
(regardless of whether the Plan has terminated), and
(b) Any other qualified plan of the Employer which enables a Plan
described in (a) to meet the requirements of Code Sections 401(a)(4) or 410.
Section 7.07. Determination Date. For any Plan Year subsequent to the
------------------
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that year.
Page 48 of 58
<PAGE>
Section 7.08. Valuation Date. The valuation date shall be January 1.
--------------
Section 7.09. Present Value. Present Value shall be based only on the
-------------
interest and mortality rates specified in Section 1.03(d).
Section 7.10. Minimum Accrued Benefit.
-----------------------
(a) Notwithstanding any other provision in this Plan, except for the
immediately following paragraphs (e) and (f) below, for any Plan Year in which
this Plan is top heavy, each Participant who is not a Key Employee and has
completed 1,000 Hours of Service will accrue a benefit (to be provided solely by
Employer contributions and expressed as a life annuity commencing at Normal
Retirement Date) of two percent (2%) of his or her highest average compensation
for the five (5) consecutive years for which the Participant had the highest
compensation. The aggregate compensation for the years during the five-year
period in which the Participant was credited with a Year of Service will be
divided by the number of such years in order to determine average annual
compensation.
(b) The minimum accrual is determined without regard to any Social
Security contribution.
(c) The minimum accrual applies even though under other Plan provisions
the Participant would not otherwise be entitled to receive an accrual, or would
have received a lesser accrual for the year because
(1) the Non-Key Employee fails to make mandatory contributions to the
Plan,
(2) the Non-Key Employee's compensation is less than a stated amount,
(3) the Non-Key Employee is not employed on the last day of the
accrual computation period, or
(4) the Plan is integrated with Social Security.
(d) For purposes of computing the minimum accrued benefit, compensation
will include W-2 wages for the calendar year ending with or within the Plan
Year, as limited by Code Section 401(a)(17).
(e) No additional benefit accruals shall be provided pursuant to the
immediately preceding paragraph (a) to the extent that the total accruals on
behalf of the Participant attributable to Employer contributions will provide a
benefit expressed as a life annuity commencing at Normal Retirement Date that
equals or exceeds twenty percent (20%) of the Participant's highest average
compensation for the five (5) consecutive years for which the Participant had
the highest compensation.
(f) All accruals of Employer derived benefit, whether or not attributable
to years for which the Plan is top heavy, may be used in computing whether the
minimum accrual requirement of the immediately preceding paragraph (e) is
satisfied.
(1) If the form of benefit is other than a single life annuity, the
Employee must receive an amount that is the Actuarial Equivalent of the
minimum single life annuity benefit. If the benefit commences at a date
other than at Normal Retirement Date, the Employee must receive at least an
amount that is the Actuarial Equivalent of the minimum single life annuity
benefit commencing at Normal Retirement Date.
(2) The minimum accrued benefit required (to the extent required to
be nonforfeitable under Code Section 416(b)) may not be suspended or
forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D).
Section 7.11. Vesting.
-------
Page 49 of 58
<PAGE>
(a) The vesting schedule for Plan Years in which this Plan is not top
heavy is located in Section 3.07(a)(1). However, for any Plan Year in which this
Plan is top heavy, the nonforfeitable interest of each Participant in his or her
Accrued Benefits shall be:
Service Years % Vested
------------- --------
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(b) The minimum vesting schedule applies to all benefits within the
meaning of Code Section 411(a)(7), except those attributable to Employee
contributions, including benefits accrued before the effective date of Section
416 and benefits accrued before the Plan became top-heavy.
(1) No reduction in Vested benefits may occur in the event the Plan's
status at top heavy changes for any Plan Year.
(2) This Section 7.11 does not apply to the Accrued Benefits of any
Employee who does not have an Hour of Service after the Plan has initially
become top heavy and such Employee's Accrued Benefits attributable to
Employer contributions will be determined without regard to this Section
7.11.
ARTICLE VIII: AMENDMENT, MERGER,
CONSOLIDATION OR TRANSFER OF ASSETS
-----------------------------------
Section 8.01. Plan Amendment.
--------------
(a) The Employer shall have the right, subject to the limitations of this
Section 8.01, to act at any time and from time to time, without consent of
Participants, active or retired, beneficiaries, or any person or persons
claiming through them, to modify or amend, in whole or in part, any or all of
the provisions of the Plan, including specifically the right to make any such
amendments effective retroactively, if necessary, to bring the Plan into
conformity with governmental regulations which must be complied with in order to
maintain qualification of the Plan, provided that no such modification or
amendment shall make it possible for any part of the assets of the Plan to be
used for or diverted to purposes other than for the exclusive benefit of
Participants and Retired Participants, and their beneficiaries under the Plan,
prior to the satisfaction of all liabilities with respect to such Participants
and Retired Participants and their beneficiaries under the Plan as provided by
Section 5.01(b). Furthermore, no amendment shall deprive Participants of any
optional form of benefit to the extent protected by law or as a condition to
qualification of the Plan under the Code provisions in effect at the applicable
time.
(b) No amendment to the Plan (including a change in the actuarial basis
for determining optional or early retirement benefits) shall be effective to the
extent that it has the effect of decreasing a Participant's Accrued Benefit.
Notwithstanding the preceding sentence, a Participant's Accrued Benefit may be
reduced to the extent permitted under Code Section 412(c)(8).
(1) For the purposes of this Section 8.01(b), a Plan amendment which
has the effect of
(i) eliminating or reducing an early retirement benefit or a
retirement-type subsidy, or
(ii) eliminating an optional form of benefit, with respect to
benefits attributable to
Page 50 of 58
<PAGE>
service before the amendment
shall be treated as reducing Accrued Benefits.
(2) In the case of a retirement-type subsidy, the immediately
preceding paragraph (1) shall apply only with respect to a Participant who
satisfies (either before or after the amendment) the preamendment
conditions for the subsidy. In general, a retirement-type subsidy is a
subsidy that continues after retirement, but does not include a qualified
disability benefit, a medical benefit, a social security supplement, or a
death benefit (including life insurance).
(3) If the vesting schedule of the Plan is amended, in the case of a
Participant who is a Participant as of the later of the date such amendment
is adopted or the date it becomes effective, the nonforfeitable percentage
(determined as of such date) of such Participant's Employer-derived Accrued
Benefit will not be less than the percentage computed under the Plan
without regard to such amendment.
(c) If the Plan's vesting schedule is amended or the Plan is amended in
any way that directly or indirectly affects the computation of a Participant's
nonforfeitable percentage, or if the Plan is deemed amended by an automatic
change to or from a top heavy vesting schedule, each Participant with at least
three (3) years of service with the Employer may elect within a reasonable
period after the adoption of the amendment or change, to have his or her
nonforfeitable percentage computed under the Plan without regard to such
amendment or change. For Participants who do not have at least one Hour of
Service in any Plan Year beginning after December 31, 1988, the preceding
sentence shall be applied by substituting "five years of service" for "three
years of service" where such language appears.
(d) The period during which the election referred to in the immediately
preceding paragraph (c) may be made shall commence with the date the amendment
is adopted or deemed to be made and shall end on the latest of:
(1) 60 days after the amendment is adopted:
(2) 60 days after the amendment becomes effective; or
(3) 60 days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
(e) If the Plan is amended and an effect of such amendment is to increase
current liability (as defined in Code Section 401(a)(29)(E)) under the Plan for
a Plan Year, and the funded current liability percentage of the Plan for the
Plan Year in which the amendment takes effect is less than sixty percent (60%),
including the amount of the unfunded current liability under the Plan
attributable to the amendment, the amendment shall not take effect until the
Employer (or any member of a controlled group which includes the Employer)
provides security to the Plan. The form and amount of such security shall
satisfy the requirements of Code Section 401(a)(29)(B) and (C). Such security
may be released provided the requirements of Code Section 401(a)(29)(D) are
satisfied.
(f) Pursuant to the Employer's right to amend the Plan, the Board of
Directors will determine whether an amendment is appropriate and will direct
that the amendment be drafted. A quorum of the Board of Directors must approve
the amendment. As soon as practicable after the Board of Directors' approval,
the Employer's President, or an officer designated by the President, will sign
the amendment, thereby adopting the amendment.
Section 8.02. Merger, Consolidation Or Transfer Of Assets.
-------------------------------------------
(a) In the event of a merger or consolidation of the Employer or transfer
of all or substantially all of
Page 51 of 58
<PAGE>
its assets to any other corporation, partnership or association, provision may
be made by such successor corporation, partnership or association at its
election for the continuance of the Plan as to such successor entity. Such
successor shall, upon its election to continue the Plan, be substituted in place
of the Employer by an instrument duly authorizing such substitution and duly
executed by the Employer and its successor. Upon notice of such substitution
accompanied by a certified copy of the resolutions of the Board of Directors and
its successor authorizing such substitution and delivered to the Trustee, the
Trustee and all Participants hereunder shall be authorized to recognize such
successor in the place of the Employer.
(b) In the case of any merger or consolidation with, or transfer of assets
or liabilities to, any other plan, each Participant in the Plan would (if the
new plan then terminated) receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit he or
she would have been entitled to receive immediately before the merger,
consolidation or transfer (if the Plan had then terminated).
(c) Before the Plan can be merged or consolidated with any other qualified
plan or its assets or liabilities transferred to any other qualified plan, the
Plan Administrator must secure (and file with the Secretary of the Treasury at
least 30 days beforehand) a certification from a government-enrolled actuary
that the benefits that would be received by a Participant of the Plan in the
event of a termination of the Plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any of the protected benefits
described in Section 8.01(b).
Page 52 of 58
<PAGE>
ARTICLE IX: PLAN TERMINATION
-----------------------------
Section 9.01. Termination Of Plan.
-------------------
(a) The Employer shall have the right to terminate the Plan. The Board of
Directors will determine whether plan termination is appropriate. A quorum of
the Board of Directors must approve the termination. As soon as practicable
after the Board of Directors' approval of the termination, the Board of
Directors will direct that a written notice of such termination be drafted and
delivered to the Trustee and the Plan Administrator.
However, any termination (other than a partial termination or an
involuntary termination pursuant to Act Section 4042) must satisfy the
requirements and follow the procedures outlined herein and in ERISA Section 4041
for a Standard Termination or a Distress Termination. Upon any termination (full
or partial), all amounts shall be allocated in accordance with the provisions
hereof and the Accrued Benefit, to the extent funded as of such date, of each
affected Participant shall become fully Vested and shall not thereafter be
subject to forfeiture.
(b) Standard Termination Procedure.
------------------------------
(1) The Plan Administrator shall first notify all "affected parties"
(as defined in Act Section 4001(a)(21)) of the Employer's intention to
terminate the Plan and the proposed date of termination. Such termination
notice must be provided at least sixty (60) days prior to the proposed
termination date. However, in the case of a standard termination, it shall
not be necessary to provide such notice to the PBGC. As soon as practicable
after the termination notice is given, the Plan Administrator shall provide
a follow-up notice to the PBGC setting forth the following:
(i) a certification of an enrolled actuary of the projected
amount of the assets of the Plan as of the proposed date of final
distribution of assets, the actuarial present value of the "benefit
liabilities" (as defined in Act Section 4001(a)(16)) under the Plan as
of the proposed termination date, and confirmation that the Plan is
projected to be sufficient for such "benefit liabilities" as of the
proposed date of final distribution;
(ii) a certification by the Plan Administrator that the
information provided to the PBGC and upon which the enrolled actuary
based his or her certification is accurate and complete; and
(iii) such other information as the PBGC may prescribe by
regulation.
The certification of the enrolled actuary and of the Plan
Administrator shall not be applicable in the case of a plan funded
exclusively by individual insurance contracts.
(2) No later than the date on which the follow-up notice is sent to
the PBGC, the Plan Administrator shall provide all Participants and
beneficiaries under the Plan with an explanatory statement specifying each
such person's "benefit liabilities," the benefit form on the basis of which
such amount is determined, and any additional information used in
determining "benefit liabilities" that may be required pursuant to
regulations promulgated by PBGC.
(3) A standard termination may only take place if at the time the
final distribution of assets occurs, the Plan is sufficient to meet all
"benefit liabilities" determined as of the termination date.
(c) Distress Termination Procedure.
------------------------------
(1) The Plan Administrator shall first notify all "affected parties"
of the Employer's intention to terminate the Plan and the proposed date of
termination. Such termination notice must be provided at least
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<PAGE>
60 days prior to the proposed termination date. As soon as practicable
after the termination notice is given, the Plan Administrator shall also
provide a follow-up notice to the PBGC setting forth the following:
(i) a certification of an enrolled actuary of the amount, as of
the proposed termination date, of the current value of the assets of
the Plan, the actuarial present value (as of such date) of the
"benefit liabilities" under the Plan, whether the Plan is sufficient
for "benefit liabilities" as of such date, the actuarial present value
(as of such date) of benefits under the Plan guaranteed under Act
Section 4022, and whether the Plan is sufficient for guaranteed
benefits as of such date;
(ii) in any case in which the Plan is not sufficient for
"benefit liabilities" as of such date, the name and address of each
Participant and beneficiary under the Plan as of such date;
(iii) a certification by the Plan Administrator that the
information provided to the PBGC and upon which the enrolled actuary
based his or her certification is accurate and complete; and
(iv) such other information as the PBGC may prescribed by
regulation.
This certification of the enrolled actuary and of the Plan
Administrator shall not be applicable in the case of a plan funded
exclusively by individual insurance contracts.
(2) A distress termination may only take place if:
(i) the Employer demonstrates to the PBGC that such termination
is necessary to enable the Employer to pay its debts while staying in
business, or to avoid unreasonably burdensome pension costs caused by
a decline in the employer' work force;
(ii) the Employer is the subject of a petition seeking
liquidation in a bankruptcy or insolvency proceeding which has not
been dismissed as of the proposed termination date; or
(iii) the Employer is the subject of a petition seeking
reorganization in a bankruptcy or insolvency proceeding which has not
been dismissed as of the proposed termination date, and the bankruptcy
court (or such other appropriate court) approves the termination and
determines that the Employer will be unable to continue in business
outside a Chapter 11 reorganization process and that such termination
is necessary to enable the Employer to pay its debts pursuant to a
plan of reorganization.
(d) Priority And Payment Of Benefits. In the case of a distress
--------------------------------
termination, upon approval by the PBGC that the Plan is sufficient for "benefit
liabilities" or for "guaranteed benefits," or in the case of a standard
termination, a letter of non- compliance has not been issued within the sixty
(60) day period (as extended) following the receipt by the PBGC of the follow-up
notice, the Plan Administrator shall allocate the assets of the Plan among
Participants and beneficiaries pursuant to ERISA Section 4044(a).
(1) If the Employer terminates the Plan, the Employer shall direct
the Trustee to compute the value of the Trust Fund held for the benefit of
Participants, Retired Participants, qualified Terminated Participants,
Disabled Participants, spouses, and beneficiaries otherwise eligible to
receive benefits hereunder. The Plan Administrator, based upon the
certification of the Actuary, shall apportion the amount so valued to all
such Participants, Retired Participants, qualified Terminated Participants,
Disabled Participants, spouses and beneficiaries in shares as determined in
accordance with ERISA Section 4044(a), but subject to the provisions of
Section 9.01(g).
Page 54 of 58
<PAGE>
(2) The value of that portion of the Trust Fund remaining after
providing for the expenses of administration of the Plan and Trust shall be
allocated for purposes of paying Monthly Retirement Income, Disability
Payments and Death Benefits in the order of precedence indicated and in the
amounts indicated in ERISA Section 4044.
(3) The allocation of the Trust Fund in accordance with ERISA Section
4044(a) shall be based on the method of payments of Monthly Retirement
Income, Disability Payments or Death Benefits specified in the Plan. In the
event that the Trust Fund assets on or after the date of termination are
insufficient to fund all benefits within any class of benefits, see ERISA
Section 4044(a), the benefits of all higher order of precedence shall be
funded, the benefits of all lower order of precedence shall be unfunded,
and the assets remaining shall be allocated among Participants of that
class on the basis of their respective actuarial reserves, subject to the
provisions of Section 4044 of ERISA.
(e) In the event of failure of the Employer upon termination of this Plan
to pay or reimburse the Trustee or the Actuary for the then outstanding charges
or expenses incurred hereunder, the Trustee is empowered to satisfy such claims
by lien upon the Trust Fund, prior to making any allocation in accordance with
Section 9.01(d).
(f) The application of the Trust Fund on the foregoing basis shall be
calculated by the Actuary and certified to the Trustee by the Employer as of the
date on which the Plan terminated. Subject to the restrictions of ERISA, as it
may be amended, when the calculations shall be completed, the interest of each
Participant, qualified Terminated Participant, Retired Participant, Disabled
Participant, spouse and beneficiary shall continue to be held in the Trust Fund
pursuant to the terms of Section 9.01(d) hereof, or at the direction of the
Employer, the Trust Fund shall be liquidated and each of their interests
distributed to them in a form of annuity contracts, annuity payments,
installments or in a lump sum subject to the provisions of Article III;
provided, however, that any funds remaining after the satisfaction of all
liabilities to Participants, qualified Terminated Participants, Retired
Participants, Disabled Participants, spouses and beneficiaries under this Plan
due to erroneous actuarial computations, shall be returned to the Employer.
(g) If the Plan is terminated within ten (10) years after the Effective
Date, the amount in excess of a Participant's restricted benefits under Section
9.02 shall become part of the general fund for purposes of allocation in
accordance with Section 9.01(d).
(h) Notwithstanding any other provision herein contained (except the
provisions of Section 9.02), should the Plan terminate or partially terminate,
the rights of all affected Participants to benefits accrued to the date of such
termination or partial termination or the amounts credited to the Participant's
accounts, are nonforfeitable. Although the rights of Participants hereunder
shall become nonforfeitable upon termination of the Plan, no Participant shall
have any recourse toward satisfaction of his or her nonforfeitable benefits
other than from the Plan assets or the PBGC.
(i) A partial termination shall be deemed to have occurred in accordance
with a determination to that effect by the Federal regulatory agency (the
Treasury Department, the Labor Department or the PBGC) having jurisdiction to so
determine under ERISA.
(j) The termination of the Plan shall comply with such other requirements
and rules as may be promulgated by the PBGC under authority of Title IV of the
ERISA, including any rules relating to time periods or deadlines for providing
notice or for making a necessary filing.
Section 9.02. Limitation Of Benefits On Termination.
-------------------------------------
(a) In the event of Plan termination, the benefit of any Highly
Compensated Participant or any Highly Compensated Former Employee shall be
limited to a benefit that is nondiscriminatory under Code Section 401(a)(4).
Page 55 of 58
<PAGE>
(b) Benefits distributed to any of the twenty-five (25) most highly
compensated active and Highly Compensated Former Employees with the greatest
compensation in the current or prior year are restricted such that the monthly
payments are no greater than an amount equal to the monthly payment that would
be made on behalf of such individual under a straight life annuity that is the
Actuarial Equivalent of the sum of the individual's Accrued Benefit, the
individual's other benefits under the Plan (other than a social security
supplement within the meaning of Regulations 1.411(a)-7(c)(4)(ii)), and the
amount the individual is entitled to receive under a social security supplement.
However, the limitation of this Section 9.02 shall not apply if:
(1) after payment of the benefit to an individual described above,
the value of Plan assets equals or exceeds 110 percent of the value of
current liabilities, as defined in Code Section 412(l)(7);
(2) the value of the benefits for an individual described above is
less than 1 percent of the value of current liabilities before
distribution; or
(3) the value of the benefits payable under the Plan to an individual
described above does not exceed $5,000 ($3,500 for Plan Years beginning
prior to January 1, 2000).
(c) For purposes of this Section, benefit includes any periodic income,
any withdrawal values payable to a living Participant, and any death benefits
not provided for by insurance on the individual's life.
(d) An individual's otherwise restricted benefit may be distributed in
full to the affected individual if, prior to receipt of the restricted amount,
the individual enters into a written agreement with the Plan Administrator to
secure repayment to the Plan of the restricted amount. The restricted amount is
the excess of the amounts distributed to the individual (accumulated with
reasonable interest) over the amounts that could have been distributed to the
individual under the straight life annuity described above (accumulated with
reasonable interest). The individual may secure repayment of the restricted
amount upon distribution by:
(1) entering into an agreement for promptly depositing in escrow with
an acceptable depositary, property having a fair market value equal to at
least 125 percent of the restricted amount;
(2) providing a bank letter of credit in an amount equal to at least
100 percent of the restricted amount; or
(3) posting a bond equal to at least 100 percent of the restricted
amount. The bond must be furnished by an insurance company, bonding company
or other surety for federal bonds.
(e) The escrow agreement may permit an individual to withdraw from escrow
amounts in excess of 125 percent of the restricted amount. If the market value
of the property in an escrow account falls below 110 percent of the remaining
restricted amount, the individual must deposit additional property to bring the
value of the property held by the depositary up to 125 percent of the restricted
amount. The escrow arrangement may provide that the individual has the right to
receive any income from the property placed in escrow, subject to the
individual's obligation to deposit additional property, as set forth in the
preceding sentence.
(f) A surety or bank may release any liability on a bond or letter of
credit in excess of 100 percent of the restricted amount.
(g) If the Plan Administrator certifies to the depositary, surety or bank
that the individual (or the individual's estate) is no longer obligated to repay
any restricted amount, a depositary may deliver to the individual any property
held under an escrow arrangement, and a surety or bank may release any liability
on an individual's bond or letter of credit.
Page 56 of 58
<PAGE>
ARTICLE X: MISCELLANEOUS PROVISIONS
------------------------------------
Section 10.01. Headings And Subheadings Contained In Plan. Any headings
------------------------------------------
or subheadings in the Plan are inserted for convenience of reference only and
are to be ignored in the construction of any provisions hereof.
Section 10.02. Illegality Of Plan Provisions. In case any provision of
-----------------------------
the Plan shall be held illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining parts of the Plan and the Plan shall
be construed and enforced as if such illegal and invalid provisions had never
been inserted herein.
Section 10.03. Correction Of Misstatements. A misstatement in the age,
---------------------------
sex, length of Continuous Service, date of employment or birth, or Average
Monthly Earnings of a Participant, shall be corrected when it becomes known that
any such misstatement of facts has occurred.
Section 10.04. Singular And Plural Terms. Words used in the singular
-------------------------
shall be read and construed as though used in the plural in all cases where they
would so apply.
Section 10.05. Governing Law. The Plan shall be construed in accordance
-------------
with the laws of the State of Alabama except where such laws are superseded by
ERISA, in which case ERISA shall control.
Section 10.06. Voluntary Continuance Of The Plan By The Employer.
-------------------------------------------------
Although it is the intention of the Employer that the Plan shall be continued
and contributions by the Employer made regularly each year, the Plan is entirely
voluntary on the part of the Employer and the continuance of the Plan and the
payments thereunder are not assumed as a contractual obligation of the Employer
or the Trustee.
Section 10.07. Source Of Payment Of Benefits. Each Participant, Retired
-----------------------------
Participant, Totally and Permanently Disabled Participant, beneficiary, or
spouse or any other person who shall claim the right to any payment or benefit
under the Plan, shall be entitled only to look to the Trust Fund for such
payment or benefit and shall not have any right, claim or demand therefor
against the Employer or Trustee except as otherwise provided by law.
Section 10.08. Suspension Of Contributions By The Employer. The Employer
-------------------------------------------
specifically reserves the right, in its sole discretion, to modify or suspend,
in whole or in part, at any time or from time to time, the contributions
specified in Article IV of the Plan.
Section 10.09. No Employment Rights Under Plan. The Plan shall not be
-------------------------------
deemed to constitute a contract between the Employer and any Participant or to
be a consideration or an inducement for the employment of any Participant or
Employee. Nothing contained in the Plan shall be deemed to give any Participant
or other Employee the right to be retained in the service of the Employer or to
interfere with the right of the Employer to discharge any Participant or
Employee at any time, regardless of the effect which such discharge shall have
upon him or her as a Participant in the Plan.
Section 10.10. Alienation Of Benefits Disallowed. No benefit or interest
---------------------------------
available hereunder will be subject in any manner to assignment, alienation,
anticipation, sale, transfer, pledge, encumbrance, or charge, and any attempt to
assign, alienate, anticipate, sell, transfer, pledge, encumber, or charge the
same shall be void; and no such benefit shall in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or against
such person, and the same shall not be recognized by the Employer, Trustee or
Plan Administrator, except as may be required by law.
The foregoing provisions of this paragraph Section 10.10 shall not
apply to a "qualified domestic relations order" defined in Code Section 414(p).
The Plan Administrator shall establish a written procedure to determine the
qualified status of domestic relations orders and to administer distributions
under such qualified orders. Finally, to the extent provided under a "qualified
domestic relations order," a former spouse of a Participant shall be
Page 57 of 58
<PAGE>
treated as the spouse or surviving spouse for all purposes under the Plan.
Section 10.11. Indemnification By Employer. The Employer shall and does
---------------------------
hereby indemnify all persons in its employ to whom it has delegated or from time
to time hereafter does delegate any fiduciary duties against any and all claims,
losses, damages, expenses and liability arising from or in connection with their
responsibilities in connection with the Plan unless the same is determined to be
due to their own gross negligence or willful misconduct. The Employer may obtain
insurance in support of such indemnification but may only charge the cost of
such insurance to the Trust to the extent individuals remain personally liable
for breach of their fiduciary responsibilities.
Section 10.12. Bonding Of Fiduciaries. Every fiduciary, except a bank or
----------------------
an insurance company, unless exempted by the Act and Regulations thereunder,
shall be bonded in an amount not less than ten percent (10%) of the amount of
the funds such fiduciary handles; provided, however, that the minimum bond shall
be $1,000 and the maximum bond, $500,000. The amount of funds handled shall be
determined at the beginning of the Plan Year by the amount of funds handled by
such person, group, or class to be covered and their predecessors, if any,
during the preceding Plan Year, or if there is no preceding Plan Year, then by
the amount of the funds to be handled during the then current year. The bond
shall provide protection to the Plan against any loss by reason of acts of fraud
or dishonesty by the fiduciary alone or in connivance with others. The surety
shall be a corporate surety company (as such term is used in ERISA Section
412(a)(2)), and the bond shall be in a form approved by the Secretary of Labor.
Notwithstanding anything in the Plan to the contrary, the cost of such bonds
shall be an expense of and may, at the election of the Plan Administrator, be
paid from the Trust Fund or by the Employer.
IN WITNESS WHEREOF, National Bank of Commerce of Birmingham has caused this
Plan, amended and restated, generally effective as of January 1, 1997, to be
executed, as of the 16th day of December, 1999.
NATIONAL BANK OF COMMERCE OF BIRMINGHAM
By: /s/ John H. Holcomb, III
------------------------------------------
John H. Holcomb, III
Its: President
Attest:
By: /s/ Kimberly Moore
---------------------------
Kimberly Moore
Its: Corporate Secretary
Page 58 of 58
<PAGE>
Exhibit 10.8
------------
AMENDMENT AND RESTATEMENT OF THE
ALABAMA NATIONAL BANCORPORATION
PERFORMANCE SHARE PLAN
1. Purpose. The purpose of the Alabama National BanCorporation Performance
Share Plan (the "Plan") is to further the long-term growth in profitability of
Alabama National BanCorporation (the "Company") by offering long- term
incentives in addition to current compensation to those key executives who will
be largely responsible for such growth.
2. Certain Definitions.
(a) "Award" means the award of Performance Shares to a Participant
pursuant to the terms of the Plan.
(b) "Award Period" means the period of calendar years (but no more than
five years) fixed by the Committee with respect to all Awards with the same Date
of Grant, commencing with each Date of Grant, except that (i) the Award Period
for an Employee whose normal retirement date (as determined under the Company's
corporate policy covering retirement of salaried employees) is less than the
period otherwise fixed by the Committee from the applicable Date of Grant shall
be the period beginning with such Date of Grant and ending on the December 31st
immediately preceding such normal retirement date and (ii) the Award Period for
a recently hired Employee may be for such lesser period as determined by the
Committee.
(c) "Committee" means the committee of the Board of Directors of the
Company which shall administer the Plan in accordance with Section 3.
(d) "Common Stock" means the common stock, par value $1.00 per share, of
the Company.
(e) "Company" means Alabama National BanCorporation, a Delaware
corporation.
(f) "Date of Grant" means as of January 1 of any year in which an Award is
made.
(g) "Employee" means any person (including any officer) employed by the
Company or any subsidiary of the Company on a full-time salaried basis.
(h) "Fair Market Value" of the Common Stock means the average of the
daily closing prices for a share of the Common Stock for the twenty (20) trading
days ending on the fifth business day prior to the date of payment of
Performance Shares for an Award Period or an Interim Period, as the case may be,
on the Composite Tape for New York Stock Exchange - Listed Stocks, or, if the
Common Stock is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), on which the Common Stock is listed, or, if the
Common Stock is not listed on any such Exchange, the average of the daily
closing bid quotations with respect to a share of the Common Stock for such
twenty (20) trading days on the National Association of Securities Dealers,
Inc., Automated Quotations System or any system then in use.
(i) "Interim Period" means a period of calendar years chosen by the
Committee commencing with any Date of Grant, which period is less than the Award
Period commencing on the Date of Grant.
(j) "Net Income Per Share" for the Company, or any other corporation,
means net income for the year divided by average common shares outstanding
during the year, computed in accordance with generally accepted accounting
principles as reported in the Company's Annual Report to Stockholders or its
equivalent.
(k) "Participant" means an Employee who is selected by the Committee to
receive an Award under the Plan.
1
<PAGE>
(l) "Performance Share" means the equivalent of one share of Common Stock.
(m) "Return on Average Equity" for the Company, or any other corporation,
for a period is obtained by dividing (i) Net Income Per Share of Common Stock
for the year, by (ii) average Stockholders' Equity Per Share at the beginning of
the year and at the end of the year, computed in accordance with generally
accepted accounting principles as reported in the Company's Annual Report to
Stockholders or its equivalent.
(n) "Section 162(m)" means Section 162(m) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder.
(o) "Stockholders' Equity Per Share" for the Company, or any other
corporation, for a particular point in time is obtained by dividing (i)
stockholders' equity by (ii) outstanding common shares, computed in accordance
with generally accepted accounting principles as reported in the Company's
Annual Report to Stockholders or its equivalent.
3. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board of Directors, which shall be composed of not less than
three members of the Board of Directors. No member of the Committee shall be
eligible to participate in the Plan while serving as a member of the Committee.
Initially, the Committee shall be the Compensation Committee. Subject to the
provisions of the Plan, the Committee shall have the authority to select the
Employees who are to participate in the Plan, to determine the Award to be made
to each Employee selected to participate in the Plan, and to determine the
conditions subject to which Awards will become payable under the Plan.
The Committee shall have full power to administer and interpret the Plan
and to adopt such rules and regulations consistent with the terms of the Plan as
the Committee deems necessary or advisable in order to carry out the provisions
of the Plan. Except as otherwise provided in the Plan, the Committee's
interpretation and construction of the Plan and its determination of any
conditions applicable to Performance Share Awards or the reasons for any
terminations of Participants shall be conclusive and binding on all
Participants.
In connection with its determination as to the payment of Performance
Shares, the Committee has full discretion to adjust Net Income Per Share or
Stockholders' Equity Per Share to recognize special or nonrecurring situations
or circumstances for the Company, or any other corporation, for any year.
The Plan shall be unfunded. Benefits under the Plan shall be paid from the
general assets of the Company.
4. Participation. Participants in the Plan shall be selected by the Committee
from those Employees who, in the estimation of the Committee, have a substantial
opportunity to influence the long-term profitability of the Company.
5. Performance Share Awards.
(a) After appropriate approval of the Plan, and thereafter from time to
time, the Committee shall select Employees to receive Awards in any year as of
the Date of Grant. Any Employee may be granted more than one Award under the
Plan, but no Employee may be granted, in the aggregate, more than 25% of the
Performance Shares which are the subject of this Plan. Awards of Performance
Shares hereunder shall not be made unless any such Award is in compliance with
all applicable laws.
(b) No Participant shall be entitled to receive any dividends or dividend
equivalents on Performance Shares; with respect to any Performance Shares, no
Participant shall have any voting or any other rights of a Company stockholder;
and no Participant shall have any interest in or right to receive any shares of
Common Stock prior to the time when the Committee determines the form of payment
of Performance Shares pursuant to Section 6.
(c) Payment of the Award to any Participant shall be made in accordance
with Section 6 and shall be subject to such conditions for payment as the
Committee may prescribe at the time the Award is made. The
2
<PAGE>
Committee may prescribe different conditions for different Participants. Such
conditions may be expressed in terms of: (i) the growth in Net Income Per Share
during the Award Period, or (ii) average Return on Average Equity in comparison
with other banks and bank holding companies, or (iii) other reasonable bases;
provided that, to the extent the Committee determines that it is necessary to
qualify compensation under Section 162(m), the performance criteria shall be
based on one or more of the criteria listed in (i) or (ii) above. The Committee
may prescribe conditions such that payment of an Award may be made with respect
to a number of shares of Common Stock that is greater than the number of
Performance Shares awarded. However, the Committee may not provide for payment
of greater than 125% of the number of Performance Shares awarded.
(d) Each Award shall be made in writing and shall set forth the terms
and conditions set by the Committee for payment of such Award including, without
limitation, the length of the Award Period and whether there will be an Interim
Period with respect to the Award and if so, the length of the Interim Period.
6. Payment of Performance Share Awards.
(a) Subject to the right of certain management or highly compensated
employees to defer payment of an Award as discussed in this Section 6(b) below,
payment of Performance Share Awards shall be as follows:
Each Participant granted an Award shall be entitled to payment of the
Award as of the close of the Award Period applicable to such Award, but
only if and after the Committee has determined that the conditions for
payment of the Award set by the Committee have been satisfied. At the time
of grant of each Award, the Committee shall decide whether there will be an
Interim Period. If the Committee determines that there shall be an Interim
Period for the Award to any Participant, each such Participant granted an
Award with an Interim Period shall be entitled to partial payment on
account thereof as of the close of the Interim Period, but only if and
after the Committee has determined that the conditions for partial payment
of the Award set by the Committee have been satisfied. Performance Shares
paid to a Participant for an Interim Period may be retained by the
Participant and shall not be repaid to the Company, notwithstanding that
based on the conditions set for payment at the end of the Award Period such
Participant would not have been entitled to payment of some or any of his
Award. Any Performance Shares paid to a Participant for the Interim Period
during an Award Period shall be deducted from the Performance Shares to
which such Participant is entitled at the end of the Award Period.
Unless otherwise directed by the Committee, payment of Awards shall be
made as promptly as possible by the Company after the determination by the
Committee that payment has been earned. Unless otherwise directed by the
Committee, all payments of Awards to Participants shall be made partly in
shares of Common Stock and partly in cash, with the cash portion being
approximately equal to the amount of federal, state and local taxes which
the Participant's employer is required to withhold on account of said
payment. The Committee, in its discretion, may provide for payment of cash
and distribution of shares of Common Stock in such other proportions as the
Committee deems appropriate, except and provided that the Committee must
pay in cash an amount equal to the federal, state and local taxes which the
Participant's employer is required to withhold on account of said payment.
There shall be deducted from the cash portion of all Awards all taxes to be
withheld with respect to such Awards.
For payment of each Award, the number of shares of Common Stock to be
distributed to Participants shall equal the Fair Market Value of the total
Performance Shares determined by the Committee to have been earned by the
Participant, less the portion of the Award that was paid in cash, divided
by the Fair Market Value of a Performance Share. To the extent that shares
of Common Stock are available in the treasury of the Company on the date
payment is to be made, such shares may be issued in payment of Awards.
(b) Each Participant who is a management or highly compensated employee
and who is entitled to participate in the Alabama National BanCorporation
Deferral of Compensation Plan for Key Employees may elect to defer payment of
any Award in accordance with said plan.
3
<PAGE>
7. Death or Disability. If, prior to the close of an Award Period, a
Participant's employment terminates by reason of his death or by his total and
permanent disability (as determined under the Company's Pension Plan), payment
of his outstanding Award or Awards shall be made as promptly as possible after
death or the date of the determination of total and permanent disability, and
the number of Performance Shares to be paid shall be computed as follows: First,
determine (based on the conditions set by the Committee for payment of Awards
for the subject Award Period) the number of Performance Shares that would have
been paid if each subject Award Period had ended on the December 31st
immediately preceding the date of death or the date of determination of total
and permanent disability. Then, multiply each above-determined number by a
fraction, the numerator of which is the number of months during the subject
Award Period that the Participant was an active Employee, and the denominator of
which is the number of months in the Award Period. This product shall be reduced
by any Performance Shares for which payment has been made with respect to any
Interim Period during each Award Period. In this instance, the Fair Market Value
of the Common Stock shall be based on the twenty (20) days immediately preceding
the date of death or the date of the determination of total and permanent
disability.
8. Retirement Prior to Close of an Award Period. If, prior to the close of an
Award Period, a Participant's employment terminates by reason of his retirement
on or after his normal retirement date (as determined under the Company's
Pension Plan) or prior to his normal retirement date if such retirement was at
the request of his employer, payment of the Participant's outstanding Award or
Awards will be made as promptly as possible after such retirement and such
payment shall be computed in the same manner as in Section 7, using the
effective date of retirement in place of the date of death or determination of
total and permanent disability.
9. Termination Under Certain Circumstances. If, prior to the close of an Award
Period, a Participant's employment terminates by reason of (i) his retirement
prior to his normal retirement date (as determined under the Company's Pension
Plan) and such retirement was at the request of the Participant and approved in
writing by his employer, (ii) the divestiture by the Company of one or more of
its business segments or a significant portion of the assets of a business
segment, or (iii) a significant reduction by the Company in its salaried work
force, the determination of whether such Participant shall receive payment of
his outstanding Award or Awards shall be within the exclusive discretion of the
Committee. Payment, if any, of his Award or Awards to such Participant shall be
made as of the close of each such Award Period by multiplying the amount of
payment otherwise due under the Award at that date had the Participant remained
employed through such date by a fraction, the numerator of which is the number
of months during the subject Award Period that the Participant was an active
Employee and the denominator of which is the number of months in the Award
Period.
10. Voluntary Termination or Discharge. If, prior to the close of an Award
Period, a Participant's status as an Employee terminates and there is no payment
due under the terms of Sections 7, 8, 9, or 20, all of such Participant's
outstanding Performance Shares shall forthwith and automatically be cancelled
and all rights of the former holder of such cancelled Performance Shares in
respect to such cancelled Performance Shares shall forthwith terminate.
11. Limitation on Awards and Payments. The maximum number of Performance Shares
which may be awarded under the Plan shall not exceed an aggregate of 400,000
(except as adjusted in accordance with Section 18); provided, however, that
since January 1, 1996 for the term of the Plan, payments of Awards shall involve
no more than 400,000 shares of Common Stock (similarly adjusted in accordance
with Section 18). If any Performance Shares awarded under the Plan are not paid
because of death, total and permanent disability, retirement, voluntary
termination, discharge or cancellation or because they lapse when conditions to
their payment are not met, they shall thereupon become available again for award
under the Plan.
12. Term of Plan. This Plan was originally effective January 1, 1996 as it was
approved by the stockholders of the Company at the Annual Meeting of
Stockholders held on June 6, 1996. This Restated Plan shall be effective April
16, 1998, as it was approved by the Board of Directors of the Company at a
meeting held on April 16, 1998. The Board of Directors of the Company may
terminate the Plan at any time. If not sooner terminated, the Plan will expire
on the date on which all of the Performance Shares subject to award under the
Plan have been paid, but no grant of Awards may be made after December 31, 2005.
Termination or expiration shall not adversely affect any right or obligation
with respect to an Award theretofore made.
4
<PAGE>
13. Cancellation of Performance Shares. With the written consent of a
Participant holding Performance Shares granted to him under the Plan, the
Committee may cancel such Performance Shares. In the event of any such
cancellation, all rights of the former holder of such cancelled Performance
Shares in respect to such cancelled Performance Shares shall forthwith
terminate; and in no such event may such Participant be granted another Award
within twelve months thereafter.
14. No Assignment of Interest. The interest of any Participant in the Plan
shall not be assignable, either by voluntary assignment or by operation of law,
and any assignment of such interest, whether voluntary or by operation of law,
shall render the Award void, except that cash or shares of Common Stock payable
under the Plan shall be transferable by testamentary will or by the laws of
descent and distribution. All shares of Common Stock paid pursuant to this Plan
are to be taken subject to an investment representation by the Participant or
other recipient that any such shares are acquired for investment and not with a
view to distribution and that such shares shall not be transferred or sold until
registered in compliance with the Securities Act of 1933 or unless an exemption
therefrom is available in the opinion of the counsel for the Company.
15. Designation of Beneficiary. Each Participant may designate a beneficiary or
beneficiaries (which beneficiary may be an entity other than a natural person)
to receive any payments which may be made following the Participant's death.
Such designation may be changed or cancelled at any time without the consent of
any such beneficiary. Any such designation, change or cancellation must be made
in a form approved by the Compensation Committee and shall not be effective
until received by the Compensation Committee. If no beneficiary has been named,
or the designated beneficiary or beneficiaries shall have predeceased the
Participant, the beneficiary shall be the Participant's spouse or, if no spouse
survives the Participant, the Participant's estate. If a Participant designates
more than one beneficiary, the rights of such beneficiaries shall be payable in
equal shares, unless the Participant has designated otherwise.
16. Employment Rights. An Award made under the Plan shall not confer any right
on the Participant to continue in the employ of the Company or any subsidiary or
limit in any way the right of his employer to terminate his employment at any
time.
17. Expenses. The expenses of administering the Plan shall be borne by the
Company.
18. Dilution, Recapitalization and Other Adjustments. In case the Company shall
at any time issue any shares of Common Stock (i) in a stock split or other
increase of outstanding shares of Common Stock, by reclassification or
otherwise, whereby the par value of shares is reduced, or (ii) in payment of a
stock dividend, the number of Performance Shares which have been awarded but not
paid, the maximum number of Performance Shares which may be awarded under the
Plan, and the maximum number of shares of Common Stock which may be issued in
payment of the Awards (see Section 11) shall be increased proportionately; and
in like manner, in case of any combination of shares of Common Stock, by a
reverse stock split, reclassification or otherwise, the number of Performance
Shares which have been awarded but not paid, the maximum number of Performance
Shares which may be awarded under the Plan, and the maximum number of shares of
Common Stock which may be issued in payment of the Awards shall be reduced
proportionately.
19. Amendment and Termination of the Plan. The Board of Directors of the
Company may amend, suspend or terminate the Plan at any time; provided, however,
that no amendment may, without stockholder approval, increase the total number
of Performance Shares which may be awarded or paid under the Plan or change the
definition of Performance Share.
20. Plan Termination. The Board of Directors may terminate the Plan at any time
in their discretion and in such event no Awards shall be made after the date of
such Plan Termination.
Plan Termination shall occur automatically and without requirement of any
action by the Board of Directors upon a "Change in Control". "Change in Control"
means (i) acquisition by any person (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of 20% or more of the
Common Stock then outstanding; or (ii) the
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consummation of (A) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Common Stock are converted into cash, securities or other
property, other than a merger of the Company in which the holders of Common
Stock immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger as they
had in Common Stock immediately prior to the merger, or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company,
including, without limitation, any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all or substantially
all, of the assets of the Company.
Payment of all Awards outstanding at the date of Plan Termination shall
be made as promptly as possible after such date and payment of each such Award
shall be computed in the same manner as in Section 7 using the effective date of
Plan Termination in place of the date of death or the date of the determination
of total and permanent disability, except that the Common Stock will be priced
at Fair Market Value based on the twenty (20) trading days immediately preceding
the date of Plan Termination.
21. Construction. The use of the masculine gender herein shall be deemed to
refer to the feminine as well. All headings are included for convenience of
reference and shall not be deemed a part of this Plan.
22. Interpretation. Notwithstanding anything else contained in this Plan to the
contrary, if any Award of Performance Shares is intended, at the time of grant,
to be other performance based compensation within the meaning of Section
162(m)(4)(C) of the Code, to the extent required to so qualify any award
hereunder, the Committee shall not be entitled to exercise any discretion
otherwise authorized under this Plan with respect to such Award if the ability
to exercise such discretion (as opposed to the exercise of such discretion)
would cause such Award to fail to qualify as other performance based
compensation.
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Exhibit 10.36
-------------
ALABAMA NATIONAL BANCORPORATION
1999 LONG TERM INCENTIVE PLAN
SECTION 1.
PURPOSE
The name of this plan is the Alabama National BanCorporation 1999 Long
Term Incentive Plan (the "Plan"). The purpose of the Plan is to enable Alabama
National BanCorporation (the "Company") and its Subsidiaries to retain employees
who contribute to the Company's success by their ability, ingenuity and
industry, to attract employees who the Company's management believes can make
such contributions, and to enable such employees to participate in the long term
success and growth of the Company through equity ownership in the Company.
SECTION 2.
DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
"Board" means the Board of Directors of the Company.
"Cause" means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty which is harmful to the business or reputation of the
Company or any Subsidiary, as determined by the Committee in its sole
discretion.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Committee" means a committee of the Board appointed for the purpose of
administering the Plan.
"Commission" means the Securities and Exchange Commission.
"Company" means Alabama National BanCorporation, a corporation organized
under the laws of the State of Delaware (or any successor corporation).
"Disability" means total and permanent disability as determined in
accordance with the Company's long term disability programs or policies in
effect at the time of determination.
"Early Retirement" means retirement from active employment with the Company
or any Subsidiary on or after the date on which a participant reaches the age of
fifty-five (55) but before the date on which the participant reaches the age of
sixty-five (65).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor thereto.
"Fair Market Value" means, as of any given date, the closing price of the
Stock on such date (or if no transactions were reported on such date on the next
preceding date on which transactions were so reported) on the NASDAQ Stock
Market or if the Stock is not on such date listed on the NASDAQ Stock Market, in
the principal market in which such Stock is traded on such date.
"Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
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"Normal Retirement" means retirement from active employment with the
Company and any Subsidiary on or after the date on which a participant reaches
the age of sixty-five (65).
"Performance Award" means an award of shares of Stock or cash to a
participant pursuant to Section 9 contingent upon achieving certain performance
goals.
"Plan" means this 1999 Long Term Incentive Plan.
"Restricted Stock" means an award of shares of Stock granted pursuant to
Section 8 hereof.
"Retirement" means Normal or Early Retirement.
"Stock" means the Common Stock of the Company.
"Stock Appreciation Right" means a right granted pursuant to Section 7,
which entitles the holder to receive a cash payment or an award of Stock in an
amount equal to the difference between (i) the Fair Market Value of the Stock
covered by such right at the date the right is granted, unless otherwise
determined by the Committee pursuant to Section 6, and (ii) the Fair Market
Value of the Stock covered by such right at the date the right is exercised,
multiplied by the number of shares covered by the right.
"Stock Option" means any option to purchase shares of Stock granted to
employees pursuant to Section 6.
"Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations
(other than the last corporation in the unbroken chain) owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
"Ten Percent Shareholder" means a person who owns (after taking into
account the attribution rules of Section 424(b) of the Code) more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company.
SECTION 3.
ADMINISTRATION
The Plan shall be administered by the Committee, which shall have the power
and authority to grant to eligible employees, pursuant to the terms of the Plan:
(i) Stock Options; (ii) Stock Appreciation Rights; (iii) Restricted Stock; or
(iv) Performance Awards.
In particular, the Committee shall have the authority:
(i) to select the employees of the Company and its Subsidiaries to whom
Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Awards
or a combination of the foregoing from time to time will be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Awards or a combination of the foregoing, are to be granted
hereunder;
(iii) to determine the number of shares of Stock to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder including, but not limited to,
any restriction on any Stock Option or other award and/or the shares of Stock
relating thereto based on performance and/or such other factors as the Committee
may determine, in its sole
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discretion, and any vesting features based on the passage of time, performance
and/or such other factors as the Committee may determine, in its sole
discretion;
(v) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under this Plan shall
be deferred either automatically or at the election of a participant, including
providing for and determining the amount (if any) of deemed earnings on any
deferred amount during any deferral period.
Subject to Section 11, the Committee shall have the authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall, from time to time, deem advisable; to interpret the terms
and provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any award hereunder shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, conclusive and binding
upon all persons, including the Company, any employee, any holder or beneficiary
of any award granted hereunder and any shareholder.
SECTION 4.
STOCK SUBJECT TO PLAN
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 300,000 (subject to appropriate adjustments to reflect
changes in the capitalization of the Company). Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
The maximum number of shares subject to awards which may be granted under
the Plan to any individual in any one year is 75,000 (subject to appropriate
adjustments to reflect changes in the capitalization of the Company).
If any shares of Stock that have been subject to Stock Options cease to be
subject to Stock Options, or if any shares subject to any Restricted Stock award
granted hereunder are forfeited or such award is otherwise terminated, such
shares shall again be available for distribution in connection with future
awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Stock Options granted under the Plan and
in the number of shares subject to Restricted Stock awards granted under the
Plan as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall always
be a whole number. Such adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Stock Option.
SECTION 5.
ELIGIBILITY
Employees of the Company or its Subsidiaries (but excluding members of the
Committee and any person who serves only as a director) who are responsible for
or contribute to the management, growth and/or profitability of the business of
the Company or its Subsidiaries are eligible to be granted Stock Options, Stock
Appreciation Rights, Restricted Stock or Performance Awards. The optionees and
participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible, and the Committee
shall determine, in its sole discretion, the number of shares covered by each
award or grant.
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<PAGE>
SECTION 6.
STOCK OPTIONS
Stock Options may be granted either alone or in addition to other awards
granted under the Plan. Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve, and the provisions of Stock
Option awards need not be the same with respect to each optionee.
The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights). To the extent that any
Stock Option does not qualify as an Incentive Stock Option, it shall constitute
a separate Non-Qualified Stock Option.
Except as provided in Section 6(j) hereof, no term of this Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as to
disqualify either the Plan or any Incentive Stock Option under Section 422 of
the Code. Notwithstanding the foregoing, in the event an optionee voluntarily
disqualifies a Stock Option as an Incentive Stock Option within the meaning of
Section 422 of the Code, the Committee may, but shall not be obligated to, make
such additional grants, awards or bonuses as the Committee shall deem
appropriate, to reflect the tax savings to the Company which results from such
disqualification.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under a
------------
Stock Option shall be determined by the Committee at the time of grant but shall
not be less than 100% of the Fair Market Value of the Stock on the date of the
grant of the Stock Option; provided, however, if the Stock Option is an
Incentive Stock Option granted to a Ten Percent Shareholder, the option price
for each share of Stock subject to such Incentive Stock Option shall be no less
than one hundred ten percent (110%) of the Fair Market Value of a share of Stock
on the date such Incentive Stock Option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
-----------
Committee, provided that no Stock Option which is granted to a Ten Percent
Shareholder shall be exercisable more than five (5) years after the date such
Stock Option is granted and that no Stock Option which is granted to an optionee
that is not a Ten Percent Shareholder shall be exercisable more than ten (10)
years after the date such Stock Option is granted.
(c) Exercisability. Subject to Section 6(j) with respect to Incentive
--------------
Stock Options, Stock Options shall be exercisable at such time or times and
subject to such terms and conditions, including, without limitation, vesting
conditions tied to Stock price or other criteria, as shall be determined by the
Committee at grant. If the Committee provides, in its discretion, that any Stock
Option is exercisable only in installments, the Committee may waive such
installment exercise provision at any time in whole or in part based on
performance and/or such other factors as the Committee may determine in its sole
discretion.
(d) Method of Exercise. Stock Options may be exercised in whole or in
------------------
part at any time during the option period, by giving written notice of exercise
to the Company specifying the number of shares to be purchased, accompanied by
payment in full of the purchase price, in cash, by check or such other
instrument as may be acceptable to the Committee. As determined by the
Committee, in its sole discretion, at or after grant, payment in full or in part
may also be made in the form of unrestricted Stock owned by the optionee or, in
the case of the exercise of a Non-Qualified Stock Option, Restricted Stock
subject to an award hereunder may be used for payment (based, in each case, on
the Fair Market Value of the Stock on the date the option is exercised, as
determined by the Committee). If payment of the option exercise price of a
Non-Qualified Stock Option is made in whole or in part with shares of Restricted
Stock the shares received upon the exercise of such Stock Option shall be
restricted or deferred, as the case
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<PAGE>
may be, in accordance with the original term of the Restricted Stock award in
question, except that the Committee may direct that such restrictions or
deferral provisions shall apply only to the number of such shares equal to the
number of shares of Restricted Stock surrendered upon the exercise of such
option. No shares of unrestricted Stock shall be issued until full payment
therefor has been made. An optionee shall have the rights to dividends or other
rights of a stockholder with respect to shares subject to the Stock Option when
the optionee has given written notice of exercise and has paid in full for such
shares.
(e) Transferability of Options. Except as otherwise set forth in this
--------------------------
Section 6(e), no Stock Option shall be transferable by the Optionee otherwise
than by will or by the laws of descent and distribution. All Stock Options shall
be exercisable, during the optionee's lifetime, only by the optionee. The
Committee shall have the discretionary authority, however, to grant
Non-Qualified Stock Options which would be transferable to members of an
optionee's immediate family (which shall include, for purposes of this section,
spouses and children and grandchildren, whether natural or adopted), and to
trusts for the benefit of such family members and partnerships or limited
liability companies in which such family members are the only partners or
members. For purposes of paragraphs (f), (g), (h) and (i) of this Section 6, a
transferred Stock Option may be exercised by the transferee only to the extent
that the optionee would have been entitled had the Stock Option not been
transferred.
(f) Termination of Employment by Reason of Death. Unless otherwise
--------------------------------------------
determined by the Committee, if any optionee's employment with the Company or
any Subsidiary terminates by reason of death, the Stock Option may thereafter be
immediately exercised, to the extent then exercisable (or on such accelerated
basis as the Committee shall determine at or after grant), by the legal
representative of the estate or by the legatee of the optionee under the will of
the optionee, for a period of three (3) years from the date of death (or such
shorter period as may be determined by the Committee at the time of grant) or
until the expiration of the stated term of such Stock Option, whichever period
is the shorter.
(g) Termination of Employment by Reason of Disability. Unless otherwise
-------------------------------------------------
determined by the Committee, if any optionee's employment with the Company and
any Subsidiary terminates by reason of Disability, any Stock Option held by such
optionee may thereafter be exercised, to the extent it was exercisable at the
time of termination due to Disability (or on such accelerated basis as the
Committee shall determine at or after grant), for a period of three (3) years
(or such shorter period as may be determined by the Committee at the time of
grant) from the date of such termination of employment or the expiration of the
stated term of such Stock Option, whichever period is the shorter; and if the
optionee dies within such period, any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death, for the remainder of such period. In the event
of termination of employment by reason of Disability, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(h) Termination of Employment by Reason of Retirement. Unless otherwise
-------------------------------------------------
determined by the Committee, if any optionee's employment with the Company or
any Subsidiary terminates by reason of Retirement (with Committee consent) under
a formal plan or policy of the Company, any Stock Option held by such optionee
may thereafter be exercised, to the extent it was exercisable at the time of
such Retirement (or on such accelerated basis as the Committee shall determine
at or after grant), for a period of three (3) years (or such shorter period as
may be determined by the Committee at the time of grant) from the date of such
termination of employment or the expiration of the stated term of such Stock
Option, whichever period is the shorter; and if the optionee dies within such
period, any unexercised Stock Option held by such optionee shall thereafter be
exercisable, to the extent to which it was exercisable at the time of death, for
the remainder of such period. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised after the
exercise periods that apply for purposes of Section 422 of the Code, such Stock
Option will thereafter be treated as a Non-Qualified Stock Option.
(i) Other Termination of Employment. Unless otherwise determined by the
-------------------------------
Committee, if an optionee's employment with the Company or any Subsidiary
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate, except that such Stock Option may be
exercised, to the extent it was exercisable at the time of termination, for the
lesser of three (3) months from the date of termination or the balance
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<PAGE>
of such Stock Option's term, if the optionee's employment with the Company and
any Subsidiary is involuntarily terminated by the optionee's employer without
Cause.
(j) Limit on Value of Incentive Stock Option First Exercisable Annually.
-------------------------------------------------------------------
The aggregate Fair Market Value (determined at the time of grant) of the Stock
for which Incentive Stock Options are exercisable for the first time by an
optionee during any calendar year under the Plan (and/or any other stock option
plans of the Company and any Subsidiary) shall not exceed $100,000.
SECTION 7.
STOCK APPRECIATION RIGHTS
(a) Grant and Exercise When Granted in Conjunction With Stock Options.
-----------------------------------------------------------------
Stock Appreciation Rights may be granted in conjunction with all or part of any
Stock Option granted under the Plan and may contain terms and conditions
different from those of the related Stock Option, except as otherwise provided
below. In the case of a Non-Qualified Stock Option, such rights may be granted
either at or after the time of the grant of such Non-Qualified Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only at the
time of the grant of such Incentive Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise provided by the Committee at the time of grant, a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Stock Option shall only be reduced if and to the extent
that the number of shares covered by the exercise or termination of the related
Stock Option exceeds the number of shares not covered by the Stock Appreciation
Right.
A Stock Appreciation Right may be exercised by an optionee, in accordance
with Section 7(c), by surrendering the applicable portion of the related Stock
Option. Upon such exercise and surrender, the optionee shall be entitled to
receive an amount determined in the manner prescribed in Section 7(c). Stock
Options which have been so surrendered, in whole or in part, shall no longer be
exercisable to the extent the related Stock Appreciation Rights have been
exercised.
(b) Grant and Exercise When Granted Alone. Stock Appreciation Rights
-------------------------------------
may be granted at the discretion of the Committee in a manner not related to an
award of a Stock Option. The Stock Appreciation Right, granted under Section
7(b), shall be exercisable in accordance with Section 7(c) over a period not to
exceed ten years. Any Stock Appreciation Right which is outstanding on the last
day of the exercisable period shall be automatically exercised on such date for
cash or Common Stock, as determined by the Committee, without any action by the
holder.
(c) Terms and Conditions. Stock Appreciation Rights shall be subject to
--------------------
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights granted pursuant to Section 7(a) shall
be exercisable only at such time or times and to the extent that the Stock
Options to which the Stock Appreciation Rights relate shall be exercisable in
accordance with the provisions of Section 6 and this Section 7 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right granted
pursuant to Section 7(a), an optionee shall be entitled to receive an amount in
cash or shares of Stock equal in value to the excess of the Fair Market Value of
one share of Stock over the option price per share specified in the related
Stock Option multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment. Upon the exercise of a Stock
Appreciation Right granted pursuant to Section 7(b), the holder shall be
entitled to receive an amount in cash or shares of Stock equal in value to the
excess of the Fair Market Value of one share of Stock over the Fair Market Value
of one share of Stock
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at the date the Stock Appreciation Right was granted multiplied by the number of
shares in respect of which the Stock Appreciation Right shall have been
exercised, with the Committee having the right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that any underlying Stock Option would be transferable
under Section 6(e) of the Plan. Otherwise, Stock Appreciation Rights shall not
be transferable by the holder other than by will or the laws of descent and
distribution. Except as set forth above, all Stock Appreciation Rights shall be
exercisable, during the holder's lifetime, only by the holder.
(iv) Upon the exercise of a Stock Appreciation Right granted
pursuant to Section 7(a), the Stock Option, or part thereof to which such Stock
Appreciation Right is related, shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 4 of the Plan on the number of
shares of Stock to be issued under the Plan.
(v) A Stock Appreciation Right granted in connection with an
Incentive Stock Option pursuant to Section 7(a) may be exercised only if and
when the market price of the Stock subject to the Incentive Stock Option exceeds
the exercise price of such Stock Option.
SECTION 8.
RESTRICTED STOCK
(a) Administration. Shares of Restricted Stock may be issued either alone
--------------
or in addition to other awards granted under the Plan. The Committee shall
determine the employees of the Company and its Subsidiaries to whom, and the
time or times at which, grants of Restricted Stock will be made, the number of
shares to be awarded, the price, if any, to be paid by the recipient of
Restricted Stock (subject to Section 8(b) hereof), the time or times within
which such awards may be subject to forfeiture, and all other conditions of the
awards. However, in no event shall any restriction, including risk of
forfeiture, attach to the Restricted Stock for a term to exceed ten years from
the date such Stock was granted. The Committee may also condition the grant of
Restricted Stock upon the attainment of specified performance goals, or such
other criteria as the Committee may determine, in its sole discretion. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
(b) Awards and Certificates. The prospective recipient of an award of
-----------------------
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
(a "Restricted Stock Award Agreement") and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable
terms and conditions.
(i) Awards of Restricted Stock must be accepted within a period of
60 days (or such shorter period as the Committee may specify) after the award
date by executing a Restricted Stock Award Agreement and paying whatever price,
if any, is required.
(ii) Each participant who is awarded Restricted Stock shall be
issued a stock certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of the participant, and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following:
The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the Alabama National BanCorporation
1999 Long Term Incentive Plan and a Restricted Stock Agreement
entered into between the registered owner and Alabama National
BanCorporation. Copies of such Plan and Agreement are on file in
the offices of Alabama National BanCorporation, 1927 First Avenue
North, Birmingham, Alabama 35203.
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(iii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the participant shall have delivered a stock power, endorsed in blank,
relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
---------------------------
pursuant to this Section 8 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and Restricted Stock
Award Agreements, during the period established by the Committee in which the
Restricted Stock is subject to forfeiture (the "Restriction Period"), the
participant shall not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. Within these limits, the Committee may,
in its sole discretion, provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions in whole or in part
based on performance and/or such other factors as the Committee may determine,
in its sole discretion.
(ii) Except as provided in Section 8(c)(i), the participant shall
have, with respect to the shares of Restricted Stock, all of the rights of a
stockholder of the Company, including the right to receive any dividends.
Dividends paid in cash with respect to shares of Restricted Stock
shall not be subject to any restrictions or subject to forfeiture. Dividends
paid in stock of the Company or stock received in connection with a stock split
with respect to Restricted Stock shall be subject to the same restrictions as on
such Restricted Stock. Certificates for shares of unrestricted Stock shall be
delivered to the participant promptly after, and only after, the period of
forfeiture shall expire without forfeiture in respect of such shares of
Restricted Stock.
(iii) Subject to the provisions of the Restricted Stock Award
Agreement and this Section 8, upon termination of employment for any reason
during the Restriction Period, all shares still subject to restriction shall be
forfeited by the participant, and the participant shall only receive the amount,
if any, paid by the participant for such forfeited Restricted Stock.
(iv) In the event of special hardship circumstances of a participant
whose employment is involuntarily terminated (other than for Cause), the
Committee may, in its sole discretion, waive in whole or in part any or all
remaining restrictions with respect to such participant's shares of Restricted
Stock.
SECTION 9.
PERFORMANCE AWARDS
Performance Awards shall be evidenced by performance award agreements
in such form not inconsistent with the Plan as the Committee shall approve from
time to time. Such agreements shall contain in substance the following terms and
conditions:
(a) Performance Period. The performance period for a Performance Award
------------------
shall be established by the Committee and shall be not more than ten (10) years.
(b) Valuation of Awards. A value for each Performance Award shall be
-------------------
established by the Committee, together with principal and minimum performance
targets to be achieved with respect to the Performance Award during the
performance period. The participant shall be entitled to receive one hundred
percent (100%) of the value of the Performance Award if the principal target is
achieved during the performance period, but shall be entitled to received
nothing for such Performance Award if the minimum target is not achieved during
the performance period. The participant shall be entitled to receive a stated
portion of the value of the Performance Award for performance during the
performance period which meets or exceeds the minimum target but fails to meet
the principal target.
(c) Performance Targets. The performance targets established under the
-------------------
Plan shall relate to the performance of the Company or any segment thereof
(collectively referred to in this Section 9 as "Company's
8
<PAGE>
performance") over the performance period, and may be established in terms of
growth in earnings or equity, ratio of earnings to stockholders' equity or to
total capital, total return to the Company's stockholders, or any other
performance standards as may be determined by the Committee. Multiple targets
may be used and may have the same or different weighting, and they may relate to
the Company's absolute performance or the Company's performance as measured
against that of other companies, or any other standards as may be determined by
the Committee.
(d) Adjustments. At any time prior to payment of the Performance Awards,
-----------
the Committee may adjust previously established performance targets and other
terms and conditions, to reflect major unforeseen events such as changes in
laws, regulations or accounting policies or procedures, mergers, acquisitions or
divestitures or extraordinary, unusual or nonrecurring items or events.
(e) Payments of Performance Awards. Following the conclusion of each
------------------------------
performance period, the Committee shall determine the extent to which
performance targets have been attained for such period as well as the other
terms and conditions established by the Committee. The Committee shall determine
what, if any, payment is due on the Performance Awards and whether such payment
shall be made in cash, in Stock, or partially in cash and partially in Stock.
Any payments made in Stock shall be made as promptly as practicable following
the end of the performance period unless deferred subject to such terms and
conditions as may be prescribed by the Committee.
(f) Termination by Death, Disability or Retirement. Any employee granted a
----------------------------------------------
Performance Award pursuant to this Section 9, who, by reason of death,
Disability or Retirement, terminates employment before the end of the
performance period, may be entitled to receive a portion of any earned
Performance Award. The Committee, in its discretion, will determine the amount,
if any, of the Performance Award earned and the time at which payment will be
made.
(g) Other Termination. An employee who voluntarily terminates employment
-----------------
or whose employment is terminated involuntarily for Cause will forfeit all
rights under the Performance Awards.
(h) Section 162(m) Provisions. Unless otherwise determined by the
-------------------------
Committee, achievement objectives established for the top five most highly
compensated officers of the Company shall be pre-established objective
performance goals within the meaning of Section 162(m) of the Code and treasury
regulations promulgated thereunder. Furthermore, unless otherwise determined by
the Committee, once the Committee has established one or more performance
targets with respect to a Performance Award granted to one of the top five most
highly compensated officers of the Company which were, when granted, intended to
be pre-established objective performance goals within the meaning of Section
162(m) of the Code and the treasury regulations thereunder, the Committee shall
not waive or alter the targets after the earlier of (i) the expiration of
twenty-five percent (25%) of the performance period or (ii) the date on which
the outcome under the targets is substantially certain. Unless otherwise
determined by the Committee, if any provision of the Plan or any Performance
Award granted to an individual who is one of the top five most highly
compensated officers of the Company hereunder would disqualify the Performance
Award with respect to such individual, or would otherwise not comply with
Section 162(m) of the Code, such provision or Performance Award shall be
construed or deemed amended to conform to Section 162(m) of the Code.
SECTION 10.
LOAN PROVISIONS
With the consent of the Committee, the Company may make, or arrange for, a
loan or loans to an employee with respect to the exercise of any Stock Option
granted under the Plan and/or with respect to the payment of the purchase price,
if any, of any Restricted Stock awarded hereunder. The Committee shall have full
authority to decide whether to make a loan or loans hereunder and to determine
the amount, term and provisions of any such loan or loans, including the
interest rate to be charged in respect of any such loan or loans, whether the
loan or loans are to be with or without recourse against the borrower, the terms
on which the loan is to be repaid and the conditions, if any, under which the
loan or loans may be forgiven.
9
<PAGE>
SECTION 11.
AMENDMENTS AND TERMINATION
The Board may amend, alter, or discontinue the Plan as it shall deem
advisable or to conform to any change in any applicable law or regulation
applicable thereto (including, without limitation, applicable federal securities
laws and regulations and applicable federal income tax laws and regulations);
provided, however, that no amendment, alteration, or discontinuation shall be
made which would impair the right of an optionee or participant under a Stock
Option, Stock Appreciation Right, Restricted Stock, or Performance Award
theretofore granted, without the optionee's or participant's consent, or which
without the approval of the stockholders would:
(a) except as expressly provided in this Plan, increase the total number
of shares reserved for issuance under the Plan;
(b) decrease the option price of any Stock Option to less than 100% of the
Fair Market Value on the date of the granting of the option;
(c) change the participants or class of participants eligible to
participate in the Plan; or
(d) extend the maximum option period under Section 6(b) of the Plan.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any holder without his or her consent. The Committee may also
substitute new Stock Options for previously granted Stock Options including
options granted under other plans applicable to the participant and previously
granted Stock Options having higher option prices.
SECTION 12.
UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company nothing set forth herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payment in lieu of or with respect to awards
hereunder; provided, however, that the existence of such trusts or other
arrangements shall be consistent with the unfunded status of the Plan.
SECTION 13.
CHANGE IN CONTROL
In the case of a merger or consolidation in which the Company is not the
surviving corporation, or a sale or other transfer of all or substantially all
of the business or property of the Company (including, but not limited to, the
sale or other transfer of one or more of the Company's principal Subsidiary
banks if such sale or transfer could constitute a substantial majority of the
Company's business or property), or liquidation or dissolution of the Company,
or in the event of a tender offer or any other change involving a threatened
change in control of the Company which, in the opinion of the Committee, could
deprive the holders of the benefits intended to be conferred by awards
hereunder, the Committee may, in anticipation of any such transaction event,
either at the time of grant or thereafter, make such adjustments in the terms
and conditions of outstanding awards, as the Committee in its sole discretion
determines are equitably warranted under the circumstances, including, without
limitation, (i) acceleration of exercise terms or (ii) acceleration of the lapse
of restrictions and/or performance objectives or other terms.
10
<PAGE>
SECTION 14.
GENERAL PROVISIONS
(a) All certificates for shares of Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Commission, any stock exchange upon which the Stock is then listed, and any
applicable Federal or state securities law, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.
(b) Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee of the Company or any Subsidiary, any right to
continued employment with the Company or a Subsidiary, as the case may be, nor
shall it interfere in any way with the right of the Company or a Subsidiary to
terminate the employment of any of its employees at any time.
(c) No employee shall have any rights as a shareholder of the Company as a
result of the grant of a Stock Option to him or her under this Plan or his or
her exercise of such Stock Option pending the actual issuance of Stock subject
to such Stock Option to such employee.
(d) Each participant shall, no later than the date as of which the value
of an award first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to the award. The
obligations of the Company under the Plan shall be conditioned on such payment
or arrangements, and the Company (and, where applicable, its Subsidiaries),
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant.
Subject to applicable laws and regulations regarding transactions in Stock
by persons who are deemed insiders, a participant may elect to have the
withholding tax obligations or, in the case of all awards hereunder except Stock
Options which have related Stock Appreciation Rights, if the Committee so
determines, any additional tax obligation with respect to any awards hereunder
satisfied by (a) having the Company withhold shares of Stock otherwise
deliverable to the participant with respect to the award or (b) delivering to
the Company shares of unrestricted Stock.
(e) At the time of grant or purchase, the Committee may provide, in
connection with any grant or purchase made under this Plan, that the shares of
Stock received as a result of such grant or purchase shall be subject to a right
of first refusal, pursuant to which the participant shall be required to offer
the Company any shares that the participant wishes to sell, with the price being
the then Fair Market Value of the Stock, subject to such terms and conditions as
the Committee may specify at the time of grant.
(f) No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified and protected
by the Company in respect of any such action, determination or interpretation.
(g) If any provision of the Plan or any agreement representing an award
granted hereunder is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or as to any person or award, or would
disqualify the Plan or any award granted hereunder under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to the applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the award, such provision shall be stricken as to such
jurisdiction, person or award and the remainder of the Plan and any such award
shall remain in full force and effect.
11
<PAGE>
(h) Each award under the Plan shall be subject to the requirement that, if
at any time the Committee shall determine that (a) the listing, registration or
qualification of the shares of Stock subject or related thereto upon any
securities exchange or under any state or federal law, or (b) the consent or
approval of any government regulatory authority, or (c) an agreement by the
recipient of an award with respect to the disposition of shares of Stock, is
necessary or desirable as a condition of, or in connection with, the granting of
such award or the issue or purchase of shares of Stock thereunder, such award
may not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee. A participant
shall agree, as a condition of receiving any award under the Plan, to execute
any documents, make any representations, agree to restrictions on stock
transferability and take any actions which in the opinion of legal counsel to
the Company is required by any applicable law, ruling or regulation.
(i) Nothing in the Plan shall affect the right or power of the Company or
its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of stock
or of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or affect the
Stock or the rights thereof or which are convertible into or exchangeable for
Stock, or the dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
(j) Headings are given to the sections and subsections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or interpretation of the Plan
or any provision thereof.
SECTION 15.
EFFECTIVE DATE OF PLAN
The effective date of this Plan shall be the date it is adopted by the
Board; provided that the shareholders of the Company shall approve the Plan
within twelve (12) months after the date of adoption; and, provided further,
that any awards granted under this Plan before the date of such shareholder
approval shall be granted subject to such approval.
SECTION 16.
TERM OF PLAN
No Stock Option, Stock Appreciation Right, Restricted Stock or Performance
Award shall be granted pursuant to the Plan on or after the tenth anniversary of
the date of stockholder approval, but awards theretofore granted may extend
beyond that date.
12
<PAGE>
Exhibit 10.37
-------------
ALABAMA NATIONAL BANCORPORATION
EMPLOYEE CAPITAL ACCUMULATION PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS...................................................... 1
ARTICLE II
ADMINISTRATION................................................... 11
2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER........... 11
2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY............... 11
2.3 POWERS AND DUTIES OF THE ADMINISTRATOR................ 12
2.4 RECORDS AND REPORTS................................... 12
2.5 APPOINTMENT OF ADVISERS............................... 13
2.6 PAYMENT OF EXPENSES................................... 13
2.7 CLAIMS PROCEDURE...................................... 13
2.8 CLAIMS REVIEW PROCEDURE............................... 13
ARTICLE III
ELIGIBILITY...................................................... 14
3.1 CONDITIONS OF ELIGIBILITY............................. 14
3.2 EFFECTIVE DATE OF PARTICIPATION....................... 14
3.3 DETERMINATION OF ELIGIBILITY.......................... 14
3.4 TERMINATION OF ELIGIBILITY............................ 14
3.5 OMISSION OF ELIGIBLE EMPLOYEE......................... 14
3.6 INCLUSION OF INELIGIBLE EMPLOYEE...................... 15
3.7 ELECTION NOT TO PARTICIPATE........................... 15
ARTICLE IV
CONTRIBUTION AND ALLOCATION...................................... 15
4.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION......... 15
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION............... 15
4.3 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION.............. 18
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS.. 18
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS...................... 21
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS........ 23
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS.................. 24
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS.... 27
4.9 MAXIMUM ANNUAL ADDITIONS.............................. 28
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS............. 30
4.11 TRANSFERS FROM QUALIFIED PLANS........................ 31
4.12 VOLUNTARY CONTRIBUTIONS............................... 32
4.13 DIRECTED INVESTMENT ACCOUNT........................... 32
ARTICLE V
VALUATIONS....................................................... 33
5.1 VALUATION OF THE TRUST FUND........................... 33
5.2 METHOD OF VALUATION................................... 33
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS....................... 33
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT............. 33
6.2 DETERMINATION OF BENEFITS UPON DEATH.................. 33
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY...... 35
</TABLE>
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<TABLE>
<S> <C>
6.4 DETERMINATION OF BENEFITS UPON TERMINATION............ 35
6.5 DISTRIBUTION OF BENEFITS.............................. 37
6.6 DISTRIBUTION OF BENEFITS UPON DEATH................... 42
6.7 TIME OF SEGREGATION OR DISTRIBUTION................... 44
6.8 DISTRIBUTION FOR MINOR BENEFICIARY.................... 44
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN........ 45
6.10 PRE-RETIREMENT DISTRIBUTION........................... 45
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP..................... 45
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION....... 46
ARTICLE VII
TRUSTEE.......................................................... 46
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE................. 46
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE........... 47
7.3 OTHER POWERS OF THE TRUSTEE........................... 48
7.4 LOANS TO PARTICIPANTS (PRIOR TO JANUARY 1, 2000)...... 49
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS.............. 50
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES......... 50
7.7 ANNUAL REPORT OF THE TRUSTEE.......................... 51
7.8 AUDIT................................................. 51
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE........ 51
7.10 TRANSFER OF INTEREST.................................. 52
7.11 DIRECT ROLLOVER....................................... 52
7.12 EMPLOYER SECURITIES AND REAL PROPERTY................. 53
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS............................... 53
8.1 AMENDMENT............................................. 53
8.2 TERMINATION........................................... 54
8.3 MERGER OR CONSOLIDATION............................... 54
ARTICLE IX
TOP HEAVY........................................................ 54
9.1 TOP HEAVY PLAN REQUIREMENTS........................... 54
9.2 DETERMINATION OF TOP HEAVY STATUS..................... 54
ARTICLE X
MISCELLANEOUS.................................................... 57
10.1 PARTICIPANT'S RIGHTS.................................. 57
10.2 ALIENATION............................................ 57
10.3 CONSTRUCTION OF PLAN.................................. 59
10.4 GENDER AND NUMBER..................................... 59
10.5 LEGAL ACTION.......................................... 59
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS................ 59
10.7 BONDING............................................... 59
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE............ 59
10.9 INSURER'S PROTECTIVE CLAUSE........................... 60
10.10 RECEIPT AND RELEASE FOR PAYMENTS...................... 60
10.11 ACTION BY THE EMPLOYER................................ 60
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY.... 60
10.13 HEADINGS.............................................. 60
10.14 APPROVAL BY INTERNAL REVENUE SERVICE.................. 60
10.15 UNIFORMITY............................................ 61
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XI
PARTICIPATING EMPLOYERS.......................................... 62
11.1 ADOPTION BY OTHER EMPLOYERS........................... 62
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS............... 62
11.3 DESIGNATION OF AGENT.................................. 62
11.4 EMPLOYEE TRANSFERS.................................... 62
11.5 PARTICIPATING EMPLOYER CONTRIBUTION................... 63
11.6 AMENDMENT............................................. 63
11.7 DISCONTINUANCE OF PARTICIPATION....................... 63
11.8 ADMINISTRATOR'S AUTHORITY............................. 64
</TABLE>
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<PAGE>
ALABAMA NATIONAL BANCORPORATION
EMPLOYEE CAPITAL ACCUMULATION PLAN
THIS AGREEMENT, hereby made and entered into this 31/st/ day of
December, 1999 by and between Alabama National BanCorporation (herein referred
to as the "Employer") and National Bank of Commerce of Birmingham (herein
referred to as the "Trustee").
RECITALS
WHEREAS, the Employer heretofore established a profit sharing plan and
trust, effective October 1, 1982 (hereinafter called the "Effective Date"),
which was initially known as the Alabama National BanCorporation 401(k) Profit
Sharing Plan and Trust and which was later named the Alabama National
BanCorporation Employee Capital Accumulation Plan (herein referred to as the
"Plan") in recognition of the contribution made to its successful operation by
its employees and for the exclusive benefit of its eligible employees; and
WHEREAS, Community Bank of Naples, N.A. ( "Community Bank") heretofore
established a profit sharing plan and trust originally effective January 1, 1996
know as the Community Bank of Naples, N.A. 401(k) Profit Sharing Plan
("Community Bank Plan") in recognition of the contribution made to its
successful operation by its employees and for the exclusive benefit of its
eligible employees;
WHEREAS, First American Bank ("FAB") heretofore established a profit
sharing plan and trust originally effective December 1, 1985 known as the First
American Bank 401(k) Savings Plan ("FAB Plan") in recognition of the
contribution made to its successful operation by its employees and for the
exclusive benefit of its eligible employees;
WHEREAS, Georgia State Bank ("GSB") heretofore established a profit
sharing plan and trust originally effective November 1, 1994 known as the
Georgia State Bank 401(k) Savings Plan ("GSB Plan") in recognition of the
contribution made to its successful operation by its employees and for the
exclusive benefit of its eligible employees; and
WHEREAS, under the terms of the above-referenced plans, the Employer,
Community Bank, FAB and GSB have the ability to amend said plans, provided the
Trustee joins in such amendment if the provisions of the Plan affecting the
Trustee are amended;
NOW, THEREFORE, effective January 1, 2000, except as otherwise
provided, the Employer, Community Bank, FAB, GSB and the Trustee in accordance
with the provisions of the plans pertaining to amendments thereof, hereby merge
the Community Bank Plan, FAB Plan and the GSB Plan into the Plan and amend and
restate said plans in their entirety to provide as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.2 "Administrator" means the Employer unless another person or entity has
been designated by the Employer pursuant to Section 2.2 to administer the Plan
on behalf of the Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
Page 1 of 64
<PAGE>
pursuant to Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to each Participant, the value
of all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section 9.2.
1.5 "Anniversary Date" means December 31st.
1.6 "Annuity Starting Date" means, with respect to GSB and FAB
Participants (see Section 6.5), the first day of the first period for which an
amount is paid as an annuity or any other form.
1.7 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
1.8 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.9 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation
must be determined without regard to any rules under Code Section 3401(a) that
limit the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made by including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or
457(b), and Employee contributions described in Code Section 414(h)(2) that are
treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall
be recognized as of such Employee's effective date of participation pursuant to
Section 3.2.
Compensation in excess of the limit imposed by Code Section 401(a)(17)
($170,000 for the 2000 calendar year) shall be disregarded. Such amount shall be
adjusted for increases in the cost of living in accordance with Code Section
401(a)(17), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or within such
calendar year. For any short Plan Year the Compensation limit shall be an amount
equal to the Compensation limit for the calendar year in which the Plan Year
begins multiplied by the ratio obtained by dividing the number of full months in
the short Plan Year by twelve (12).
For purposes of this Section, if the Plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
limitation applies separately with respect to the Compensation of any
Participant from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment and restatement,
the definition of Compensation has been modified, then, for Plan Years prior to
the Plan Year which includes the adoption date of this amendment and
restatement, Compensation means compensation determined pursuant to the Plan
then in effect.
1.10 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.11 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding any such amounts distributed as excess "annual additions" pursuant
to Section 4.10(a).
1.12 "Early Retirement Date." This Plan does not provide for a retirement
date prior to Normal
Page 2 of 64
<PAGE>
Retirement Date.
1.13 "Elective Contribution" means the Employer contributions to the Plan
of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to Section 4.10(a). In addition, any Employer
Qualified Non-Elective Contribution made pursuant to Section 4.1(c) and Section
4.6(b) which is used to satisfy the "Actual Deferral Percentage" tests shall be
considered an Elective Contribution for purposes of the Plan. Any contributions
deemed to be Elective Contributions (whether or not used to satisfy the "Actual
Deferral Percentage" tests) shall be subject to the requirements of Sections
4.2(b) and 4.2(c) and shall further be required to satisfy the nondiscrimination
requirements of Regulation 1.401(k)-1(b)(5), the provisions of which are
specifically incorporated herein by reference.
1.14 "Eligible Employee" means any Employee.
Employees who are Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall not be eligible to participate in this Plan.
Employees whose employment is governed by the terms of a collective
bargaining agreement between Employee representatives (within the meaning of
Code Section 7701(a)(46)) and the Employer under which retirement benefits were
the subject of good faith bargaining between the parties will not be eligible to
participate in this Plan unless such agreement expressly provides for coverage
in this Plan.
Employees of Affiliated Employers shall not be eligible to participate
in this Plan unless such Affiliated Employers have specifically adopted this
Plan in writing.
1.15 "Employee" means any person who is employed by the Employer or
Affiliated Employer. Employee shall include Leased Employees within the meaning
of Code Sections 414(n)(2) and 414(o)(2) unless such Leased Employees are
covered by a plan described in Code Section 414(n)(5) and such Leased Employees
do not constitute more than 20% of the recipient's non-highly compensated work
force.
1.16 "Employer" means Alabama National BanCorporation and any successor
which shall maintain this Plan; and any predecessor which has maintained this
Plan. The Employer is a corporation, with principal offices in the State of
Alabama. In addition, where appropriate, the term Employer shall include any
Participating Employer (as defined in Section 11.1) which shall adopt this Plan.
1.17 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on behalf of
Highly Compensated Participants for such Plan Year, over the maximum amount of
such contributions permitted under the limitations of Section 4.7(a) (determined
by reducing contributions made on behalf of Highly Compensated Participants in
order of the actual contribution ratios beginning with the highest of such
ratios).
1.18 "Excess Contributions" means, with respect to a Plan Year, the excess
of Elective Contributions used to satisfy the "Actual Deferral Percentage" tests
made on behalf of Highly Compensated Participants for the Plan Year over the
maximum amount of such contributions permitted under Section 4.5(a) (determined
by reducing contributions made on behalf of Highly Compensated Participants in
order of the actual deferral ratios beginning with the highest of such ratios).
Excess Contributions shall be treated as an "annual addition" pursuant to
Section 4.9(b).
1.19 "Excess Deferred Compensation" means, with respect to any taxable year
of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.9(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for
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purposes of Sections 9.2 and 4.4(f), Excess Deferred Compensation shall continue
to be treated as Employer contributions even if distributed pursuant to Section
4.2(f). However, Excess Deferred Compensation of Non-Highly Compensated
Participants is not taken into account for purposes of Section 4.5(a) to the
extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).
1.20 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on January 1st of each year and ending the following December 31st.
1.22 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a Terminated
Participant's Account, or
(b) the last day of the Plan Year in which the Participant incurs
five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4(f)(2). In addition, the term Forfeiture shall also include amounts
deemed to be Forfeitures pursuant to any other provision of this Plan.
1.23 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
For Plan Years beginning after December 31, 1997, for purposes of
this Section, the determination of "415 Compensation" shall include any elective
deferral (as defined in Code Section 402(g)(3)), and any amount which is
contributed or deferred by the Employer at the election of the Participant and
which is not includible in the gross income of the Participant by reason of Code
Sections 125 or 457.
If, in connection with the adoption of this amendment and
restatement, the definition of "415 Compensation" has been modified, then, for
Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "415 Compensation" means compensation determined
pursuant to the Plan then in effect.
1.25 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year, except that "414(s) Compensation" shall only be recognized for
that portion of the Plan Year during which an Employee was a Participant in the
Plan.
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For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of the limit imposed by Code Section
401(a)(17) ($170,000 for the 2000 calendar year) shall be disregarded. Such
amount shall be adjusted for increases in the cost of living in accordance with
Code Section 401(a)(17), except that the dollar increase in effect on January 1
of any calendar year shall be effective for the Plan Year beginning with or
within such calendar year. For any short Plan Year the "414(s) Compensation"
limit shall be an amount equal to the "414(s) Compensation" limit for the
calendar year in which the Plan Year begins multiplied by the ratio obtained by
dividing the number of full months in the short Plan Year by twelve (12).
If, in connection with the adoption of this amendment and restatement,
the definition of "414(s) Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "414(s) Compensation" means compensation determined pursuant to the
Plan then in effect.
1.26 "Highly Compensated Employee" means, for Plan Years beginning after
December 31, 1996, an Employee described in Code Section 414(q) and the
Regulations thereunder, and generally means an Employee who performed services
for the Employer during the "determination year" and is in one or more of the
following groups:
(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section 1.32(c).
(b) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $80,000.
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately preceding
twelve-month period.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amount specified in (b) above shall be adjusted at such time
and in the same manner as under Code Section 415(d), except that the base period
shall be the calendar quarter ending September 30, 1996. In the case of such an
adjustment, the dollar limit which shall be applied is the limit for the
calendar year in which the "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken into account as
a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year."
1.27 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly Compensated Former
Employee only if during the separation year (or year
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preceding the separation year) or any year after the Employee attains age 55 (or
the last year ending before the Employee's 55th birthday), the Employee either
received "415 Compensation" in excess of $50,000 or was a "five percent owner."
For purposes of this Section, "determination year," "415 Compensation" and "five
percent owner" shall be determined in accordance with Section 1.26. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees.
The method set forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and consistent basis
for all purposes for which the Code Section 414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.29 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties (these hours will be credited to the Employee for
the computation period in which the duties are performed); (2) each hour for
which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period (these hours will
be calculated and credited pursuant to Department of Labor regulation 2530.200b-
2 which is incorporated herein by reference); (3) each hour for which back pay
is awarded or agreed to by the Employer without regard to mitigation of damages
(these hours will be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the computation
period in which the award, agreement or payment is made). The same Hours of
Service shall not be credited both under (1) or (2), as the case may be, and
under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by
or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund,
or insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
For purposes of this Section, Hours of Service will be credited for
employment with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.30 "Income" means the income or losses allocable to Excess Deferred
Compensation, Excess Contributions or Excess Aggregate Contributions which
amount shall be allocated in the same manner as income or losses are allocated
pursuant to Section 4.4(e).
1.31 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
1.32 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key
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Employee if he, at any time during the Plan Year that contains the
"Determination Date" or any of the preceding four (4) Plan Years, has been
included in one of the following categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect under
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of Code Section
318) both more than one-half percent interest and the largest interests in
the Employer.
(c) a "five percent owner" of the Employer. "Five percent owner" means
any person who owns (or is considered as owning within the meaning of Code
Section 318) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than five percent (5%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers.
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than one percent (1%) of the outstanding stock of
the Employer or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than one percent (1%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers. However, in determining whether an individual has "415
Compensation" of more than $150,000, "415 Compensation" from each employer
required to be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be taken into account.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
1.33 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.34 "Leased Employee" means, for Plan Years beginning after December 31,
1996, any person (other than an Employee of the recipient) who pursuant to an
agreement between the recipient and any other person ("leasing organization")
has performed services for the recipient (or for the recipient and related
persons determined in accordance with Code Section 414(n)(6)) on a substantially
full time basis for a period of at least one year, and such services are
performed under primary direction or control by the recipient employer.
Contributions or benefits provided a Leased Employee by the leasing organization
which are attributable to services performed for the recipient employer shall be
treated as provided by the recipient employer. A Leased Employee shall not be
considered an Employee of the recipient:
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(a) if such employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at least 10%
of compensation, as defined in Code Section 415(c)(3), but
including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and
Employee contributions described in Code Section 414(h)(2)
that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.35 "Non-Elective Contribution" means the Employer contributions to the
Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution used in the "Actual Deferral Percentage" tests.
1.36 "Non-Highly Compensated Participant" means any Participant who is not
a Highly Compensated Employee. However, for the Plan Year prior to the first
Plan Year of this amendment and restatement, for the purposes of Section 4.5(a)
and Section 4.6, if the prior year testing method is used, a Non-Highly
Compensated Participant shall be determined using the definition of highly
compensated employee in effect for the preceding Plan Year.
1.37 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.39 "Normal Retirement Date" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age.
1.40 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service shall be
measured on the same computation period.
"Authorized leave of absence" means an unpaid, temporary cessation
from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by reason
of the Employee's pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child, or any absence
for the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the immediately following computation period.
The Hours of Service credited for a "maternity or paternity leave of absence"
shall be those which would normally have been credited but for such absence, or,
in any case in which the Administrator is unable to determine such hours
normally credited, eight (8) Hours of Service per day. The
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total Hours of Service required to be credited for a "maternity or paternity
leave of absence" shall not exceed 501.
1.41 "Participant" means any Eligible Employee who participates in the Plan
and has not for any reason become ineligible to participate further in the Plan.
1.42 "Participant Direction Procedures" means such instructions, guidelines
or policies, the terms of which are incorporated herein, as shall be established
pursuant to Section 4.13 and observed by the Administrator and applied to
Participants who have Participant Directed Accounts.
1.43 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from the Employer Non-Elective Contributions.
A separate accounting shall be maintained with respect to that portion
of the Participant's Account attributable to Employer matching contributions
made pursuant to Section 4.1(b), Employer discretionary contributions made
pursuant to Section 4.1(d) and any Employer Qualified Non-Elective
Contributions.
1.44 "Participant's Combined Account" means the total aggregate amount of
each Participant's Elective Account and Participant's Account.
1.45 "Participant's Directed Account" means that portion of a Participant's
interest in the Plan with respect to which the Participant has directed the
investment in accordance with the Participant Direction Procedure.
1.46 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer Elective
Contributions used to satisfy the "Actual Deferral Percentage" tests. A separate
accounting shall be maintained with respect to that portion of the Participant's
Elective Account attributable to such Elective Contributions pursuant to Section
4.2 and any Employer Qualified Non-Elective Contributions.
1.47 "Plan" means this instrument, including all amendments thereto.
1.48 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.49 "Pre-Retirement Survivor Annuity" means a death benefit which is an
immediate annuity for the life of a GSB/FAB Participant's spouse (see Section
6.5) the payments under which must be equal to the amount of benefit which can
be purchased with 50% of the accounts of a GSB/FAB Participant, as applicable. A
proportionate share of each of the Participant's accounts shall be used to
provide any Pre-Retirement Survivor Annuity.
1.50 "Qualified Non-Elective Contribution" means any Employer contributions
made pursuant to Section 4.1(c) and Section 4.6(b) and Section 4.8(f). Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and may be used to satisfy the "Actual Deferral Percentage" tests or
the "Actual Contribution Percentage" tests.
1.51 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.52 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
1.53 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date or Late Retirement Date (see
Section 6.1).
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1.54 "Super Top Heavy Plan" means a plan described in Section 9.2(b).
1.55 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
1.56 "Top Heavy Plan" means a plan described in Section 9.2(a).
1.57 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.
1.58 "Total and Permanent Disability" means a physical or mental condition
of a Participant resulting from bodily injury, disease, or mental disorder which
renders him incapable of continuing his usual and customary employment with the
Employer. The disability of a Participant shall be determined by a licensed
physician chosen by the Administrator. However, a Participant eligible for
Social Security disability benefits shall automatically satisfy the requirements
for determining disability. The determination shall be applied uniformly to all
Participants.
1.59 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
1.60 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.61 "USERRA" means the Uniformed Services Employment and Reemployment
Rights Act of 1994. Notwithstanding any provision of this Plan to the contrary,
effective December 12, 1994, contributions, benefits and service credit with
respect to qualified military service will be provided in accordance with Code
Section 414(u).
1.62 "Valuation Date" means the Anniversary Date and such other date or
dates deemed necessary by the Administrator. The Valuation Date may include any
day during the Plan Year that the Trustee, any transfer agent appointed by the
Trustee or the Employer and any stock exchange used by such agent are open for
business.
1.63 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
1.64 "Voluntary Contribution Account" means the account established and
maintained by the Administrator for each applicable Participant with respect to
his total interest in the Plan resulting from such Participant's nondeductible
voluntary contributions made pursuant to Section 4.12.
1.65 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service. The participation computation period beginning after a 1-Year Break in
Service shall be measured from the date on which an Employee again performs an
Hour of Service. The participation computation period shall shift to the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service. An Employee who is credited with the required
Hours of Service in both the initial computation period (or the computation
period beginning after a 1-Year Break in Service) and the Plan Year which
includes the anniversary of the date on which the Employee first performed an
Hour of Service, shall be credited with two (2) Years of Service for purposes of
eligibility to participate.
For vesting purposes, the computation periods shall be the Plan Year,
including periods prior to the Effective Date of the Plan.
The computation period shall be the Plan Year if not otherwise set
forth herein.
Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c). However,
in determining whether an Employee has completed a Year of Service for benefit
accrual purposes in the
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short Plan Year, the number of the Hours of Service required shall be
proportionately reduced based on the number of full months in the short Plan
Year.
Years of Service with Your Insurance Man, Inc., St. Clair Federal
Savings Bank, First Gulf Bank, Alabama Exchange Bank, Citizens Bank of
Talladega, Bank of Dadeville, First National Bank of Ashland, National Bank of
Commerce of Birmingham, NBC Securities, Inc., Metro Bank, First Western Bank,
First American Bank of Pelham, Ashland Insurance, Inc., Tuskegee Loan Company,
Clay County Finance Company, Future Finance Company, Bank of the South East and
First Bank of Baldwin County shall be recognized.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II
ADMINISTRATION
2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) In addition to the general powers and responsibilities otherwise
provided for in this Plan, the Employer shall be empowered to appoint and
remove the Trustee and the Administrator from time to time as it deems
necessary for the proper administration of the Plan to ensure that the Plan
is being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and the
Act. The Employer may appoint counsel, specialists, advisers, agents
(including any nonfiduciary agent) and other persons as the Employer deems
necessary or desirable in connection with the exercise of its fiduciary
duties under this Plan. The Employer may compensate such agents or advisers
from the assets of the Plan as fiduciary expenses (but not including any
business (settlor) expenses of the Employer), to the extent not paid by the
Employer.
(b) The Employer may, by written agreement or designation, appoint at
its option an Investment Manager (qualified under the Investment Company
Act of 1940 as amended), investment adviser, or other agent to provide
direction to the Trustee with respect to any or all of the Plan assets.
Such appointment shall be given by the Employer in writing in a form
acceptable to the Trustee and shall specifically identify the Plan assets
with respect to which the Investment Manager or other agent shall have
authority to direct the investment.
(c) The Employer shall establish a "funding policy and method," i.e.,
it shall determine whether the Plan has a short run need for liquidity
(e.g., to pay benefits) or whether liquidity is a long run goal and
investment growth (and stability of same) is a more current need, or shall
appoint a qualified person to do so. The Employer or its delegate shall
communicate such needs and goals to the Trustee, who shall coordinate such
Plan needs with its investment policy. The communication of such a "funding
policy and method" shall not, however, constitute a directive to the
Trustee as to investment of the Trust Funds. Such "funding policy and
method" shall be consistent with the objectives of this Plan and with the
requirements of Title I of the Act.
(d) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or allocated
by it under the provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be satisfied by formal periodic
review by the Employer or by a qualified person specifically designated by
the Employer, through day-to-day conduct and evaluation, or through other
appropriate ways.
2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall be the Administrator. The Employer may appoint any
person, including, but not limited to, the Employees of the Employer, to perform
the duties of the Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. Upon the resignation
or removal of any individual performing the duties of the Administrator, the
Employer may designate a successor.
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2.3 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion to
construe the terms of the Plan and to determine all questions arising in
connection with the administration, interpretation, and application of the Plan.
Any such determination by the Administrator shall be conclusive and binding upon
all persons. The Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable to carry out the purpose
of the Plan; provided, however, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant hereunder
and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration of the
Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of any Contract to be purchased
from any insurer, and to designate the insurer from which such Contract
shall be purchased;
(g) to compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed to
the Plan;
(h) to consult with the Employer and the Trustee regarding the short
and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives;
(i) to prepare and distribute to Employees a procedure for notifying
GSB/FAB Participants and Beneficiaries (see Section 6.5) of their rights to
elect joint and survivor annuities and Pre-Retirement Survivor Annuities as
required by the Act and regulations thereunder;
(j) to prepare and implement a procedure to notify Eligible Employees
that they may elect to have a portion of their Compensation deferred or
paid to them in cash;
(k) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.4 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account,
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records, policies, and other data that may be necessary for proper
administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.5 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, agents (including
nonfiduciary agents) and other persons as the Administrator or the Trustee deems
necessary or desirable in connection with the administration of this Plan,
including but not limited to agents and advisers to assist with the
administration and management of the Plan, and thereby to provide, among such
other duties as the Administrator may appoint, assistance with maintaining Plan
records and the providing of investment information to the Plan's investment
fiduciaries and to Plan Participants.
2.6 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses incident
to the functioning of the Administrator, or any person or persons retained or
appointed by any Named Fiduciary incident to the exercise of their duties under
the Plan, including, but not limited to, fees of accountants, counsel,
Investment Managers, agents (including nonfiduciary agents) appointed for the
purpose of assisting the Administrator or the Trustee in carrying out the
instructions of Participants as to the directed investment of their accounts and
other specialists and their agents, and other costs of administering the Plan.
Until paid, the expenses shall constitute a liability of the Trust Fund.
2.7 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.8 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.7
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.7. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
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ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed one (1) Year of Service and
has attained age 21 shall be eligible to participate hereunder as of the date he
has satisfied such requirements. However, any Employee who was a Participant in
the Plan prior to the effective date of this amendment and restatement shall
continue to participate in the Plan.
Notwithstanding the foregoing, the following special eligibility rules
shall apply:
(a) With respect to employees who were employed with Community Bank on
October 15, 1996, such employees were eligible to participate regardless of
the foregoing eligibility requirements.
(b) With respect to employees of the Employer who were age 20 and
employed on July 1, 1996 by the Employer, such employees were eligible to
participate regardless of the foregoing eligibility requirements.
3.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
first day of the calendar quarter following the date such Employee met the
eligibility requirements of Section 3.1, provided said Employee was still
employed as of such date (or if not employed on such date, as of the date of
rehire if a 1-Year Break in Service has not occurred).
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a Participant.
3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.8.
3.4 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification of an
Eligible Employee to an ineligible Employee, such Former Participant shall
continue to vest in his interest in the Plan for each Year of Service
completed while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed pursuant to the
terms of the Plan. Additionally, his interest in the Plan shall continue to
share in the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an eligible
class of Employees and becomes ineligible to participate, such Employee
will participate immediately upon returning to an eligible class of
Employees.
3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the
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amount which the said Employer would have contributed with respect to him had he
not been omitted. Such contribution shall be made regardless of whether or not
it is deductible in whole or in part in any taxable year under applicable
provisions of the Code.
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as
a Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has been
made, the Employer shall not be entitled to recover the contribution made with
respect to the ineligible person regardless of whether or not a deduction is
allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a Forfeiture
(except for Deferred Compensation which shall be distributed to the ineligible
person) for the Plan Year in which the discovery is made.
3.7 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least fifteen (15) days before
the beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 4.2(a), which amount shall be deemed
an Employer Elective Contribution.
(b) On behalf of each Participant who is eligible to share in matching
contributions for the Plan Year, a matching contribution equal to 100% of
each such Participant's Deferred Compensation plus a uniform discretionary
percentage of each such Participant's Deferred Compensation, the exact
percentage, if any, to be determined each year by the Employer, which
amount, if any, shall be deemed an Employer Non-Elective Contribution.
Except, however, in applying the matching percentage specified
above, only salary reductions up to 5% of annual Compensation shall be
considered. Matching contributions shall be allocated as soon as
administratively feasible following each payroll.
(c) On behalf of each Non-Highly Compensated Participant who is
eligible to share in the Qualified Non-Elective Contribution for the Plan
Year, a discretionary Qualified Non-Elective Contribution equal to a
uniform percentage of each eligible individual's Compensation, the exact
percentage, if any, to be determined each year by the Employer. Any
Employer Qualified Non-Elective Contribution shall be deemed an Employer
Elective Contribution.
(d) A discretionary amount, which amount, if any, shall be deemed an
Employer Non-Elective Contribution.
(e) Additionally, to the extent necessary, the Employer shall
contribute to the Plan the amount necessary to provide the top heavy
minimum contribution. All contributions by the Employer shall be made in
cash.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1% to 15% of his
Compensation which would
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have been received in the Plan Year, but for the deferral election. A
deferral election (or modification of an earlier election) may not be made
with respect to Compensation which is currently available on or before the
date the Participant executed such election. For purposes of this Section,
Compensation shall be determined prior to any reductions made pursuant to
Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee
contributions described in Code Section 414(h)(2) that are treated as
Employer contributions.
The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer Elective
Contribution and allocated to that Participant's Elective Account.
(b) The balance in each Participant's Elective Account shall be fully
Vested at all times and shall not be subject to Forfeiture for any reason.
(c) Notwithstanding anything in the Plan to the contrary, amounts held
in the Participant's Elective Account may not be distributable (including
any offset of loans) earlier than:
(1) a Participant's separation from service, Total and Permanent
Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or
existence of a "successor plan," as that term is described in
Regulation 1.401(k)-1(d)(3);
(4) the date of disposition by the Employer to an entity that is
not an Affiliated Employer of substantially all of the assets
(within the meaning of Code Section 409(d)(2)) used in a trade or
business of such corporation if such corporation continues to
maintain this Plan after the disposition with respect to a
Participant who continues employment with the corporation
acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a subsidiary
(within the meaning of Code Section 409(d)(3)) to an entity which
is not an Affiliated Employer but only with respect to a
Participant who continues employment with such subsidiary; or
(6) the proven financial hardship of a Participant, subject to the
limitations of Section 6.11.
(d) For each Plan Year, a Participant's Deferred Compensation made
under this Plan and all other plans, contracts or arrangements of the
Employer maintaining this Plan shall not exceed, during any taxable year of
the Participant, the limitation imposed by Code Section 402(g), as in
effect at the beginning of such taxable year. If such dollar limitation is
exceeded, a Participant will be deemed to have notified the Administrator
of such excess amount which shall be distributed in a manner consistent
with Section 4.2(f). The dollar limitation shall be adjusted annually
pursuant to the method provided in Code Section 415(d) in accordance with
Regulations.
(e) In the event a Participant has received a hardship distribution
from his Participant's Elective Account pursuant to Section 6.11(b) or
pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan
maintained by the Employer, then such Participant shall not be permitted to
elect to have Deferred Compensation contributed to the Plan on his behalf
for a period of twelve (12) months following the receipt of the
distribution. Furthermore, the dollar limitation under Code Section 402(g)
shall be reduced, with respect to the Participant's taxable year following
the taxable year in which the hardship distribution was made, by the amount
of such Participant's Deferred Compensation, if any, pursuant to this Plan
(and any other plan maintained by the Employer) for the taxable year of the
hardship distribution.
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(f) If a Participant's Deferred Compensation under this Plan together
with any elective deferrals (as defined in Regulation 1.402(g)-1(b)) under
another qualified cash or deferred arrangement (as defined in Code Section
401(k)), a simplified employee pension (as defined in Code Section 408(k)),
a salary reduction arrangement (within the meaning of Code Section
3121(a)(5)(D)), a deferred compensation plan under Code Section 457(b), or
a trust described in Code Section 501(c)(18) cumulatively exceed the
limitation imposed by Code Section 402(g) (as adjusted annually in
accordance with the method provided in Code Section 415(d) pursuant to
Regulations) for such Participant's taxable year, the Participant may, not
later than March 1 following the close of the Participant's taxable year,
notify the Administrator in writing of such excess and request that his
Deferred Compensation under this Plan be reduced by an amount specified by
the Participant. In such event, the Administrator may direct the Trustee to
distribute such excess amount (and any Income allocable to such excess
amount) to the Participant not later than the first April 15th following
the close of the Participant's taxable year. Any distribution of less than
the entire amount of Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferred Compensation and
Income. The amount distributed shall not exceed the Participant's Deferred
Compensation under the Plan for the taxable year (and any Income allocable
to such excess amount). Any distribution on or before the last day of the
Participant's taxable year must satisfy each of the following conditions:
(1) the distribution must be made after the date on which the Plan
received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution of
Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(f) shall be
made first from unmatched Deferred Compensation and, thereafter, from
Deferred Compensation which is matched. Matching contributions which relate
to such Deferred Compensation shall be forfeited.
(g) Notwithstanding Section 4.2(f) above, a Participant's Excess
Deferred Compensation shall be reduced, but not below zero, by any
distribution of Excess Contributions pursuant to Section 4.6(a) for the
Plan Year beginning with or within the taxable year of the Participant.
(h) At Normal Retirement Date, or such other date when the Participant
shall be entitled to receive benefits, the fair market value of the
Participant's Elective Account shall be used to provide additional benefits
to the Participant or his Beneficiary.
(i) Employer Elective Contributions made pursuant to this Section may
be segregated into a separate account for each Participant in a federally
insured savings account, certificate of deposit in a bank or savings and
loan association, money market certificate, or other short-term debt
security acceptable to the Trustee until such time as the allocations
pursuant to Section 4.4 have been made.
(j) The Employer and the Administrator shall implement the salary
reduction elections provided for herein in accordance with the following:
(1) A Participant must make his initial salary deferral election
within a reasonable time, not to exceed thirty (30) days, after
entering the Plan pursuant to Section 3.2. If the Participant
fails to make an initial salary deferral election within such
time, then such Participant may thereafter make an election in
accordance with the rules governing modifications. The Participant
shall make such an election by entering into a written salary
reduction agreement with the Employer and filing such agreement
with the Administrator. Such election shall initially be effective
beginning with the pay period following the acceptance of the
salary reduction agreement by the Administrator, shall not have
retroactive effect and shall remain in force until revoked.
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(2) A Participant may modify a prior election during the Plan Year
and concurrently make a new election by filing a written notice
with the Administrator within a reasonable time before the pay
period for which such modification is to be effective. However,
modifications to a salary deferral election shall only be
permitted quarterly, during election periods established by the
Administrator prior to the first day of each calendar quarter
(January 1, April 1, July 1, October 1). Any modification shall
not have retroactive effect and shall remain in force until
revoked.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the Plan
Year by providing the Administrator with thirty (30) days written
notice of such revocation (or upon such shorter notice period as
may be acceptable to the Administrator). Such revocation shall
become effective as of the beginning of the first pay period
coincident with or next following the expiration of the notice
period. Furthermore, the termination of the Participant's
employment, or the cessation of participation for any reason,
shall be deemed to revoke any salary reduction agreement then in
effect, effective immediately following the close of the pay
period within which such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to
the Plan for each Plan Year within the time prescribed by law, including
extensions of time, for the filing of the Employer federal income tax return for
the Fiscal Year.
However, subject to the 10-day extension provided for in Department of
Labor regulations 2510.3-102 (which are incorporated herein by reference),
Employer Elective Contributions accumulated through payroll deductions shall be
paid to the Trustee as of the earliest date on which such contributions can
reasonably be segregated from the Employer's general assets, but in no event be
paid to the Trustee later than the 15th business day of the month following the
month in which such amounts would otherwise have been payable to the Participant
in cash. Furthermore, any additional Employer contributions which are allocable
to the Participant's Elective Account for a Plan Year shall be paid to the Plan
no later than the twelve-month period immediately following the close of such
Plan Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in the
name of each Participant to which the Administrator shall credit as of each
Anniversary Date all amounts allocated to each such Participant as set
forth herein.
(b) The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the Employer
contributions for each Plan Year. Within a reasonable period of time after
the date of receipt by the Administrator of such information, the
Administrator shall allocate such contribution as follows:
(1) With respect to the Employer Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective Account
in an amount equal to each such Participant's Deferred
Compensation for the year.
(2) With respect to the Employer Non-Elective Contribution made
pursuant to Section 4.1(b), to each Participant's Account in
accordance with Section 4.1(b).
Any Participant actively employed during the Plan Year shall be
eligible to share in the matching contribution for the Plan Year.
(3) With respect to the Employer Qualified Non-Elective
Contribution made pursuant to Section 4.1(c), to each
Participant's Elective Account when used to satisfy the "Actual
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Deferral Percentage" tests or Participant's Account in accordance
with Section 4.1(c).
Only Non-Highly Compensated Participants who have completed a Year
of Service during the Plan Year shall be eligible to share in the
Qualified Non-Elective Contribution for the year.
(4) With respect to the Employer Non-Elective Contribution made
pursuant to Section 4.1(d), to each Participant's Account in the
same proportion that each such Participant's Compensation for the
year bears to the total Compensation of all Participants for such
year.
Only Participants who have completed a Year of Service during the
Plan Year shall be eligible to share in the discretionary
contribution for the year.
(c) As of each Anniversary Date any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to reinstate
previously forfeited account balances of Former Participants, if any, in
accordance with Section 6.4(f)(2). The remaining Forfeitures, if any, shall
be used to reduce the contribution of the Employer hereunder for the Plan
Year in which such Forfeitures occur in the following manner:
(1) Forfeitures attributable to Employer matching contributions
made pursuant to Section 4.1(b) shall be used to reduce the
Employer contribution for the Plan Year in which such Forfeitures
occur.
(2) Forfeitures attributable to Employer discretionary
contributions made pursuant to Section 4.1(d) shall be used to
reduce the Employer contribution for the Plan Year in which such
Forfeitures occur.
(d) For any Top Heavy Plan Year, Employees not otherwise eligible to
share in the allocation of contributions as provided above, shall receive
the minimum allocation provided for in Section 4.4(f) if eligible pursuant
to the provisions of Section 4.4(h).
(e) As of each Valuation Date, before allocation of one-half of the
Employer contributions for the entire Plan Year, any earnings or losses
(net appreciation or net depreciation) of the Trust Fund shall be allocated
in the same proportion that each Participant's and Former Participant's
nonsegregated accounts bear to the total of all Participants' and Former
Participants' nonsegregated accounts as of such date. Earnings or losses
with respect to a Participant's Directed Account shall be allocated in
accordance with Section 4.13.
Participants' transfers from other qualified plans and voluntary
contributions deposited in the general Trust Fund shall share in any
earnings and losses (net appreciation or net depreciation) of the Trust
Fund in the same manner provided above. Each segregated account maintained
on behalf of a Participant shall be credited or charged with its separate
earnings and losses.
(f) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer contributions allocated to the Participant's Combined Account of
each Employee shall be equal to at least three percent (3%) of such
Employee's "415 Compensation" (reduced by contributions and forfeitures, if
any, allocated to each Employee in any defined contribution plan included
with this plan in a Required Aggregation Group). However, if (1) the sum of
the Employer contributions allocated to the Participant's Combined Account
of each Key Employee for such Top Heavy Plan Year is less than three
percent (3%) of each Key Employee's "415 Compensation" and (2) this Plan is
not required to be included in an Aggregation Group to enable a defined
benefit plan to meet the requirements of Code Section 401(a)(4) or 410, the
sum of the Employer contributions allocated to the Participant's Combined
Account of each Employee shall be equal to the largest percentage allocated
to the Participant's Combined Account of any Key Employee. However, in
determining whether a Non-Key
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Employee has received the required minimum allocation, such Non-Key
Employee's Deferred Compensation and matching contributions needed to
satisfy the "Actual Contribution Percentage" tests pursuant to Section
4.7(a) shall not be taken into account.
However, no such minimum allocation shall be required in this Plan
for any Employee who participates in another defined contribution plan
subject to Code Section 412 included with this Plan in a Required
Aggregation Group.
(g) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Combined Account of any Key
Employee shall be equal to the ratio of the sum of the Employer
contributions allocated on behalf of such Key Employee divided by the "415
Compensation" for such Key Employee.
(h) For any Top Heavy Plan Year, the minimum allocations set forth
above shall be allocated to the Participant's Combined Account of all
Employees who are Participants and who are employed by the Employer on the
last day of the Plan Year, including Employees who have (1) failed to
complete a Year of Service; and (2) declined to make mandatory
contributions (if required) or, in the case of a cash or deferred
arrangement, elective contributions to the Plan.
(i) In lieu of the above, if an Employee participates in this Plan and
a defined benefit pension plan included in a Required Aggregation Group
which is top heavy, a minimum allocation of five percent (5%) of "415
Compensation" shall be provided under this Plan.
(j) For the purposes of this Section, "415 Compensation" shall be
limited to the amount established by Code Section 401(a)(17) ($170,000 for
the 2000 calendar year). Such amount shall be adjusted for increases in the
cost of living in accordance with Code Section 401(a)(17), except that the
dollar increase in effect on January 1 of any calendar year shall be
effective for the Plan Year beginning with or within such calendar year.
For any short Plan Year the "415 Compensation" limit shall be an amount
equal to the "415 Compensation" limit for the calendar year in which the
Plan Year begins multiplied by the ratio obtained by dividing the number of
full months in the short Plan Year by twelve (12).
(k) Notwithstanding anything herein to the contrary, Participants who
terminated employment for any reason during the Plan Year shall share in
the salary reduction contributions made by the Employer for the year of
termination without regard to the Hours of Service credited.
(l) If a Former Participant is reemployed after five (5) consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as
follows:
(1) one account for nonforfeitable benefits attributable to pre-
break service; and
(2) one account representing his status in the Plan attributable
to post-break service.
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4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning after
December 31, 1996, the annual allocation derived from Employer Elective
Contributions to a Highly Compensated Participant's Elective Account shall
satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group (for
the preceding Plan Year if the prior year testing method is used
to calculate the "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group) multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the Highly
Compensated Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group (for
the preceding Plan Year if the prior year testing method is used
to calculate the "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group) shall not be more than two
percentage points. Additionally, the "Actual Deferral Percentage"
for the Highly Compensated Participant group shall not exceed the
"Actual Deferral Percentage" for the Non-Highly Compensated
Participant group (for the preceding Plan Year if the prior year
testing method is used to calculate the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group)
multiplied by 2. The provisions of Code Section 401(k)(3) and
Regulation 1.401(k)-1(b) are incorporated herein by reference.
However, in order to prevent the multiple use of the alternative
method described in (2) above and in Code Section 401(m)(9)(A),
any Highly Compensated Participant eligible to make elective
deferrals pursuant to Section 4.2 or to receive matching
contributions under this Plan or under any other plan maintained
by the Employer or an Affiliated Employer shall have a combination
of his Elective Contributions and Employer matching contributions
reduced pursuant to Section 4.6(a) and Regulation 1.401(m)-2, the
provisions of which are incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant group and Non-
Highly Compensated Participant group for a Plan Year, the average of the
ratios, calculated separately for each Participant in such group, of the
amount of Employer Elective Contributions allocated to each Participant's
Elective Account for such Plan Year, to such Participant's "414(s)
Compensation" for such Plan Year. The actual deferral ratio for each
Participant and the "Actual Deferral Percentage" for each group shall be
calculated to the nearest one-hundredth of one percent. Employer Elective
Contributions allocated to each Non-Highly Compensated Participant's
Elective Account shall be reduced by Excess Deferred Compensation to the
extent such excess amounts are made under this Plan or any other plan
maintained by the Employer.
Notwithstanding the above, if the prior year test method is used
to calculate the "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group for the first Plan Year of this amendment and
restatement, the "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group for the preceding Plan Year shall be
calculated pursuant to the provisions of the Plan then in effect.
(c) For the purposes of Sections 4.5(a) and 4.6, a Highly Compensated
Participant and a Non-Highly Compensated Participant shall include any
Employee eligible to make a deferral election pursuant to Section 4.2,
whether or not such deferral election was made or suspended pursuant to
Section 4.2.
Notwithstanding the above, if the prior year testing method is
used to calculate the "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group for the first Plan Year of this amendment and
restatement, for purposes of Section 4.5(a) and 4.6, a Non-Highly
Compensated Participant
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<PAGE>
shall include any such Employee eligible to make a deferral election,
whether or not such deferral election was made or suspended, pursuant to
the provisions of the Plan in effect for the preceding Plan Year.
(d) If the Plan uses the prior year testing method, the "Actual
Deferral Percentage" for the Non-Highly Compensated Participant group is
determined without regard to changes in the group of Non-Highly Compensated
Participants who are eligible under the Plan in the testing year. However,
if the Plan results from, or is otherwise affected by, a "Plan Coverage
Change" that becomes effective during the testing year, then the "Actual
Deferral Percentage" for the Non-Highly Compensated Participant group for
the prior year is the "Weighted Average Of The Actual Deferral Percentages
For The Prior Year Subgroups." Notwithstanding the above, if ninety (90)
percent or more of the total number of Non-Highly Compensated Participants
from all "Prior Year Subgroups" are from a single "Prior Year Subgroup,"
then in determining the "Actual Deferral Percentage" for the Non-Highly
Compensated Participants for the prior year, the Employer may elect to use
the "Actual Deferral Percentage" for Non-Highly Compensated Participants
for the prior year under which that single "Prior Year Subgroup" was
eligible, in lieu of using the weighted averages. For purposes of this
Section the following definitions shall apply:
(1) "Plan Coverage Change" means a change in the group or groups
of eligible Participants on account of (i) the establishment or
amendment of a plan, (ii) a plan merger, consolidation, or spinoff
under Code Section 414(l), (iii) a change in the way plans within
the meaning of Code Section 414(l) are combined or separated for
purposes of Regulation 1.401(k)-1(g)(11), or (iv) a combination of
any of the foregoing.
(2) "Prior Year Subgroup" means all Non-Highly Compensated
Participants for the prior year who, in the prior year, were
eligible Participants under a specific Code Section 401(k) plan
maintained by the Employer and who would have been eligible
Participants in the prior year under the plan tested if the plan
coverage change had first been effective as of the first day of
the prior year instead of first being effective during the testing
year.
(3) "Weighted Average Of The Actual Deferral Percentages For The
Prior Year Subgroups" means the sum, for all prior year subgroups,
of the "Adjusted Actual Deferral Percentages."
(4) "Adjusted Actual Deferral Percentage" with respect to a prior
year subgroup means the Actual Deferral Percentage for Non-Highly
Compensated Participants for the prior year of the specific plan
under which the members of the prior year subgroup were eligible
Participants, multiplied by a fraction, the numerator of which is
the number of Non-Highly Compensated Participants in the prior
year subgroup and the denominator of which is the total number of
Non-Highly Compensated Participants in all prior year subgroups.
(e) For the purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k), if two or more plans which include cash or deferred
arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii)), the cash or
deferred arrangements included in such plans shall be treated as one
arrangement. In addition, two or more cash or deferred arrangements may be
considered as a single arrangement for purposes of determining whether or
not such arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k).
In such a case, the cash or deferred arrangements included in such plans
and the plans including such arrangements shall be treated as one
arrangement and as one plan for purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k). Any adjustment to the Non-Highly Compensated
Participant actual deferral ratio for the prior year shall be made in
accordance with Internal Revenue Service Notice 98-1 and any superseding
guidance. Plans may be aggregated under this paragraph (e) only if they
have the same plan year. Notwithstanding the above, for Plan Years
beginning after December 31, 1996, if two or more plans which include cash
or deferred arrangements are permissively aggregated under Regulation
1.410(b)-7(d), all plans permissively aggregated must use either the
current year testing method or the prior year testing method for the
testing year.
Page 22 of 64
<PAGE>
Notwithstanding the above, an employee stock ownership plan
described in Code Section 4975(e)(7) or 409 may not be combined with this
Plan for purposes of determining whether the employee stock ownership plan
or this Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and
401(k).
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part of an
employee stock ownership plan as defined in Code Section 4975(e)(7) or 409)
of the Employer or an Affiliated Employer, all such cash or deferred
arrangements shall be treated as one cash or deferred arrangement for the
purpose of determining the actual deferral ratio with respect to such
Highly Compensated Participant. However, if the cash or deferred
arrangements have different plan years, this paragraph shall be applied by
treating all cash or deferred arrangements ending with or within the same
calendar year as a single arrangement.
(g) For the purpose of this Section, when calculating the "Actual
Deferral Percentage" for the Non-Highly Compensated Participant group, the
current year testing method shall be used. Any change from the current year
testing method to the prior year testing method shall be made pursuant to
Internal Revenue Service Notice 98-1, Section VII (or superseding
guidance), the provisions of which are incorporated herein by reference.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event (or if it is anticipated) that the initial allocations of
the Employer Elective Contributions made pursuant to Section 4.4 do (or might)
not satisfy one of the tests set forth in Section 4.5(a) for Plan Years
beginning after December 31, 1996, the Administrator shall adjust Excess
Contributions pursuant to the options set forth below:
(a) On or before the fifteenth day of the third month following the
end of each Plan Year, the Highly Compensated Participant having the
largest amount of Elective Contributions shall have a portion of his
Elective Contributions distributed to him until the total amount of Excess
Contributions has been distributed, or until the amount of his Elective
Contributions equals the Elective Contributions of the Highly Compensated
Participant having the second largest amount of Elective Contributions.
This process shall continue until the total amount of Excess Contributions
has been distributed. In determining the amount of Excess Contributions to
be distributed with respect to an affected Highly Compensated Participant
as determined herein, such amount shall be reduced pursuant to Section
4.2(f) by any Excess Deferred Compensation previously distributed to such
affected Highly Compensated Participant for his taxable year ending with or
within such Plan Year.
(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:
(i) may be postponed but not later than the close of the
Plan Year following the Plan Year to which they are allocable;
(ii) shall be adjusted for Income; and
(iii) shall be designated by the Employer as a distribution
of Excess Contributions (and Income).
(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of
Excess Contributions and Income.
(3) Matching contributions which relate to Excess Contributions
shall be forfeited unless the related matching contribution is
distributed as an Excess Aggregate Contribution pursuant to
Section 4.8.
Page 23 of 64
<PAGE>
(b) Within twelve (12) months after the end of the Plan Year, the
Employer may make a special Qualified Non-Elective Contribution on behalf
of Non-Highly Compensated Participants in an amount sufficient to satisfy
(or to prevent an anticipated failure of) one of the tests set forth in
Section 4.5(a). Such contribution shall be allocated to the Participant's
Elective Account of each Non-Highly Compensated Participant in the same
proportion that each Non-Highly Compensated Participant's Compensation for
the year bears to the total Compensation of all Non-Highly Compensated
Participants.
However, if the prior year testing method is used, the special
Qualified Non-Elective Contribution shall be allocated in the prior Plan
Year to the Participant's Elective Account on behalf of each Non-Highly
Compensated Participant who was employed by the Employer on the last day of
the prior Plan Year in the same proportion that each such Non-Highly
Compensated Participant's Compensation for the prior Plan Year bears to the
total Compensation of all such Non-Highly Compensated Participants for the
prior Plan Year. Such contribution shall be made by the Employer prior to
the end of the current Plan Year.
Notwithstanding the above, for Plan Years beginning after December
31, 1998, if the testing method changes from the current year testing
method to the prior year testing method, then for purposes of preventing
the double counting of Qualified Non-Elective Contributions for the first
testing year for which the change is effective, any special Qualified Non-
Elective Contribution on behalf of Non-Highly Compensated Participants used
to satisfy the "Actual Deferral Percentage" or "Actual Contribution
Percentage" test under the current year testing method for the prior year
testing year shall be disregarded.
(c) If during a Plan Year the projected aggregate amount of Elective
Contributions to be allocated to all Highly Compensated Participants under
this Plan would, by virtue of the tests set forth in Section 4.5(a), cause
the Plan to fail such tests, then the Administrator may automatically
reduce proportionately or in the order provided in Section 4.6(a) each
affected Highly Compensated Participant's deferral election made pursuant
to Section 4.2 by an amount necessary to satisfy one of the tests set forth
in Section 4.5(a).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for Plan Years beginning
after December 31, 1996 for the Highly Compensated Participant group shall
not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant group (for the preceding Plan Year if the prior year
testing method is used to calculate the "Actual Contribution
Percentage" for the Non-Highly Compensated Participant group); or
(2) the lesser of 200 percent of such percentage for the Non-
Highly Compensated Participant group (for the preceding Plan Year
if the prior year testing method is used to calculate the "Actual
Contribution Percentage" for the Non-Highly Compensated
Participant group), or such percentage for the Non-Highly
Compensated Participant group (for the preceding Plan Year if the
prior year testing method is used to calculate the "Actual
Contribution Percentage" for the Non-Highly Compensated
Participant group) plus 2 percentage points. However, to prevent
the multiple use of the alternative method described in this
paragraph and Code Section 401(m)(9)(A), any Highly Compensated
Participant eligible to make elective deferrals pursuant to
Section 4.2 or any other cash or deferred arrangement maintained
by the Employer or an Affiliated Employer and to make Employee
contributions or to receive matching contributions under this Plan
or under any plan maintained by the Employer or an Affiliated
Employer shall have a combination of his Elective Contributions
and Employer matching contributions reduced pursuant to Regulation
1.401(m)-2 and Section 4.8(a). The provisions of Code Section
401(m) and Regulations 1.401(m)-1(b) and 1.401(m)-2 are
incorporated herein by reference.
(b) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to the Highly
Compensated Participant group and Non-Highly Compensated
Page 24 of 64
<PAGE>
Participant group (for the preceding Plan Year if the prior year testing
method is used to calculate the "Actual Contribution Percentage" for the
Non-Highly Compensated Participant group), the average of the ratios
(calculated separately for each Participant in each group rounded to the
nearest one-hundredth of one percent) of:
(1) the sum of Employer matching contributions made pursuant to
Section 4.1(b) on behalf of each such Participant for such Plan
Year
(2) the Participant's "414(s) Compensation" for such Plan Year.
Notwithstanding the above, if the prior year testing method is
used to calculate the "Actual Contribution Percentage" for the Non-Highly
Compensated Participant group for the first Plan Year of this amendment and
restatement, for purposes of Section 4.7(a), the "Actual Contribution
Percentage" for the Non-Highly Compensated Participant group for the
preceding Plan Year shall be determined pursuant to the provisions of the
Plan then in effect.
(c) For purposes of determining the "Actual Contribution Percentage",
only Employer matching contributions contributed to the Plan prior to the
end of the succeeding Plan Year shall be considered. In addition, the
Administrator may elect to take into account, with respect to Employees
eligible to have Employer matching contributions pursuant to Section 4.1(b)
allocated to their accounts, elective deferrals (as defined in Regulation
1.402(g)-1(b)) and qualified non-elective contributions (as defined in Code
Section 401(m)(4)(C)) contributed to any plan maintained by the Employer.
Such elective deferrals and qualified non-elective contributions shall be
treated as Employer matching contributions subject to Regulation 1.401(m)-
1(b)(5) which is incorporated herein by reference. However, the Plan Year
must be the same as the plan year of the plan to which the elective
deferrals and the qualified non-elective contributions are made.
(d) For purposes of this Section and Code Sections 401(a)(4), 410(b)
and 401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as one
plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the
average benefits test under Code Section 410(b)(2)(A)(ii)), such plans
shall be treated as one plan. In addition, two or more plans of the
Employer to which matching contributions, Employee contributions, or both,
are made may be considered as a single plan for purposes of determining
whether or not such plans satisfy Code Sections 401(a)(4), 410(b) and
401(m). In such a case, the aggregated plans must satisfy this Section and
Code Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans
were a single plan. Any adjustment to the Non-Highly Compensated
Participant actual contribution ratio for the prior year shall be made in
accordance with Internal Revenue Service Notice 98-1 and any superseding
guidance. Plans may be aggregated under this paragraph (e) only if they
have the same plan year. Notwithstanding the above, for Plan Years
beginning after December 31, 1996, if two or more plans which include cash
or deferred arrangements are permissively aggregated under Regulation
1.410(b)-7(d), all plans permissively aggregated must use either the
current year testing method or the prior year testing method for the
testing year.
Notwithstanding the above, an employee stock ownership plan
described in Code Section 4975(e)(7) or 409 may not be aggregated with this
Plan for purposes of determining whether the employee stock ownership plan
or this Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and
401(m).
(e) If a Highly Compensated Participant is a Participant under two or
more plans (other than an employee stock ownership plan as defined in Code
Section 4975(e)(7) or 409) which are maintained by the Employer or an
Affiliated Employer to which matching contributions, Employee
contributions, or both, are made, all such contributions on behalf of such
Highly Compensated Participant shall be aggregated for purposes of
determining such Highly Compensated Participant's actual contribution
ratio. However, if the plans have different plan years, this paragraph
shall be applied by treating all plans ending with or within the same
calendar year as a single plan.
(f) For purposes of Sections 4.7(a) and 4.8, a Highly Compensated
Participant and
Page 25 of 64
<PAGE>
Non-Highly Compensated Participant shall include any Employee eligible to
have Employer matching contributions (whether or not a deferral election
was made or suspended) or voluntary employee contributions (whether or not
voluntary employee contributions are made) allocated to his account for the
Plan Year.
Notwithstanding the above, if the prior year testing method is
used to calculate the "Actual Contribution Percentage" for the Non-Highly
Compensated Participant group for the first Plan Year of this amendment and
restatement, for the purposes of Section 4.7(a), a Non-Highly Compensated
Participant shall include any such Employee eligible to have Employer
matching contributions (whether or not a deferral election was made or
suspended) or voluntary employee contributions (whether or not voluntary
employee contributions are made) allocated to his account for the preceding
Plan Year pursuant to the provisions of the Plan then in effect.
(g) If the Plan uses the prior year testing method, the "Actual
Contribution Percentage" for the Non-Highly Compensated Participant group
is determined without regard to changes in the group of Non-Highly
Compensated Participants who are eligible under the Plan in the testing
year. However, if the Plan results from, or is otherwise affected by, a
"Plan Coverage Change" that becomes effective during the testing year, then
the "Actual Contribution Percentage" for the Non-Highly Compensated
Participant group for the prior year is the "Weighted Average Of The Actual
Contribution Percentages For The Prior Year Subgroups." Notwithstanding the
above, if ninety (90) percent or more of the total number of Non-Highly
Compensated Participants from all "Prior Year Subgroups" are from a single
"Prior Year Subgroup," then in determining the "Actual Contribution
Percentage" for the Non-Highly Compensated Participants for the prior year,
the Employer may elect to use the "Actual Contribution Percentage" for Non-
Highly Compensated Participants for the prior year under which that single
"Prior Year Subgroup" was eligible, in lieu of using the weighted averages.
For purposes of this Section the following definitions shall apply:
(1) "Plan Coverage Change" means a change in the group or groups
of eligible Participants on account of (i) the establishment or
amendment of a plan, (ii) a plan merger, consolidation, or spinoff
under Code Section 414(l), (iii) a change in the way plans within
the meaning of Code Section 414(l) are combined or separated for
purposes of Regulation 1.401(k)-1(g)(11), or (iv) a combination of
any of the foregoing.
(2) "Prior Year Subgroup" means all Non-Highly Compensated
Participants for the prior year who, in the prior year, were
eligible Participants under a specific Code Section 401(m) plan
maintained by the Employer and who would have been eligible
Participants in the prior year under the plan tested if the plan
coverage change had first been effective as of the first day of
the prior year instead of first being effective during the testing
year.
(3) "Weighted Average Of The Actual Contribution Percentages For
The Prior Year Subgroups" means the sum, for all prior year
subgroups, of the "Adjusted Actual Contribution Percentages."
(4) "Adjusted Actual Contribution Percentage" with respect to a
prior year subgroup means the Actual Contribution Percentage for
Non-Highly Compensated Participants for the prior year of the
specific plan under which the members of the prior year subgroup
were eligible Participants, multiplied by a fraction, the
numerator of which is the number of Non-Highly Compensated
Participants in the prior year subgroup and the denominator of
which is the total number of Non-Highly Compensated Participants
in all prior year subgroups.
(h) For the purpose of this Section, when calculating the "Actual
Contribution Percentage" for the Non-highly Compensated Participant group,
the current year testing method shall be used. Any change from the current
year testing method to the prior year testing method shall be made pursuant
to Internal Revenue Service Notice 98-1, Section vii (or superseding
guidance), the provisions of which are incorporated herein by reference.
Page 26 of 64
<PAGE>
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event (or if it is anticipated) that, for Plan Years
beginning after December 31, 1996, the "Actual Contribution Percentage" for
the Highly Compensated Participant group exceeds (or might exceed) the
"Actual Contribution Percentage" for the Non-Highly Compensated Participant
group pursuant to Section 4.7(a), the Administrator (on or before the
fifteenth day of the third month following the end of the Plan Year, but in
no event later than the close of the following Plan Year) shall direct the
Trustee to distribute to the Highly Compensated Participant having the
largest amount of contributions determined pursuant to Section 4.7(b)(2),
his Vested portion of such contributions (and Income allocable to such
contributions) and, if forfeitable, forfeit such non-Vested Excess
Aggregate Contributions attributable to Employer matching contributions
(and Income allocable to such forfeitures) until the total amount of Excess
Aggregate Contributions has been distributed, or until his remaining amount
equals the amount of contributions determined pursuant to Section 4.7(b)(2)
of the Highly Compensated Participant having the second largest amount of
contributions. This process shall continue until the total amount of Excess
Aggregate Contributions has been distributed.
If the correction of Excess Aggregate Contributions attributable
to Employer matching contributions is not in proportion to the Vested and
non-Vested portion of such contributions, then the Vested portion of the
Participant's Account attributable to Employer matching contributions after
the correction shall be subject to Section 6.5(h).
(b) Any distribution and/or forfeiture of less than the entire amount
of Excess Aggregate Contributions (and Income) shall be treated as a pro
rata distribution and/or forfeiture of Excess Aggregate Contributions and
Income. Distribution of Excess Aggregate Contributions shall be designated
by the Employer as a distribution of Excess Aggregate Contributions (and
Income). Forfeitures of Excess Aggregate Contributions shall be treated in
accordance with Section 4.4.
(c) Excess Aggregate Contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes of
Code Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are reallocated to
Participants' Accounts for the Plan Year in which the forfeiture occurs
shall be treated as an "annual addition" pursuant to Section 4.9(b) for the
Participants to whose Accounts they are reallocated and for the
Participants from whose Accounts they are forfeited.
(d) The determination of the amount of Excess Aggregate Contributions
with respect to any Plan Year shall be made after first determining the
Excess Contributions, if any, to be treated as voluntary Employee
contributions due to recharacterization for the plan year of any other
qualified cash or deferred arrangement (as defined in Code Section 401(k))
maintained by the Employer that ends with or within the Plan Year.
(e) If during a Plan Year the projected aggregate amount of Employer
matching contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth in
Section 4.7(a), cause the Plan to fail such tests, then the Administrator
may automatically reduce proportionately or in the order provided in
Section 4.8(a) each affected Highly Compensated Participant's projected
share of such contributions by an amount necessary to satisfy one of the
tests set forth in Section 4.7(a).
(f) Notwithstanding the above, within twelve (12) months after the
end of the Plan Year, the Employer may make a special Qualified Non-
Elective Contribution on behalf of Non-Highly Compensated Participants in
an amount sufficient to satisfy (or to prevent an anticipated failure of)
one of the tests set forth in Section 4.7(a). Such contribution shall be
allocated to the Participant's Account of Non-Highly Compensated
Participant in the same proportion that each Non-Highly Compensated
Participant's
Page 27 of 64
<PAGE>
Compensation for the Plan Year bears to the total Compensation of all Non-
Highly Compensated Participants for the Plan Year. A separate accounting of
any special Qualified Non-Elective Contribution shall be maintained in the
Participant's Account.
However, if the prior year testing method is used, the special
Qualified Non-Elective Contribution shall be allocated in the prior Plan
Year to the Participant's Account on behalf of each Non-Highly Compensated
Participant who was employed by the Employer on the last day of the prior
Plan Year in the same proportion that each such Non-Highly Compensated
Participant's Compensation for the prior Plan Year bears to the total
Compensation of all such Non-Highly Compensated Participants for the prior
Plan Year. Such contribution shall be made by the Employer prior to the end
of the current Plan Year. A separate accounting of any special Qualified
Non-Elective Contributions shall be maintained in the Participant's
Account.
Notwithstanding the above, for Plan Years beginning after
December 31, 1998, if the testing method changes from the current year
testing method to the prior year testing method, then for purposes of
preventing the double counting of Qualified Non-Elective Contributions for
the first testing year for which the change is effective, any special
Qualified Non-Elective Contribution on behalf of Non-Highly Compensated
Participants used to satisfy the "Actual Deferral Percentage" or "Actual
Contribution Percentage" test under the current year testing method for the
prior year testing year shall be disregarded.
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall equal
the lesser of: (1) $30,000 adjusted annually as provided in Code Section
415(d) pursuant to the Regulations, or (2) twenty-five percent (25%) of the
Participant's "415 Compensation" for such "limitation year." For any short
"limitation year," the dollar limitation in (1) above shall be reduced by a
fraction, the numerator of which is the number of full months in the short
"limitation year" and the denominator of which is twelve (12).
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer contributions, (2) Employee
contributions, (3) forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(l)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit plan (as defined in Code Section 419(e)) maintained by the
Employer. Except, however, the "415 Compensation" percentage limitation
referred to in paragraph (a)(2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as an
"annual addition," or (2) any amount otherwise treated as an "annual
addition" under Code Section 415(l)(1).
(c) For purposes of applying the limitations of Code Section 415, the
transfer of funds from one qualified plan to another is not an "annual
addition." In addition, the following are not Employee contributions for
the purposes of Section 4.9(b)(2): (1) rollover contributions (as defined
in Code Sections 402(e)(6), 403(a)(4), 403(b)(8) and 408(d)(3)); (2)
repayments of loans made to a Participant from the Plan; (3) repayments of
distributions received by an Employee pursuant to Code Section 411(a)(7)(B)
(cash-outs); (4) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(3)(D) (mandatory contributions); and (5)
Employee contributions to a simplified employee pension excludable from
gross income under Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code Section 415, the
"limitation year" shall be the Plan Year.
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(e) For the purpose of this Section, all qualified defined benefit
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined benefit plan, and all qualified defined contribution
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined contribution plan.
(f) For the purpose of this Section, if the Employer is a member of a
controlled group of corporations, trades or businesses under common control
(as defined by Code Section 1563(a) or Code Section 414(b) and (c) as
modified by Code Section 415(h)), is a member of an affiliated service
group (as defined by Code Section 414(m)), or is a member of a group of
entities required to be aggregated pursuant to Regulations under Code
Section 414(o), all Employees of such Employers shall be considered to be
employed by a single Employer.
(g) For the purpose of this Section, if this Plan is a Code Section
413(c) plan, each Employer who maintains this Plan will be considered to be
a separate Employer.
(h)(1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan shall
equal the maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited to such Participant's accounts
during the "limitation year."
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan
not subject to Code Section 412 maintained by the Employer which
have the same Anniversary Date, "annual additions" will be
credited to the Participant's accounts under the defined
contribution plan subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts under the
defined contribution plan not subject to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by
the Employer which have the same Anniversary Date, the maximum
"annual additions" under this Plan shall equal the product of (A)
the maximum "annual additions" for the "limitation year" minus
any "annual additions" previously credited under subparagraphs
(1) or (2) above, multiplied by (B) a fraction (i) the numerator
of which is the "annual additions" which would be credited to
such Participant's accounts under this Plan without regard to the
limitations of Code Section 415 and (ii) the denominator of which
is such "annual additions" for all plans described in this
subparagraph.
(i) For Plan Years commencing prior to January 1, 2000, if an
Employee is (or has been) a Participant in one or more defined benefit
plans and one or more defined contribution plans maintained by the
Employer, the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any "limitation year" may not exceed 1.0.
(j) The defined benefit plan fraction for any "limitation year" is a
fraction, the numerator of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer, and the denominator of which is the
lesser of 125 percent of the dollar limitation determined for the
"limitation year" under Code Sections 415(b) and (d) or 140 percent of the
highest average compensation, including any adjustments under Code Section
415(b).
Notwithstanding the above, if the Participant was a Participant
as of the first day of the first "limitation year" beginning after December
31, 1986, in one or more defined benefit plans maintained by the Employer
which were in existence on May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the annual benefits under
such plans which the Participant had accrued as of the close of the last
"limitation year" beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans individually
and in the aggregate satisfied the requirements of Code Section 415 for all
"limitation years"
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beginning before January 1, 1987.
(k) The defined contribution plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the annual additions to
the Participant's Account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
"limitation years" (including the annual additions attributable to the
Participant's nondeductible Employee contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
annual additions attributable to all welfare benefit funds, as defined in
Code Section 419(e), and individual medical accounts, as defined in Code
Section 415(l)(2), maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior "limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any "limitation year" is the lesser of 125
percent of the dollar limitation determined under Code Sections 415(b) and
(d) in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day
of the first "limitation year" beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an
amount equal to the product of (1) the excess of the sum of the fractions
over 1.0 times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end of
the last "limitation year" beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made after
May 5, 1986, but using the Code Section 415 limitation applicable to the
first "limitation year" beginning on or after January 1, 1987. The annual
addition for any "limitation year" beginning before January 1, 1987 shall
not be recomputed to treat all Employee contributions as annual additions.
(l) Notwithstanding the foregoing, for any "limitation year" in which
the Plan is a Top Heavy Plan, 100 percent shall be substituted for 125
percent in Sections 4.9(j) and 4.9(k).
(m) For Plan Years commencing prior to January 1, 2000, if the sum of
the defined benefit plan fraction and the defined contribution plan
fraction shall exceed 1.0 in any "limitation year" for any Participant in
this Plan, the Administrator shall limit, to the extent necessary, the
"annual additions" to such Participant's accounts for such "limitation
year." If, after limiting the "annual additions" to such Participant's
accounts for the "limitation year," the sum of the defined benefit plan
fraction and the defined contribution plan fraction still exceed 1.0, the
Administrator shall then adjust the numerator of the defined contribution
plan fraction so that the sum of both fractions shall not exceed 1.0 in any
"limitation year" for such Participant.
(n) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed in
this Section shall at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in estimating a
Participant's Compensation, a reasonable error in determining the amount of
elective deferrals (within the meaning of Code Section 402(g)(3)) that may
be made with respect to any Participant under the limits of Section 4.9 or
other facts and circumstances to which Regulation 1.415-6(b)(6) shall be
applicable, the "annual additions" under this Plan would cause the maximum
"annual additions" to be exceeded for any Participant, the Administrator
shall (1) distribute any elective deferrals (within the meaning of Code
Section 402(g)(3)) or return any Employee contributions (whether voluntary
or mandatory), and for the distribution of gains attributable to those
elective deferrals and Employee contributions, to the extent that the
distribution or return would reduce the "excess amount" in the
Participant's accounts (2) hold any "excess amount" remaining after the
return of any elective deferrals
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or voluntary Employee contributions in a "Section 415 suspense account" (3)
use the "Section 415 suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to reduce Employer
contributions for that Participant if that Participant is covered by the
Plan as of the end of the "limitation year," or if the Participant is not
so covered, allocate and reallocate the "Section 415 suspense account" in
the next "limitation year" (and succeeding "limitation years" if necessary)
to all Participants in the Plan before any Employer or Employee
contributions which would constitute "annual additions" are made to the
Plan for such "limitation year" (4) reduce Employer contributions to the
Plan for such "limitation year" by the amount of the "Section 415 suspense
account" allocated and reallocated during such "limitation year."
(b) For purposes of this Article, "excess amount" for any Participant
for a "limitation year" shall mean the excess, if any, of (1) the "annual
additions" which would be credited to his account under the terms of the
Plan without regard to the limitations of Code Section 415 over (2) the
maximum "annual additions" determined pursuant to Section 4.9.
(c) For purposes of this Section, "Section 415 suspense account"
shall mean an unallocated account equal to the sum of "excess amounts" for
all Participants in the Plan during the "limitation year." The "Section 415
suspense account" shall not share in any earnings or losses of the Trust
Fund.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be transferred
from other qualified plans by Eligible Employees, provided that the trust
from which such funds are transferred permits the transfer to be made and
the transfer will not jeopardize the tax exempt status of the Plan or Trust
or create adverse tax consequences for the Employer. The amounts
transferred shall be set up in a separate account herein referred to as a
"Participant's Rollover Account." Such account shall be fully Vested at all
times and shall not be subject to Forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account shall be held by the
Trustee pursuant to the provisions of this Plan and may not be withdrawn
by, or distributed to the Participant, in whole or in part, except as
provided in paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as defined in
Regulation 1.401(k)-1(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a plan-
to-plan transfer shall be subject to the distribution limitations provided
for in Regulation 1.401(k)-1(d).
(d) The Administrator, at the election of the Participant, shall
direct the Trustee to distribute all or a portion of the amount credited to
the Participant's Rollover Account. Any distributions of amounts held in a
Participant's Rollover Account shall be made in a manner which is
consistent with and satisfies the provisions of Section 6.5, including, but
not limited to, all notice and consent requirements of Code Sections 417
and 411(a)(11) and the Regulations thereunder. Furthermore, such amounts
shall be considered as part of a Participant's benefit in determining
whether an involuntary cash-out of benefits without Participant consent may
be made.
(e) The Administrator may direct that employee transfers made after a
Valuation Date be segregated into a separate account for each Participant
in a federally insured savings account, certificate of deposit in a bank or
savings and loan association, money market certificate, or other short term
debt security acceptable to the Trustee until such time as the allocations
pursuant to this Plan have been made, at which time they may remain
segregated or be invested as part of the general Trust Fund, to be
determined by the Administrator.
(f) For purposes of this Section, the term "qualified plan" shall
mean any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts transferred
to this Plan directly from another qualified plan; (ii) distributions from
another qualified plan which are eligible rollover distributions and which
are either transferred by the Employee to
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this Plan within sixty (60) days following his receipt thereof or are
transferred pursuant to a direct rollover; (iii) amounts transferred to
this Plan from a conduit individual retirement account provided that the
conduit individual retirement account has no assets other than assets which
(A) were previously distributed to the Employee by another qualified plan
as a lump-sum distribution (B) were eligible for tax-free rollover to a
qualified plan and (C) were deposited in such conduit individual retirement
account within sixty (60) days of receipt thereof and other than earnings
on said assets; and (iv) amounts distributed to the Employee from a conduit
individual retirement account meeting the requirements of clause (iii)
above, and transferred by the Employee to this Plan within sixty (60) days
of his receipt thereof from such conduit individual retirement account.
(g) Prior to accepting any transfers to which this Section applies,
the Administrator may require the Employee to establish that the amounts to
be transferred to this Plan meet the requirements of this Section and may
also require the Employee to provide an opinion of counsel satisfactory to
the Employer that the amounts to be transferred meet the requirements of
this Section.
(h) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction having
the effect of such a transfer) shall only be permitted if it will not
result in the elimination or reduction of any "Section 411(d)(6) protected
benefit" as described in Section 8.1.
4.12 VOLUNTARY CONTRIBUTIONS
(a) Prior to January 1, 2000, a Participant in the FAB Plan (see
recitals section of this Plan) was allowed to voluntarily contribute a
portion of his compensation earned while a Participant under the FAB Plan.
However, on and after January 1, 2000, no further voluntary contributions
will be allowed. The balance in each Participant's Voluntary Contribution
Account is fully Vested at all times and shall not be subject to Forfeiture
for any reason.
(b) A Participant may elect to withdraw his voluntary contributions
from his Voluntary Contribution Account and the actual earnings thereon in
a manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements of
Code Sections 417 and 411(a)(11) and the Regulations thereunder. If the
Administrator maintains sub-accounts with respect to voluntary
contributions (and earnings thereon) which were made on or before a
specified date, a Participant shall be permitted to designate which sub-
account shall be the source for his withdrawal.
(c) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits, the
fair market value of the Voluntary Contribution Account shall be used to
provide additional benefits to the Participant or his Beneficiary.
4.13 DIRECTED INVESTMENT ACCOUNT
(a) Participants may, subject to a procedure established by the
Administrator (the Participant Direction Procedures) and applied in a
uniform nondiscriminatory manner, direct the Trustee to invest all of their
accounts in specific assets, specific funds or other investments permitted
under the Plan and the Participant Direction Procedures. That portion of
the interest of any Participant so directing will thereupon be considered a
Participant's Directed Account.
(b) As of each Valuation Date, all Participant Directed Accounts
shall be charged or credited with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in the market value
using publicly listed fair market values when available or appropriate.
(1) To the extent that the assets in a Participant's Directed
Account are accounted for as pooled assets or investments, the
allocation of earnings, gains and losses of each Participant's
Directed Account shall be based upon the total amount of funds so
invested, in a manner proportionate to the Participant's share of
such pooled investment.
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(2) To the extent that the assets in the Participant's Directed
Account are accounted for as segregated assets, the allocation of
earnings, gains and losses from such assets shall be made on a
separate and distinct basis.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Valuation Date,
to determine the net worth of the assets comprising the Trust Fund as it exists
on the Valuation Date. In determining such net worth, the Trustee shall value
the assets comprising the Trust Fund at their fair market value as of the
Valuation Date and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Employer or the Trust Fund. The Trustee may
update the value of any shares held in the Participant Directed Account by
reference to the number of shares held by that Participant, priced at the market
value as of the Valuation Date.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust
Fund which are listed on a registered stock exchange, the Administrator shall
direct the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the Valuation Date. If such
securities were not traded on the Valuation Date, or if the exchange on which
they are traded was not open for business on the Valuation Date, then the
securities shall be valued at the prices at which they were last traded prior to
the Valuation Date. Any unlisted security held in the Trust Fund shall be valued
at its bid price next preceding the close of business on the Valuation Date,
which bid price shall be obtained from a registered broker or an investment
banker. In determining the fair market value of assets other than securities for
which trading or bid prices can be obtained, the Trustee may appraise such
assets itself, or in its discretion, employ one or more appraisers for that
purpose and rely on the values established by such appraiser or appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date. However, a
Participant may postpone the termination of his employment with the Employer to
a later date, in which event the participation of such Participant in the Plan,
including the right to receive allocations pursuant to Section 4.4, shall
continue until his Late Retirement Date. Upon a Participant's Retirement Date or
attainment of his Normal Retirement Date without termination of employment with
the Employer, or as soon thereafter as is practicable, the Trustee shall
distribute, at the election of the Participant, all amounts credited to such
Participant's Combined Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or
other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The Administrator
shall direct the Trustee, in accordance with the provisions of Sections 6.6
and 6.7, to distribute the value of the deceased Participant's accounts to
the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator shall
direct the Trustee, in accordance with the provisions of Sections 6.6 and
6.7, to distribute any remaining Vested amounts credited to the accounts of
a deceased Former Participant to such Former Participant's Beneficiary.
(c) Any security interest held by the Plan by reason of an
outstanding loan to the Participant or Former Participant shall be taken
into account in determining the amount of the Pre-Retirement Survivor
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Annuity for GSB/FAB Participants (see Section 6.5) and the death benefit
for all other Participants.
(d) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the value of the
account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(e) Participants other than GSB and FAB Participants. For all
Participants other than GSB/FAB Participants (see Section 6.5), the
Beneficiary of the death benefit payable pursuant to this Section shall be
the Participant's spouse. Except, however, the Participant may designate a
Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the Participant's
Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court
order to such effect (and there is no "qualified domestic
relations order" as defined in Code Section 414(p) which provides
otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
Any consent by the Participant's spouse to waive any rights to
the death benefit must be in writing, must acknowledge the effect
of such waiver, and be witnessed by a Plan representative or a
notary public. Further, the spouse's consent must be irrevocable
and must acknowledge the specific nonspouse Beneficiary.
GSB/FAB Participants. Unless otherwise elected in the manner
prescribed in Section 6.6, a GSB/FAB Participant's spouse (see Section 6.5)
shall receive a death benefit equal to the Pre-Retirement Survivor Annuity.
The GSB/FAB Participant may designate a Beneficiary other than his spouse
to receive that portion of his death benefit which is not payable as a Pre-
Retirement Survivor Annuity. The GSB/FAB Participant may also designate a
Beneficiary other than his spouse to receive the Pre-Retirement Survivor
Annuity but only if:
(1) the GSB/FAB Participant and his spouse have validly waived
the Pre-Retirement Survivor Annuity in the manner prescribed in
Section 6.6, and the spouse has waived his or her right to be the
Participant's Beneficiary, or
(2) the GSB/FAB Participant is legally separated or has been
abandoned (within the meaning of local law) and the Participant
has a court order to such effect (and there is no "qualified
domestic relations order" as defined in Code Section 414(p) which
provides otherwise), or
(3) the GSB/FAB Participant has no spouse, or
(4) the spouse cannot be located.
With respect to all Participants, in the event of a designation
of Beneficiary, the designation shall be made on a form satisfactory to
the Administrator. A Participant may at any time revoke his designation of
a Beneficiary or change his Beneficiary by filing written notice of such
revocation or change with the Administrator. However, the Participant's
spouse must again consent in writing to any change in Beneficiary unless
the original consent acknowledged that the spouse had the right to limit
consent only to a specific Beneficiary and that the spouse voluntarily
elected to relinquish such right. With respect to GSB/FAB Participants,
the consent only applies to that portion of the death benefit that would
otherwise be
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paid as a Pre-Retirement Survivor Annuity. GSB/FAB Participants may, at any
time, designate a Beneficiary to receive death benefits that are in excess
of the Pre-Retirement Survivor Annuity. In the event no valid designation
of Beneficiary exists at the time of the Participant's death, the death
benefit shall be payable to his spouse.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior
to his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Combined Account shall become fully Vested. In
the event of a Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) If a Participant's employment with the Employer is terminated for
any reason other than death, Total and Permanent Disability or retirement,
such Participant shall be entitled to such benefits as are provided
hereinafter pursuant to this Section 6.4.
Distribution of the funds due to a Terminated Participant shall
be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of the
Employer (upon the Participant's death, Total and Permanent Disability or
Normal Retirement). However, at the election of the Participant, the
Administrator shall direct the Trustee to cause the entire Vested portion
of the Terminated Participant's Combined Account to be payable to such
Terminated Participant as soon as administratively feasible. Any
distribution under this paragraph shall be made in a manner which is
consistent with and satisfies the provisions of Section 6.5, including, but
not limited to, all notice and consent requirements of Code Sections 417
and 411(a)(11) and the Regulations thereunder.
If the value of a Terminated Participant's Vested benefit derived
from Employer and Employee contributions does not exceed $5,000 ($3,500 for
Plan Years beginning prior to January 1, 2000) and has never exceeded
$5,000 ($3,500 for Plan Years beginning prior to January 1, 2000) at the
time of any prior distribution, the Administrator shall direct the Trustee
to cause the entire Vested benefit to be paid to such Participant in a
single lump sum.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
Vesting Schedule
Years of Service Percentage
1 20 %
2 40 %
3 60 %
4 80 %
5 100 %
(c) With regard to Participants who were participating in the
Community Bank Plan prior to said plan's merger into this Plan (see
recitals to this Plan) on January 1, 2000, in lieu of the foregoing vesting
schedule, the following vesting schedule shall apply:
Vesting Schedule
Years of Service Percentage
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1 25%
2 50%
3 75%
4 100%
Further, notwithstanding the vesting schedules above, the Vested
percentage of a Participant's Account shall not be less than the Vested
percentage attained as of the later of the effective date or adoption date
of this amendment and restatement.
(d) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer contributions to the Plan or upon any full
or partial termination of the Plan, all amounts credited to the account of
any affected Participant shall become 100% Vested and shall not thereafter
be subject to Forfeiture.
(e) The computation of a Participant's nonforfeitable percentage of
his interest in the Plan shall not be reduced as the result of any direct
or indirect amendment to this Plan. For this purpose, the Plan shall be
treated as having been amended if the Plan provides for an automatic change
in vesting due to a change in top heavy status. In the event that the Plan
is amended to change or modify any vesting schedule, a Participant with at
least three (3) Years of Service as of the expiration date of the election
period may elect to have his nonforfeitable percentage computed under the
Plan without regard to such amendment. If a Participant fails to make such
election, then such Participant shall be subject to the new vesting
schedule. The Participant's election period shall commence on the adoption
date of the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(f)
(1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall
continue to participate in the Plan in the same manner as if such
termination had not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service,
and such Former Participant had received a distribution of his
entire Vested interest prior to his reemployment, his forfeited
account shall be reinstated only if he repays the full amount
distributed to him before the earlier of five (5) years after the
first date on which the Participant is subsequently reemployed by
the Employer or the close of the first period of five (5)
consecutive 1-Year Breaks in Service commencing after the
distribution. In the event the Former Participant does repay the
full amount distributed to him, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by any
gains or losses occurring subsequent to the Valuation Date
coinciding with or preceding his termination. The source for such
reinstatement shall first be any Forfeitures occurring during the
year. If such source is insufficient, then the Employer shall
contribute an amount which is sufficient to restore any such
forfeited Accounts provided, however, that if a discretionary
contribution is made for such year pursuant to Section 4.1(d),
such contribution shall first be applied to restore any such
Accounts and the remainder shall be allocated in accordance with
Section 4.4.
(3) If any Former Participant is reemployed after a 1-Year Break
in Service has
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occurred, Years of Service shall include Years of Service prior
to his 1-Year Break in Service subject to the following rules:
(i) If a Former Participant has a 1-Year Break in
Service, his pre-break and post-break service shall be used
for computing Years of Service for eligibility and for
vesting purposes only after he has been employed for one (1)
Year of Service following the date of his reemployment with
the Employer;
(ii) Any Former Participant who under the Plan does not
have a nonforfeitable right to any interest in the Plan
resulting from Employer contributions shall lose credits
otherwise allowable under (i) above if his consecutive 1-
Year Breaks in Service equal or exceed the greater of (A)
five (5) or (B) the aggregate number of his pre-break Years
of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service,
a Former Participant's Vested Account balance attributable
to pre-break service shall not be increased as a result of
post-break service;
(iv) If a Former Participant is reemployed by the
Employer, he shall participate in the Plan immediately on
his date of reemployment;
(v) If a Former Participant (a 1-Year Break in Service
previously occurred, but employment had not terminated) is
credited with an Hour of Service after the first eligibility
computation period in which he incurs a 1-Year Break in
Service, he shall participate in the Plan immediately.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Participants other than GSB and FAB Plan Participants. With
respect to all Participants other than GSB Plan and FAB Plan Participants
(see recitals of this Plan) and with respect to any Employee hired on or
after January 1, 2000, the Administrator, pursuant to the election of such
Participant, shall direct the Trustee to distribute to such Participant or
Beneficiary any amount to which he is entitled under the Plan in one lump-
sum payment in cash.
GSB Plan Participants. With respect to Participants who were
Participants in the GSB Plan prior to January 1, 2000 (see recitals of this
Plan)("GSB Participants"), unless otherwise elected as provided below, if
such Participant is married on the Annuity Starting Date and does not die
before the Annuity Starting Date, he shall receive the value of all of his
benefits in the form of a joint and survivor annuity. The joint and
survivor annuity is an annuity that commences immediately and shall be
equal in value to a single life annuity. Such joint and survivor benefits
following the GSB Participant's death shall continue to the spouse during
the spouse's lifetime at a rate equal to 50% of the rate at which such
benefits were payable to the GSB Participant. This joint and 50% survivor
annuity shall be considered the designated qualified joint and survivor
annuity and automatic form of payment for the purposes of this Plan.
However, the GSB Participant may elect to receive a smaller annuity benefit
with continuation of payments to the spouse at a rate of seventy-five
percent (75%) of the rate payable to the GSB Participant during his
lifetime, which alternative joint and survivor annuity shall be equal in
value to the automatic joint and 50% survivor annuity. An unmarried GSB
Participant shall receive the value of his benefit in the form of a life
annuity. Such unmarried GSB Participant, however, may elect in writing to
waive the life annuity. The election must comply with the provisions of
this Section as if it were an election to waive the joint and survivor
annuity by a married GSB Participant, but without the spousal consent
requirement. The GSB Participant may elect to have any annuity provided for
in this Section distributed upon the attainment of the "earliest retirement
age" under the Plan. The "earliest retirement age" is the earliest date on
which, under the Plan, the GSB Participant could elect to receive
retirement benefits.
FAB Plan Participants. With respect to Participants who were
Participants in the FAB
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Plan prior to January 1, 2000 (see recitals of this Plan)("FAB
Participants"), unless otherwise elected as provided below, if such FAB
Participant is married on the Annuity Starting Date and does not die before
the Annuity Starting Date, he shall receive the value of all of his
benefits in the form of a joint and survivor annuity. The joint and
survivor annuity is an annuity that commences immediately and shall be
equal in value to a single life annuity. Such joint and survivor benefits
following the FAB Participant's death shall continue to the spouse during
the spouse's lifetime at a rate equal to 50% of the rate at which such
benefits were payable to the FAB Participant. This joint and 50% survivor
annuity shall be considered the designated qualified joint and survivor
annuity and automatic form of payment for the purposes of this Plan.
However, the FAB Participant may elect to receive a smaller annuity benefit
with continuation of payments to the spouse at a rate of one-hundred
percent (100%) of the rate payable to the FAB Participant during his
lifetime, which alternative joint and survivor annuity shall be equal in
value to the automatic joint and 50% survivor annuity. An unmarried FAB
Participant shall receive the value of his benefit in the form of a life
annuity. Such unmarried FAB Participant, however, may elect in writing to
waive the life annuity. The election must comply with the provisions of
this Section as if it were an election to waive the joint and survivor
annuity by a married FAB Participant, but without the spousal consent
requirement. The FAB Participant may elect to have any annuity provided for
in this Section distributed upon the attainment of the "earliest retirement
age" under the Plan. The "earliest retirement age" is the earliest date on
which, under the Plan, the FAB Participant could elect to receive
retirement benefits.
(2) Any election to waive the joint and survivor annuity must be
made by the GSB/FAB Participant in writing during the election
period and be consented to by the GSB/FAB Participant's spouse.
If the spouse is legally incompetent to give consent, the
spouse's legal guardian, even if such guardian is the GSB/FAB
Participant, may give consent. Such election shall designate a
Beneficiary (or a form of benefits) that may not be changed
without spousal consent (unless the consent of the spouse
expressly permits designations by the Participant without the
requirement of further consent by the spouse). Such spouse's
consent shall be irrevocable and must acknowledge the effect of
such election and be witnessed by a Plan representative or a
notary public. Such consent shall not be required if it is
established to the satisfaction of the Administrator that the
required consent cannot be obtained because there is no spouse,
the spouse cannot be located, or other circumstances that may be
prescribed by Regulations. The election made by the GSB/FAB
Participant and consented to by his spouse may be revoked by the
Participant in writing without the consent of the spouse at any
time during the election period. The number of revocations shall
not be limited. Any new election must comply with the
requirements of this paragraph. A former spouse's waiver shall
not be binding on a new spouse.
(3) The election period for GSB/FAB Participants to waive the
joint and survivor annuity shall be the 90 day period ending on
the Annuity Starting Date.
(4) With regard to the election, the Administrator shall provide
to the GSB/FAB Participant no less than 30 days and no more than
90 days before the Annuity Starting Date a written explanation
of:
(i) the terms and conditions of the joint and survivor
annuity,
(ii) the GSB/FAB Participant's right to make, and the
effect of, an election to waive the joint and survivor
annuity,
(iii) the right of the GSB/FAB Participant's spouse to
consent to any election to waive the joint and survivor
annuity, and
(iv) the right of the GSB/FAB Participant to revoke such
election, and the effect of such revocation.
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(5) The Annuity Starting Date for a distribution in a form other
than a qualified joint and survivor annuity may be less than 30
days after receipt of the written explanation described above,
provided that:
(i) the Administrator clearly informs the GSB/FAB
Participant that the Participant has a right to a period of
30 days after receiving the notice to consider whether to
waive the joint and survivor annuity and elect (with spousal
consent) to a form of distribution other than a joint and
survivor annuity,
(ii) the GSB/FAB Participant is permitted to revoke an
affirmative distribution election at least until the Annuity
Starting Date, or, if later, at any time prior to the
expiration of the 7-day period that begins the day after the
explanation of the joint and survivor annuity is provided to
the Participant, and
(iii) the Annuity Starting Date is a date after the date
that the written explanation was provided to the GSB/FAB
Participant.
Notwithstanding the above, the Annuity Starting Date may be
a date prior to the date the written explanation is provided
to the GSB/FAB Participant if the distribution does not
commence until at least 30 days after such written
explanation is provided, subject to the waiver of the 30-day
period as provided for above.
(b) Optional Forms of Benefit for GSB Participants. In the event a
married GSB Participant duly elects pursuant to paragraph (a)(2) above not
to receive his benefit in the form of a joint and survivor annuity, or if
such GSB Participant is not married, in the form of a life annuity, the
Administrator, pursuant to the election of the GSB Participant, shall
direct the Trustee to distribute to a Participant or his Beneficiary any
amount to which he is entitled under the Plan in one of the following forms
of distribution, as elected by the GSB Participant (or Beneficiary, if
applicable):
(i) one lump-sum payment in cash;
(ii) payments over a period certain in monthly, quarterly,
semiannual, or annual cash installments. In order to provide such
installment payments, the Administrator may (A) segregate the
aggregate amount thereof in a separate, federally insured savings
account, certificate of deposit in a bank or savings and loan
association, money market certificate or other liquid short-term
security or (B) purchase a nontransferable annuity contract for a
term certain (with no life contingencies).
Optional Forms of Benefit for FAB Participants. In the event a
married FAB Participant duly elects pursuant to paragraph (a)(2) above not
to receive his benefit in the form of a joint and survivor annuity, or if
such FAB Participant is not married, in the form of a life annuity, the
Administrator, pursuant to the election of the FAB Participant, shall
direct the Trustee to distribute to a Participant or his Beneficiary any
amount to which he is entitled under the Plan in one of the following forms
of distribution, as elected by the FAB Participant (or Beneficiary, if
applicable):
(i) one lump-sum payment in cash;
(ii) payments over a period certain in monthly, quarterly,
semiannual, or annual cash installments. In order to provide such
installment payments, the Administrator may (A) segregate the
aggregate amount thereof in a separate, federally insured savings
account, certificate of deposit in a bank or savings and loan
association, money market certificate or other liquid short-term
security or (B) purchase a nontransferable annuity contract for a
term certain (with no life contingencies).
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<PAGE>
(iii) straight life annuity;
(iv) single life annuity with periods certain of five (5), ten
(10) or fifteen (15) years;
(v) single life annuity with installment referral;
(vi) fixed period annuity for period of months less than sixty
(60).
(c) The present value of a GSB/FAB Participant's joint and survivor
annuity derived from Employer and Employee contributions may not be paid
without his written consent if the value exceeds, or has ever exceeded,
$5,000 ($3,500 for Plan Years beginning prior to January 1, 2000) at the
time of any prior distribution. Further, the spouse of a GSB/FAB
Participant must consent in writing to any immediate distribution. Any
written consent required by this Section 6.5(c) must be obtained not more
than 90 days before commencement of the distribution and shall be made in a
manner consistent with Section 6.5(a)(2).
If the value of the Participant's benefit derived from Employer
and Employee contributions does not exceed $5,000 ($3,500 for Plan Years
beginning prior to January 1, 2000) and has never exceeded $5,000 ($3,500
for Plan Years beginning prior to January 1, 2000) at the time of any prior
distribution, the Administrator may immediately distribute such benefit
without such Participant's consent. With respect to GSB/FAB Participants,
no distribution may be made under the preceding sentence after the Annuity
Starting Date unless the Participant and his spouse consent in writing to
such distribution.
(d) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $5,000 ($3,500 for Plan Years beginning
prior to January 1, 2000) at the time of any prior distribution shall
require such Participant's consent if such distribution commences prior to
the later of his Normal Retirement Age or age 62. With regard to this
required consent:
(1) With respect to GSB/FAB Participants, no consent shall be
valid unless the Participant has received a general description
of the material features and an explanation of the relative
values of the optional forms of benefit available under the Plan
that would satisfy the notice requirements of Code Section 417.
(2) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent,
it shall be deemed an election to defer the commencement of
payment (or distribution, as applicable) of any benefit. However,
any election to defer the receipt of benefits shall not apply
with respect to distributions which are required under Section
6.5(e).
(3) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the
Annuity Starting Date (or the date distribution commences, as
applicable).
Notwithstanding the above, the Annuity Starting Date may be a
date prior to the date the explanation is provided to the GSB/FAB
Participant if the distribution does not commence until at least
30 days after such explanation is provided, subject to the waiver
of the 30-day period as provided for in Section 6.5(a)(5).
(4) Consent of the Participant to the distribution must not be
made before the Participant receives the notice and must not be
made more than 90 days before the Annuity Starting Date (or the
date distribution commences, as applicable).
(5) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to
the distribution.
Any such distribution may commence less than 30 days, (with respect to
GSB/FAB Participants,
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<PAGE>
subject to Section 6.5(a)(5)), after the notice required under Regulation
1.411(a)-11(c) is given, provided that: (1) the Administrator clearly
informs the Participant that the Participant has a right to a period of at
least 30 days after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable, a particular
distribution option), and (2) the Participant, after receiving the notice,
affirmatively elects a distribution.
(e) Notwithstanding any provision in the Plan to the contrary, for
Plan Years beginning after December 31, 1996, the distribution of a
Participant's benefits, whether under the Plan or through the purchase of
an annuity contract, shall be made in accordance with the following
requirements and shall otherwise comply with Code Section 401(a)(9) and the
Regulations thereunder (including Regulation 1.401(a)(9)-2), the provisions
of which are incorporated herein by reference:
(1) A Participant's benefits shall be distributed or must begin
to be distributed to him not later than April 1st of the calendar
year following the later of (i) the calendar year in which the
Participant attains age 70 1/2 or (ii) the calendar year in which
the Participant retires, provided, however, that this clause (ii)
shall not apply in the case of a Participant who is a "five (5)
percent owner" at any time during the Plan Year ending with or
within the calendar year in which such owner attains age 70 1/2.
Such distributions shall be equal to or greater than any required
distribution.
Alternatively, if the distribution is to be in the form of a
joint and survivor annuity or single life annuity as provided in
paragraph (a)(1) above, then distributions must begin no later
than the applicable April 1st as determined under the preceding
paragraph and must be made over the life of the Participant (or
the lives of the Participant and the Participant's designated
Beneficiary) in accordance with Regulations.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
(3) With respect to Participants who were Participants in the
FAB Plan prior to said plan's merger into this Plan (see recitals
to this Plan) on January 1, 2000, such Participants shall be
allowed choose to receive minimum distributions on the April 1 of
the calendar year following the calendar year in which said
Participant attained age 70 1/2. However, the foregoing election
is only applicable to those Participants in the FAB Plan who were
entitled to minimum distributions in the 1998 and 1999 Plan
Years.
(f) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse (other than in the case of a life
annuity) may, at the election of the Participant or the Participant's
spouse, be redetermined in accordance with Regulations. The election, once
made, shall be irrevocable. If no election is made by the time
distributions must commence, then the life expectancy of the Participant
and the Participant's spouse shall not be subject to recalculation. Life
expectancy and joint and last survivor expectancy shall be computed using
the return multiples in Tables V and VI of Regulation 1.72-9.
(g) All annuity Contracts under this Plan shall be non-transferable
when distributed. Furthermore, the terms of any annuity Contract purchased
and distributed to a Participant or spouse shall comply with all of the
requirements of the Plan.
(h) If a distribution is made at a time when a Participant is not
fully Vested in his Participant's Account and the Participant may increase
the Vested percentage in such account:
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
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<PAGE>
(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X") determined
by the formula:
X equals P(AB plus R x D)) - R x D)
For purposes of applying the formula: P is the Vested percentage
at the relevant time, AB is the account balance at the relevant
time, D is the amount of distribution, and R is the ratio of the
account balance at the relevant time to the account balance after
distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Participants other than GSB/FAB Participants. The death benefit
payable pursuant to Section 6.2 shall be paid to the Participant's
Beneficiary in one lump-sum payment in cash subject to the rules of Section
6.5.
GSB/FAB Participants. Unless otherwise elected as provided
below, a Vested GSB/FAB Participant (see Section 6.5) who dies before the
Annuity Starting Date and who has a surviving spouse shall have the Pre-
Retirement Survivor Annuity paid to his surviving spouse. The GSB/FAB
Participant's spouse may direct that payment of the Pre-Retirement Survivor
Annuity commence within a reasonable period after the Participant's death.
If the spouse does not so direct, payment of such benefit will commence at
the time the Participant would have attained the later of his Normal
Retirement Age or age 62. However, the spouse may elect a later
commencement date. Any distribution to the Participant's spouse shall be
subject to the rules specified in Section 6.6(g).
(b) Any election by an GSB/FAB Participant to waive the Pre-
Retirement Survivor Annuity before the Participant's death must be made by
the Participant in writing during the election period and shall require the
spouse's irrevocable consent in the same manner provided for in Section
6.5(a)(2). Further, the spouse's consent must acknowledge the specific
nonspouse Beneficiary. Notwithstanding the foregoing, the nonspouse
Beneficiary need not be acknowledged, provided the consent of the spouse
acknowledges that the spouse has the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elects to relinquish
such right.
(c) The election period for a GSB/FAB Participant to waive the Pre-
Retirement Survivor Annuity shall begin on the first day of the Plan Year
in which the GSB/FAB Participant attains age 35 and end on the date of the
Participant's death. An earlier waiver (with spousal consent) may be made
provided a written explanation of the Pre-Retirement Survivor Annuity is
given to the GSB/FAB Participant and such waiver becomes invalid at the
beginning of the Plan Year in which the Participant turns age 35. In the
event a Vested GSB/FAB Participant separates from service prior to the
beginning of the election period, the election period shall begin on the
date of such separation from service.
(d) With regard to the election to waive the Pre-Retirement Survivor
Annuity by GSB/FAB Participants, the Administrator shall provide each
Participant within the applicable period, with respect to such Participant
(and consistent with Regulations), a written explanation of the Pre-
Retirement Survivor Annuity containing comparable information to that
required pursuant to Section 6.5(a)(4). For the purposes of this paragraph,
the term "applicable period" means, with respect to a Participant,
whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan Year in
which the GSB/FAB Participant attains age 32 and ending with the
close of the Plan Year preceding the Plan Year in which the
Participant attains age 35;
(2) A reasonable period after the individual becomes a GSB/FAB
Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retirement Survivor Annuity with
respect to the GSB/FAB Participant;
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(4) A reasonable period ending after Code Section 401(a)(11)
applies to the GSB/FAB Participant; or
(5) A reasonable period after separation from service in the
case of a GSB/FAB Participant who separates before attaining age
35. For this purpose, the Administrator must provide the
explanation beginning one year before the separation from service
and ending one year after such separation. If such a Participant
thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
For purposes of applying this Section 6.6(d), a reasonable period
ending after the enumerated events described in paragraphs (2), (3) and (4)
is the end of the two year period beginning one year prior to the date the
applicable event occurs, and ending one year after that date.
(e) If the aggregate value of the Participant's account balance
derived from Employer and Employee contributions does not exceed $5,000
($3,500 for Plan Years beginning prior to January 1, 2000) and has never
exceeded $5,000 ($3,500 for Plan Years beginning prior to January 1, 2000)
at the time of any prior distribution, the Administrator shall direct the
immediate distribution of the present value of the Pre-Retirement Survivor
Annuity to the Participant's spouse. No distribution may be made under the
preceding sentence after the Annuity Starting Date unless the spouse
consents in writing. If the value exceeds, or has ever exceeded, $5,000
($3,500 for Plan Years beginning prior to January 1, 2000) at the time of
any prior distribution, an immediate distribution of the entire amount of
the Pre-Retirement Survivor Annuity may be made to the surviving spouse,
provided such surviving spouse consents in writing to such distribution.
Any written consent required under this paragraph must be obtained not more
than 90 days before commencement of the distribution and shall be made in a
manner consistent with Section 6.5(a)(2).
(f)
(1) Participants other than GSB/FAB Participants. With respect
to Participants other than GSB/FAB Participants, the death
benefit is to be paid to the Participant's Beneficiary in one
lump sum payment in cash.
GSB Participants. To the extent the death benefit is not paid in
the form of a Pre-Retirement Survivor Annuity, it shall be paid
to the GSB Participant's Beneficiary by any of the following
methods, as elected by the Participant (or if no election has
been made prior to the Participant's death, by his Beneficiary),
subject to the rules specified in Section 6.5:
(i) One lump-sum payment in cash;
(ii) Payment in monthly, quarterly, semi-annual, or annual
cash installments over a period to be determined by the GSB
Participant or his Beneficiary. After periodic installments
commence, the Beneficiary shall have the right to direct the
Trustee to reduce the period over which such periodic
installments shall be made, and the Trustee shall adjust the
cash amount of such periodic installments accordingly.
FAB Participants. To the extent the death benefit is not paid in
the form of a Pre-Retirement Survivor Annuity, it shall be paid
to the FAB Participant's Beneficiary by any of the following
methods, as elected by the Participant (or if no election has
been made prior to the Participant's death, by his Beneficiary),
subject to the rules specified in Section 6.5:
(i) One lump-sum payment in cash;
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<PAGE>
(ii) Payment in monthly, quarterly, semi-annual, or annual
cash installments over a period to be determined by the FAB
Participant or his Beneficiary. After periodic installments
commence, the Beneficiary shall have the right to direct the
Trustee to reduce the period over which such periodic
installments shall be made, and the Trustee shall adjust the
cash amount of such periodic installments accordingly.
(iii) straight life annuity;
(iv) single life annuity with periods certain of five (5),
ten (10) or fifteen (15) years;
(v) single life annuity with installment referral;
(vi) fixed period annuity for period of months less than
sixty (60).
(2) In the event the death benefit payable pursuant to Section
6.2 is payable in installments, then, upon the death of the
Participant, the Administrator may direct the Trustee to
segregate the death benefit into a separate account, and the
Trustee shall invest such segregated account separately, and the
funds accumulated in such account shall be used for the payment
of the installments.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in accordance
with the following requirements and shall otherwise comply with Code
Section 401(a)(9) and the Regulations thereunder. If it is determined
pursuant to Regulations that the distribution of a Participant's interest
has begun and the Participant dies before his entire interest has been
distributed to him, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of distribution
selected pursuant to Section 6.5 as of his date of death. If a Participant
dies before he has begun to receive any distributions of his interest under
the Plan or before distributions are deemed to have begun pursuant to
Regulations, then his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, in the event that the Participant's spouse (determined
as of the date of the Participant's death) is his Beneficiary, then in lieu
of the preceding rules, distributions must be made over the life of the
spouse (or over a period not extending beyond the life expectancy of the
spouse) and must commence on or before the later of: (1) December 31st of
the calendar year immediately following the calendar year in which the
Participant died; or (2) December 31st of the calendar year in which the
Participant would have attained age 70 1/2. If the surviving spouse dies
before distributions to such spouse begin, then the 5-year distribution
requirement of this Section shall apply as if the spouse was the
Participant.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to
make a distribution or to commence a series of payments the distribution may be
made or begun as soon as is practicable. However, unless a Former Participant
elects in writing to defer the receipt of benefits (such election may not result
in a death benefit that is more than incidental), the payment of benefits shall
begin not later than the 60th day after the close of the Plan Year in which the
latest of the following events occurs: (a) the date on which the Participant
attains the earlier of age 65 or the Normal Retirement Age specified herein; (b)
the 10th anniversary of the year in which the Participant commenced
participation in the Plan; or (c) the date the Participant terminates his
service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors
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Act or Gift to Minors Act, if such is permitted by the laws of the state in
which said Beneficiary resides. Such a payment to the legal guardian, custodian
or parent of a minor Beneficiary shall fully discharge the Trustee, Employer,
and Plan from further liability on account thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to
a Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored
unadjusted for earnings or losses.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of 59 1/2
years, the Administrator, at the election of the Participant, shall direct the
Trustee to distribute all or a portion of the Vested amount then credited to the
accounts maintained on behalf of the Participant.
Notwithstanding the above, Participants who were Participants in the
GSB Plan (see recitals to this Plan) prior to said plans's merger into this Plan
on January 1, 2000, shall have the right to withdraw all or a portion of the
Vested amount then credited to the accounts maintained on behalf of said
Participants which are attributable to Employer Non-Elective Contributions
(including earnings thereon) regardless of the age of the Participant so long as
the Participant is one-hundred percent (100%) Vested and such contributions have
been in the Participant's account for at least two (2) years.
In the event that the Administrator makes a distribution pursuant to
this Section 6.10, the Participant shall continue to be eligible to participate
in the Plan on the same basis as any other Employee. Any distribution made
pursuant to this Section shall be made in a manner consistent with Section 6.5,
including, but not limited to, all notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations thereunder.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant, shall
direct the Trustee to distribute to any Participant in any one Plan Year up
to the lesser of 100% of his Participant's Elective Account valued as of
the last Valuation Date or the amount necessary to satisfy the immediate
and heavy financial need of the Participant. Any distribution made pursuant
to this Section shall be deemed to be made as of the first day of the Plan
Year or, if later, the Valuation Date immediately preceding the date of
distribution, and the Participant's Elective Account shall be reduced
accordingly. Withdrawal under this Section is deemed to be on account of an
immediate and heavy financial need of the Participant if the withdrawal is
for:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of his
dependents (as defined in Code Section 152) or necessary for
these persons to obtain medical care;
(2) The costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);
(3) Payment of tuition, related educational fees, and room and
board expenses for the next twelve (12) months of post-secondary
education for the Participant, his spouse, children, or
dependents; or
(4) Payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
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(b) No distribution shall be made pursuant to this Section unless the
Administrator, based upon the Participant's representation and such other
facts as are known to the Administrator, determines that all of the
following conditions are satisfied:
(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant. The amount
of the immediate and heavy financial need may include any amounts
necessary to pay any federal, state, or local income taxes or
penalties reasonably anticipated to result from the distribution;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by the
Employer;
(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and voluntary
Employee contributions will be suspended for at least twelve (12)
months after receipt of the hardship distribution or, the
Participant, pursuant to a legally enforceable agreement, will
suspend his elective deferrals to the Plan and all other plans
maintained by the Employer for at least twelve (12) months after
receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may not make elective deferrals for
the Participant's taxable year immediately following the taxable
year of the hardship distribution in excess of the applicable
limit under Code Section 402(g) for such next taxable year less
the amount of such Participant's elective deferrals for the
taxable year of the hardship distribution.
(c) Notwithstanding the above, distributions from the Participant's
Elective Account pursuant to this Section shall be limited, as of the date
of distribution, to the Participant's Elective Account as of the end of the
last Plan Year ending before July 1, 1989, plus the total Participant's
Deferred Compensation after such date, reduced by the amount of any
previous distributions pursuant to this Section and Section 6.10.
(d) Any distribution made pursuant to this Section shall be made in a
manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements of
Code Sections 417 and 411(a)(11) and the Regulations thereunder.
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to any
"alternate payee" under a "qualified domestic relations order." Furthermore, a
distribution to an "alternate payee" shall be permitted if such distribution is
authorized by a "qualified domestic relations order," even if the affected
Participant has not separated from service and has not reached the "earliest
retirement age" under the Plan. For the purposes of this Section, "alternate
payee," "qualified domestic relations order" and "earliest retirement age" shall
have the meaning set forth under Code Section 414(p).
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
(a) The Trustee shall have the following categories of
responsibilities:
(1) Consistent with the "funding policy and method" determined
by the Employer, to invest, manage, and control the Plan assets
subject, however, to the direction of a Participant with respect
to his Participant Directed Accounts, the Employer or an
Investment Manager appointed by the Employer or any agent of the
Employer;
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(2) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the
event of their death, to their Beneficiaries; and
(3) To maintain records of receipts and disbursements and
furnish to the Employer and/or Administrator for each Plan Year a
written annual report per Section 7.7.
(b) In the event that the Trustee shall be directed by a Participant
(pursuant to the Participant Direction Procedures), or the Employer, or an
Investment Manager or other agent appointed by the Employer with respect to
the investment of any or all Plan assets, the Trustee shall have no
liability with respect to the investment of such assets, but shall be
responsible only to execute such investment instructions as so directed.
(1) The Trustee shall be entitled to rely fully on the written
instructions of a Participant (pursuant to the Participant
Direction Procedures), or the Employer, or any Fiduciary or
nonfiduciary agent of the Employer, in the discharge of such
duties, and shall not be liable for any loss or other liability,
resulting from such direction (or lack of direction) of the
investment of any part of the Plan assets.
(2) The Trustee may delegate the duty to execute such
instructions to any nonfiduciary agent, which may be an affiliate
of the Trustee or any Plan representative.
(3) The Trustee may refuse to comply with any direction from the
Participant in the event the Trustee, in its sole and absolute
discretion, deems such directions improper by virtue of
applicable law. The Trustee shall not be responsible or liable
for any loss or expense which may result from the Trustee's
refusal or failure to comply with any directions from the
Participant.
(4) Any costs and expenses related to compliance with the
Participant's directions shall be borne by the Participant's
Directed Account, unless paid by the Employer.
(c) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the
Trust Fund invested without distinction between principal and income and in
such securities or property, real or personal, wherever situated, as the
Trustee shall deem advisable, including, but not limited to, stocks, common
or preferred, bonds and other evidences of indebtedness or ownership, and
real estate or any interest therein. The Trustee shall at all times in
making investments of the Trust Fund consider, among other factors, the
short and long-term financial needs of the Plan on the basis of information
furnished by the Employer. In making such investments, the Trustee shall
not be restricted to securities or other property of the character
expressly authorized by the applicable law for trust investments; however,
the Trustee shall give due regard to any limitations imposed by the Code or
the Act so that at all times the Plan may qualify as a qualified Profit
Sharing Plan and Trust.
(b) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which the
duties of such bank or trust company shall be of a custodial, clerical and
record-keeping nature.
(c) The Trustee may from time to time transfer to a common,
collective, pooled trust fund or money market fund maintained by any
corporate Trustee or affiliate thereof hereunder, all or such part of the
Trust Fund as the Trustee may deem advisable, and such part or all of the
Trust Fund so transferred shall be subject to all the terms and provisions
of the common, collective, pooled trust fund or money market fund which
contemplate the commingling for investment purposes of such trust assets
with trust assets of other trusts. The Trustee may transfer any part of the
Trust Fund intended for temporary investment of cash
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balances to a money market fund maintained by National Bank of Commerce of
Birmingham or its affiliates. The Trustee may, from time to time, withdraw
from such common, collective, pooled trust fund or money market fund all or
such part of the Trust Fund as the Trustee may deem advisable.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common
law, statutory authority, including the Act, and other provisions of the Plan,
shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other property
and to retain the same. In conjunction with the purchase of securities,
margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to purchase,
or otherwise dispose of any securities or other property held by the
Trustee, by private contract or at public auction. No person dealing with
the Trustee shall be bound to see to the application of the purchase money
or to inquire into the validity, expediency, or propriety of any such sale
or other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights or
other options, and to make any payments incidental thereto; to oppose, or
to consent to, or otherwise participate in, corporate reorganizations or
other changes affecting corporate securities, and to delegate discretionary
powers, and to pay any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to stocks,
bonds, securities, or other property. However, the Trustee shall not vote
proxies relating to securities for which it has not been assigned full
investment management responsibilities. In those cases where another party
has such investment authority or discretion, the Trustee will deliver all
proxies to said party who will then have full responsibility for voting
those proxies;
(d) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's nominees,
and to hold any investments in bearer form, but the books and records of
the Trustee shall at all times show that all such investments are part of
the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any part,
of the Trust Fund; and no person lending money to the Trustee shall be
bound to see to the application of the money lent or to inquire into the
validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash balances
as the Trustee may, from time to time, deem to be in the best interests of
the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as Trustee
hereunder, whether or not such securities or other property would normally
be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Plan, to commence or defend
suits or legal or administrative proceedings, and to represent the Plan in
all suits and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their reasonable
expenses and
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compensation, and such agent or counsel may or may not be agent or counsel
for the Employer;
(k) To apply for and procure from responsible insurance companies, to
be selected by the Administrator, as an investment of the Trust Fund such
annuity, or other Contracts (on the life of any Participant) as the
Administrator shall deem proper; to exercise, at any time or from time to
time, whatever rights and privileges may be granted under such annuity, or
other Contracts; to collect, receive, and settle for the proceeds of all
such annuity or other Contracts as and when entitled to do so under the
provisions thereof;
(l) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To invest in shares of investment companies registered under the
Investment Company Act of 1940, including any money market fund advised by
or offered through National Bank of Commerce of Birmingham;
(o) To sell, purchase and acquire put or call options if the options
are traded on and purchased through a national securities exchange
registered under the Securities Exchange Act of 1934, as amended, or, if
the options are not traded on a national securities exchange, are
guaranteed by a member firm of the New York Stock Exchange;
(p) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time, with
assets belonging to any other qualified employee pension benefit trust
created by the Employer or an affiliated company of the Employer, and to
commingle such assets and make joint or common investments and carry joint
accounts on behalf of this Plan and such other trust or trusts, allocating
undivided shares or interests in such investments or accounts or any pooled
assets of the two or more trusts in accordance with their respective
interests;
(r) To appoint a nonfiduciary agent or agents to assist the Trustee
in carrying out any investment instructions of Participants and of any
Investment Manager or Fiduciary, and to compensate such agent(s) from the
assets of the Plan, to the extent not paid by the Employer;
(s) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem
necessary to carry out the purposes of the Plan.
7.4 LOANS TO PARTICIPANTS (PRIOR TO JANUARY 1, 2000)
(a) Prior to January 1, 2000, loans were allowed to be made to
Participants in the FAB Plan (see recitals of this Plan). However, on and
after January 1, 2000, no further loans will be allowed to any Participant.
The following provisions apply to the loans made prior to January 1, 2000.
The Trustee may, in the Trustee's discretion, make loans to
Participants and Beneficiaries under the following circumstances: (1) loans
shall be made available to all Participants and Beneficiaries on a
reasonably equivalent basis; (2) loans shall not be made available to
Highly Compensated Employees in an amount greater than the amount made
available to other Participants and Beneficiaries; (3) loans shall bear a
reasonable rate of interest; (4) loans shall be adequately secured; and (5)
shall provide for repayment over a reasonable period of time.
(b) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the Participant)
shall be limited to the lesser of:
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(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date on
which such loan is made, over the outstanding balance of loans
from the Plan to the Participant on the date on which such loan
was made, or
(2) one-half (1/2) of the present value of the non-forfeitable
accrued benefit of the Participant under the Plan.
For purposes of this limit, all plans of the Employer shall be
considered one plan.
(c) Loans shall provide for level amortization with payments to be
made not less frequently than quarterly over a period not to exceed five
(5) years. However, loans used to acquire any dwelling unit which, within a
reasonable time, is to be used (determined at the time the loan is made) as
a principal residence of the Participant shall provide for periodic
repayment over a reasonable period of time that may exceed five (5) years.
For this purpose, a principal residence has the same meaning as a principal
residence under Code Section 1034. Loan repayments will be suspended under
this Plan as permitted under Code Section 414(u)(4).
(d) Any loan made pursuant to this Section where the Vested interest
of the Participant is used to secure such loan shall require the written
consent of the Participant's spouse in a manner consistent with Section
6.5(a)(1). Such written consent must be obtained within the 90-day period
prior to the date the loan is made. However, no spousal consent shall be
required under this paragraph if the total accrued benefit subject to the
security is not in excess of $5,000 ($3,500 for Plan Years beginning prior
to January 1, 2000).
(e) Any loans granted or renewed shall be made pursuant to a
Participant loan program. Such loan program shall be established in writing
and must include, but need not be limited to, the following:
(1) the identity of the person or positions authorized to
administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of loans
offered;
(5) the procedure under the program for determining a reasonable
rate of interest;
(6) the types of collateral which may secure a Participant loan;
and
(7) the events constituting default and the steps that will be
taken to preserve Plan assets.
Such Participant loan program shall be contained in a
separate written document which, when properly executed, is hereby
incorporated by reference and made a part of the Plan. Furthermore,
such Participant loan program may be modified or amended in writing
from time to time without the necessity of amending this Section.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to
time, in accordance with the terms of the Plan, make payments out of the Trust
Fund. The Trustee shall not be responsible in any way for the application of
such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
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The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and the Trustee. An
individual serving as Trustee who already receives full-time pay from the
Employer shall not receive compensation from the Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including reasonable counsel
fees incurred by it as Trustee. Such compensation and expenses shall be paid
from the Trust Fund unless paid or advanced by the Employer. All taxes of any
kind and all kinds whatsoever that may be levied or assessed under existing or
future laws upon, or in respect of, the Trust Fund or the income thereof, shall
be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary
Date or receipt of the Employer contribution for each Plan Year, the Trustee
shall furnish to the Employer and Administrator a written statement of account
with respect to the Plan Year for which such contribution was made setting
forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales or
other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator
deems appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval
thereof. Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof shall be deemed
an approval thereof. The approval by the Employer of any statement of
account shall be binding as to all matters embraced therein as between the
Employer and the Trustee to the same extent as if the account of the
Trustee had been settled by judgment or decree in an action for a judicial
settlement of its account in a court of competent jurisdiction in which the
Trustee, the Employer and all persons having or claiming an interest in the
Plan were parties; provided, however, that nothing herein contained shall
deprive the Trustee of its right to have its accounts judicially settled if
the Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be required by the Act
and the regulations thereunder for any Plan Year, the Administrator shall
direct the Trustee to engage on behalf of all Participants an independent
qualified public accountant for that purpose. Such accountant shall, after
an audit of the books and records of the Plan in accordance with generally
accepted auditing standards, within a reasonable period after the close of
the Plan Year, furnish to the Administrator and the Trustee a report of his
audit setting forth his opinion as to whether any statements, schedules or
lists that are required by Act Section 103 or the Secretary of Labor to be
filed with the Plan's annual report, are presented fairly in conformity
with generally accepted accounting principles applied consistently. All
auditing and accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the Administrator
as provided in Act Section 103(b) within one hundred twenty (120) days
after the end of the Plan Year or by such other date as may be prescribed
under regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the Employer,
at least thirty (30) days
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before its effective date, a written notice of his resignation.
(b) The Employer may remove the Trustee by mailing by registered or
certified mail, addressed to such Trustee at his last known address, at
least thirty (30) days before its effective date, a written notice of his
removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such successor,
upon accepting such appointment in writing and delivering same to the
Employer, shall, without further act, become vested with all the estate,
rights, powers, discretions, and duties of his predecessor with like
respect as if he were originally named as a Trustee herein. Until such a
successor is appointed, the remaining Trustee or Trustees shall have full
authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to the
death, resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such designation,
the successor shall, without further act, become vested with all the
estate, rights, powers, discretions, and duties of his predecessor with the
like effect as if he were originally named as Trustee herein immediately
upon the death, resignation, incapacity, or removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he shall
furnish to the Employer and Administrator a written statement of account
with respect to the portion of the Plan Year during which he served as
Trustee. This statement shall be either (i) included as part of the annual
statement of account for the Plan Year required under Section 7.7 or (ii)
set forth in a special statement. Any such special statement of account
should be rendered to the Employer no later than the due date of the annual
statement of account for the Plan Year. The procedures set forth in Section
7.7 for the approval by the Employer of annual statements of account shall
apply to any special statement of account rendered hereunder and approval
by the Employer of any such special statement in the manner provided in
Section 7.7 shall have the same effect upon the statement as the Employer's
approval of an annual statement of account. No successor to the Trustee
shall have any duty or responsibility to investigate the acts or
transactions of any predecessor who has rendered all statements of account
required by Section 7.7 and this subparagraph.
7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the
Trustee at the direction of the Administrator shall transfer the Vested
interest, if any, of such Participant in his account to another trust forming
part of a pension, profit sharing or stock bonus plan maintained by such
Participant's new employer and represented by said employer in writing as
meeting the requirements of Code Section 401(a), provided that the trust to
which such transfers are made permits the transfer to be made.
7.11 DIRECT ROLLOVER
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Section, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
that is equal to at least $500 paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(b) For purposes of this Section the following definitions shall
apply:
(1) An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to
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the extent such distribution is required under Code Section
401(a)(9); the portion of any other distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities); any hardship distribution described in Code
Section 401(k)(2)(B)(i)(IV); and any other distribution that is
reasonably expected to total less than $200 during a year.
(2) An eligible retirement plan is an individual retirement
account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity
plan described in Code Section 403(a), or a qualified trust
described in Code Section 401(a), that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p), are distributees with
regard to the interest of the spouse or former spouse.
(4) A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
7.12 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold "qualifying
Employer securities" and "qualifying Employer real property," as those terms are
defined in the Act, provided, however, that the Trustee shall not be permitted
to acquire any qualifying Employer securities or qualifying Employer real
property if, immediately after the acquisition of such securities or property,
the fair market value of all qualifying Employer securities and qualifying
Employer real property held by the Trustee hereunder should amount to more than
100% of the fair market value of all the assets in the Trust Fund.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the Plan,
subject to the limitations of this Section. However, any amendment which
affects the rights, duties or responsibilities of the Trustee and
Administrator, other than an amendment to remove the Trustee or
Administrator, may only be made with the Trustee's and Administrator's
written consent. Any such amendment shall become effective as provided
therein upon its execution. The Trustee shall not be required to execute
any such amendment unless the Trust provisions contained herein are a part
of the Plan and the amendment affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it authorizes or
permits any part of the Trust Fund (other than such part as is required to
pay taxes and administration expenses) to be used for or diverted to any
purpose other than for the exclusive benefit of the Participants or their
Beneficiaries or estates; or causes any reduction in the amount credited to
the account of any Participant; or causes or permits any portion of the
Trust Fund to revert to or become property of the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger, plan
transfer or similar transaction) shall be effective to the extent it
eliminates or reduces any "Section 411(d)(6) protected benefit" or adds or
modifies conditions relating to "Section 411(d)(6) protected benefits" the
result of which is a further restriction on such benefit unless such
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protected benefits are preserved with respect to benefits accrued as of the
later of the adoption date or effective date of the amendment. "Section
411(d)(6) protected benefits" are benefits described in Code Section
411(d)(6)(A), early retirement benefits and retirement-type subsidies, and
optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate the
Plan by delivering to the Trustee and Administrator written notice of such
termination. Upon any full or partial termination, all amounts credited to
the affected Participants' Combined Accounts shall become 100% Vested as
provided in Section 6.4 and shall not thereafter be subject to forfeiture,
and all unallocated amounts shall be allocated to the accounts of all
Participants in accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall direct
the distribution of the assets of the Trust Fund to Participants in a
manner which is consistent with and satisfies the provisions of Section
6.5. Distributions to a Participant shall be made in cash or through the
purchase of irrevocable nontransferable deferred commitments from an
insurer. Except as permitted by Regulations, the termination of the Plan
shall not result in the reduction of "Section 411(d)(6) protected benefits"
in accordance with Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
ARTICLE IX
TOP HEAVY
9.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan
and the special minimum allocation requirements of Code Section 416(c) pursuant
to Section 4.4 of the Plan.
9.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in which,
as of the Determination Date, (1) the Present Value of Accrued Benefits of
Key Employees and (2) the sum of the Aggregate Accounts of Key Employees
under this Plan and all plans of an Aggregation Group, exceeds sixty
percent (60%) of the Present Value of Accrued Benefits and the Aggregate
Accounts of all Key and Non-Key Employees under this Plan and all plans of
an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but
such Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate Account
balance shall not be taken into account for purposes of determining whether
this Plan is a Top Heavy or Super Top Heavy Plan (or whether any
Aggregation Group which includes this Plan is a Top Heavy Group). In
addition, if a Participant or Former Participant has not performed any
services for any Employer maintaining the Plan at any time during the five
year period ending on the Determination Date, any accrued benefit for such
Participant or Former Participant shall not be taken into account for the
purposes of determining whether this Plan is a Top Heavy or Super Top Heavy
Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year in
which, as of the
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Determination Date, (1) the Present Value of Accrued Benefits of Key
Employees and (2) the sum of the Aggregate Accounts of Key Employees under
this Plan and all plans of an Aggregation Group, exceeds ninety percent
(90%) of the Present Value of Accrued Benefits and the Aggregate Accounts
of all Key and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most
recent valuation occurring within a twelve (12) month period
ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of any
contributions actually made after the Valuation Date but due on
or before the Determination Date, except for the first Plan Year
when such adjustment shall also reflect the amount of any
contributions made after the Determination Date that are
allocated as of a date in that first Plan Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4) preceding
Plan Years. However, in the case of distributions made after the
Valuation Date and prior to the Determination Date, such
distributions are not included as distributions for top heavy
purposes to the extent that such distributions are already
included in the Participant's Aggregate Account balance as of the
Valuation Date. Notwithstanding anything herein to the contrary,
all distributions, including distributions under a terminated
plan which if it had not been terminated would have been required
to be included in an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of life
insurance policies) of a Participant's account balance because of
death shall be treated as a distribution for the purposes of this
paragraph.
(4) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified
voluntary employee contributions shall not be considered to be a
part of the Participant's Aggregate Account balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and made
from a plan maintained by one employer to a plan maintained by
another employer), if this Plan provides the rollovers or plan-
to-plan transfers, it shall always consider such rollovers or
plan-to-plan transfers as a distribution for the purposes of this
Section. If this Plan is the plan accepting such rollovers or
plan-to-plan transfers, it shall not consider such rollovers or
plan-to-plan transfers as part of the Participant's Aggregate
Account balance.
(6) with respect to related rollovers and plan-to-plan transfers
(ones either not initiated by the Employee or made to a plan
maintained by the same employer), if this Plan provides the
rollover or plan-to-plan transfer, it shall not be counted as a
distribution for purposes of this Section. If this Plan is the
plan accepting such rollover or plan-to-plan transfer, it shall
consider such rollover or plan-to-plan transfer as part of the
Participant's Aggregate Account balance, irrespective of the date
on which such rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are to
be treated as the same employer in (5) and (6) above, all
employers aggregated under Code Section 414(b), (c), (m) and (o)
are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation Group or
a Permissive
Page 55 of 64
<PAGE>
Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Employer in which a
Key Employee is a participant in the Plan Year containing the
Determination Date or any of the four preceding Plan Years, and
each other plan of the Employer which enables any plan in which a
Key Employee participates to meet the requirements of Code
Sections 401(a)(4) or 410, will be required to be aggregated.
Such group shall be known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No plan in the Required
Aggregation Group will be considered a Top Heavy Plan if the
Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include
any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a
whole, would continue to satisfy the provisions of Code Sections
401(a)(4) and 410. Such group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a
Top Heavy Plan if the Permissive Aggregation Group is a Top Heavy
Group. No plan in the Permissive Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation Group
is not a Top Heavy Group.
(3) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated in
order to determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of
the Employer if it was maintained within the last five (5) years
ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding Plan
Year, or (b) in the case of the first Plan Year, the last day of such Plan
Year.
(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant other
than a Key Employee, shall be as determined using the single accrual method
used for all plans of the Employer and Affiliated Employers, or if no such
single method exists, using a method which results in benefits accruing not
more rapidly than the slowest accrual rate permitted under Code Section
411(b)(1)(C). The determination of the Present Value of Accrued Benefit
shall be determined as of the most recent Valuation Date that falls within
or ends with the 12-month period ending on the Determination Date except as
provided in Code Section 416 and the Regulations thereunder for the first
and second plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as of the
Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under
all defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for
all Participants.
Page 56 of 64
<PAGE>
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
10.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall
be payable out of the Trust Fund to any person (including a Participant or
his Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be void; and no such benefit shall in
any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any such person, nor shall it be subject to
attachment or legal process for or against such person, and the same shall
not be recognized by the Trustee, except to such extent as may be required
by law.
(b) This provision shall not apply to the extent a Participant or
Beneficiary is indebted to the Plan, as a result of a loan from the Plan.
At the time a distribution is to be made to or for a Participant's or
Beneficiary's benefit, such proportion of the amount distributed as shall
equal such loan indebtedness shall be paid by the Trustee to the Trustee or
the Administrator, at the direction of the Administrator, to apply against
or discharge such loan indebtedness. Prior to making a payment, however,
the Participant or Beneficiary must be given written notice by the
Administrator that such loan indebtedness is to be so paid in whole or part
from his Participant's Combined Account. If the Participant or Beneficiary
does not agree that the loan indebtedness is a valid claim against his
Vested Participant's Combined Account, he shall be entitled to a review of
the validity of the claim in accordance with procedures provided in
Sections 2.7 and 2.8.
(c) This provision shall not apply to a "qualified domestic relations
order" defined in Code Section 414(p), and those other domestic relations
orders permitted to be so treated by the Administrator under the provisions
of the Retirement Equity Act of 1984. The Administrator shall establish a
written procedure to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders.
Further, to the extent provided under a "qualified domestic relations
order," a former spouse of a Participant shall be treated as the spouse or
surviving spouse for all purposes under the Plan.
(d) This provision shall not apply to an offset to a Participant's
accrued benefit against an amount that the Participant is ordered or
required to pay the Plan with respect to a judgment, order, or decree
issued, or a settlement entered into, on or after January 1, 2000, in
accordance with Code Sections 401(a)(13)(C) and (D). In a case in which the
survivor annuity requirements of Code Section 401(a)(11) apply with respect
to distributions from the Plan to the Participant, if the Participant has a
spouse at the time at which the offset is to be made:
(1) either such spouse has consented in writing to such offset
and such consent is witnessed by a notary public or
representative of the Plan (or it is established to the
satisfaction of a Plan representative that such consent may not
be obtained by reason of circumstances described in Code Section
417(a)(2)(B)), or an election to waive the right of the spouse to
either a qualified joint and survivor annuity or a qualified pre-
retirement survivor annuity is in effect in accordance with the
requirements of Code Section 417(a),
(2) such spouse is ordered or required in such judgment, order,
decree or settlement to pay an amount to the Plan in connection
with a violation of fiduciary duties, or
Page 57 of 64
<PAGE>
(3) in such judgment, order, decree or settlement, such spouse
retains the right to receive the survivor annuity under a
qualified joint and survivor annuity provided pursuant to Code
Section 401(a)(11)(A)(i) and under a qualified pre-retirement
survivor annuity provided pursuant to Code Section
401(a)(11)(A)(ii).
Page 58 of 64
<PAGE>
10.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the
Act and the laws of the State of Alabama, other than its laws respecting choice
of law, to the extent not preempted by the Act.
10.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
10.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee, the Employer or
the Administrator may be a party, and such claim, suit, or proceeding is
resolved in favor of the Trustee, the Employer or the Administrator, they shall
be entitled to be reimbursed from the Trust Fund for any and all costs,
attorney's fees, and other expenses pertaining thereto incurred by them for
which they shall have become liable.
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by
law, it shall be impossible by operation of the Plan or of the Trust, by
termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive contribution
under a mistake of fact pursuant to Act Section 403(c)(2)(A), the Employer
may demand repayment of such excessive contribution at any time within one
(1) year following the time of payment and the Trustees shall return such
amount to the Employer within the one (1) year period. Earnings of the Plan
attributable to the excess contributions may not be returned to the
Employer but any losses attributable thereto must reduce the amount so
returned.
10.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount not
less than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond, $500,000.
The amount of funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or class to be
covered and their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be handled
during the then current year. The bond shall provide protection to the Plan
against any loss by reason of acts of fraud or dishonesty by the Fiduciary alone
or in connivance with others. The surety shall be a corporate surety company (as
such term is used in Act Section 412(a)(2)), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer, the Administrator, nor the Trustee, nor their
successors shall be responsible for the validity of any Contract issued
hereunder or for the failure on the part of the insurer to make payments
provided by any such Contract, or for the action of any person which may delay
payment or render a Contract null and void or unenforceable in whole or in part.
Page 59 of 64
<PAGE>
10.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
10.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative,
Beneficiary, or to any guardian or committee appointed for such Participant or
Beneficiary in accordance with the provisions of the Plan, shall, to the extent
thereof, be in full satisfaction of all claims hereunder against the Trustee and
the Employer, either of whom may require such Participant, legal representative,
Beneficiary, guardian or committee, as a condition precedent to such payment, to
execute a receipt and release thereof in such form as shall be determined by the
Trustee or Employer.
10.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan or as accepted by or assigned to them pursuant to any
procedure provided under the Plan, including but not limited to any agreement
allocating or delegating their responsibilities, the terms of which are
incorporated herein by reference. In general, unless otherwise indicated herein
or pursuant to such agreements, the Employer shall have the duties specified in
Article II hereof, as the same may be allocated or delegated thereunder,
including but not limited to the responsibility for making the contributions
provided for under Section 4.1; and shall have the authority to appoint and
remove the Trustee and the Administrator; to formulate the Plan's "funding
policy and method"; and to amend or terminate, in whole or in part, the Plan.
The Administrator shall have the responsibility for the administration of the
Plan, including but not limited to the items specified in Article II of the
Plan, as the same may be allocated or delegated thereunder. The Trustee shall
have the responsibility of management and control of the assets held under the
Trust, except to the extent directed pursuant to Article II or with respect to
those assets, the management of which has been assigned to an Investment
Manager, who shall be solely responsible for the management of the assets
assigned to it, all as specifically provided in the Plan and any agreement with
the Trustee. Each named Fiduciary warrants that any directions given,
information furnished, or action taken by it shall be in accordance with the
provisions of the Plan, authorizing or providing for such direction, information
or action. Furthermore, each named Fiduciary may rely upon any such direction,
information or action of another named Fiduciary as being proper under the Plan,
and is not required under the Plan to inquire into the propriety of any such
direction, information or action. It is intended under the Plan that each named
Fiduciary shall be responsible for the proper exercise of its own powers,
duties, responsibilities and obligations under the Plan as specified or
allocated herein. No named Fiduciary shall guarantee the Trust Fund in any
manner against investment loss or depreciation in asset value. Any person or
group may serve in more than one Fiduciary capacity. In the furtherance of their
responsibilities hereunder, the "named Fiduciaries" shall be empowered to
interpret the Plan and Trust and to resolve ambiguities, inconsistencies and
omissions, which findings shall be binding, final and conclusive.
10.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
10.14 APPROVAL BY INTERNAL REVENUE SERVICE
Page 60 of 64
<PAGE>
(a) Notwithstanding anything herein to the contrary, contributions to
this Plan are conditioned upon the initial qualification of the Plan under
Code Section 401. If the Plan receives an adverse determination with
respect to its initial qualification, then the Plan may return such
contributions to the Employer within one year after such determination,
provided the application for the determination is made by the time
prescribed by law for filing the Employer's return for the taxable year in
which the Plan was adopted, or such later date as the Secretary of the
Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except Sections
3.5, 3.6, and 4.1(e), any contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution by the Employer
under the Code and, to the extent any such deduction is disallowed, the
Employer may, within one (1) year following the disallowance of the
deduction, demand repayment of such disallowed contribution and the Trustee
shall return such contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the excess contribution
may not be returned to the Employer, but any losses attributable thereto
must reduce the amount so returned.
10.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
Page 61 of 64
<PAGE>
ARTICLE XI
PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of
the Employer and Trustee, any other corporation or entity, whether an affiliate
or subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the
same Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold
and invest as one Trust Fund all contributions made by Participating
Employers, as well as all increments thereof. However, the assets of the
Plan shall, on an ongoing basis, be available to pay benefits to all
Participants and Beneficiaries under the Plan without regard to the
Employer or Participating Employer who contributed such assets.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer or a
Participating Employer, shall not affect such Participant's rights under
the Plan, and all amounts credited to such Participant's Combined Account
as well as his accumulated service time with the transferor or predecessor,
and his length of participation in the Plan, shall continue to his credit.
(d) All rights and values forfeited by termination of employment
shall inure only to the benefit of the Participants of the Employer or
Participating Employer by which the forfeiting Participant was employed,
except if the Forfeiture is for an Employee whose Employer is an Affiliated
Employer, then said Forfeiture shall inure to the benefit of the
Participants of those Employers who are Affiliated Employers. Should an
Employee of one ("First") Employer be transferred to an associated
("Second") Employer which is an Affiliated Employer, such transfer shall
not cause his account balance (generated while an Employee of "First"
Employer) in any manner, or by any amount to be forfeited. Such Employee's
Participant Combined Account balance for all purposes of the Plan,
including length of service, shall be considered as though he had always
been employed by the "Second" Employer and as such had received
contributions, forfeitures, earnings or losses, and appreciation or
depreciation in value of assets totaling the amount so transferred.
(e) Any expenses of the Trust which are to be paid by the Employer or
borne by the Trust Fund shall be paid by each Participating Employer in the
same proportion that the total amount standing to the credit of all
Participants employed by such Employer bears to the total standing to the
credit of all Participants.
11.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this
Plan; provided, however, that with respect to all of its relations with the
Trustee and Administrator for the purpose of this Plan, each Participating
Employer shall be deemed to have designated irrevocably the Employer as its
agent. Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related to
its adoption of the Plan.
11.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No
Page 62 of 64
<PAGE>
such transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner as
was the Participating Employer from whom the Employee was transferred.
11.5 PARTICIPATING EMPLOYER CONTRIBUTION
Any contribution subject to allocation during each Plan Year shall be
allocated only among those Participants of the Employer or Participating
Employer making the contribution, except if the contribution is made by an
Affiliated Employer, in which event such contribution shall be allocated among
all Participants of all Participating Employers who are Affiliated Employers in
accordance with the provisions of this Plan. On the basis of the information
furnished by the Administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating Employer. The
Trustee may, but need not, register Contracts so as to evidence that a
particular Participating Employer is the interested Employer hereunder, but in
the event of an Employee transfer from one Participating Employer to another,
the employing Employer shall immediately notify the Trustee thereof.
11.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall
be a Participating Employer hereunder shall only be by the written action of
each and every Participating Employer and with the consent of the Trustee where
such consent is necessary in accordance with the terms of this Plan.
11.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or
revoke its participation in the Plan. At the time of any such discontinuance or
revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee. The Trustee shall thereafter
transfer, deliver and assign Contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as shall
have been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees, provided however, that no
such transfer shall be made if the result is the elimination or reduction of any
"Section 411(d)(6) protected benefits" in accordance with Section 8.1(c). If no
successor is designated, the Trustee shall retain such assets for the Employees
of said Participating Employer pursuant to the provisions of Article VII hereof.
In no such event shall any part of the corpus or income of the Trust as it
relates to such Participating Employer be used for or diverted to purposes other
than for the exclusive benefit of the Employees of such Participating Employer.
Page 63 of 64
<PAGE>
11.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary
rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.
IN WITNESS WHEREOF, this Plan has been executed the day and year
first above written.
EMPLOYER
Alabama National BanCorporation
By /s/ John H. Holcomb, III
---------------------------------------
Its Chairman
-----------------------------
ATTEST /s/ Kimberly Moore, Secretary
----------------------------------
TRUSTEE
National Bank of Commerce of Birmingham
By /s/ Fred Murphy
---------------------------------------
Its Vice President and Assistant
-----------------------------
Trust Manager
-----------------------------
ATTEST /s/ Kimberly Moore, Secretary
----------------------------------
Page 64 of 64
<PAGE>
EXHIBIT 11.1
Alabama National BanCorporation
Computation of Earnings Per Share
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Per Share
Income Shares Amount
-------- -------- ----------
<S> <C> <C> <C>
Year ended December 31, 1999
Basic EPS net income.............................................................................. $22,271 11,079 $2.01
=====
Effect of dilutive securities options............................................................. 194
------- ------
Diluted EPS....................................................................................... $22,271 11,273 $1.98
======= ====== =====
Year ended December 31, 1998
Basic EPS net income.............................................................................. $17,372 10,804 $1.61
=====
Effect of dilutive securities options............................................................. 369
-------- -------
Diluted EPS....................................................................................... $17,372 11,173 $1.55
======== ======= ======
Year ended December 31, 1997
Basic EPS net income.............................................................................. $14,116 10,552 $1.34
=====
Effect of dilutive securities options............................................................. 447
------- ------
Diluted EPS....................................................................................... $14,116 10,999 $1.28
======= ====== =====
</TABLE>
<PAGE>
Exhibit 21.1
------------
SUBSIDIARIES OF ANB
Name of Subsidiary State of Organization
National Bank of Commerce of Birmingham.................... National Bank
NBC Securities, Inc............................... Alabama
NBC Investments, Inc.............................. Nevada
NBC Joint Ventures, Inc........................... Alabama
Bank of Dadeville.......................................... Alabama
Ashland Insurance, Inc............................ Alabama
Alabama Exchange Bank...................................... Alabama
Tuskegee Loan Company, Inc........................ Alabama
First Gulf Bank . . . ..................................... Alabama
First Citizens Bank........................................ Alabama
Clay County Finance Company, Inc.................. Alabama
FCB Investments, Inc.............................. Nevada
First American Bank........................................ Alabama
Corporate Billing, Inc............................ Alabama
FAB Investments, Inc.............................. Nevada
Rankin Insurance, Inc............................. Alabama
Citizens & Peoples Bank, National Association.............. National Bank
Public Bank................................................ Florida
Georgia State Bank......................................... Georgia
Community Bank of Naples, National Association............. National Bank
CBN Investments, Inc.............................. Nevada
<PAGE>
Exhibit 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Alabama National BanCorporation (ANB) on Form S-8 (File No. 333-07951), Form
S-8 (File No. 333-27285), Form S-8 (File No. 333-70205), Form S-8 (File No.
333-70207), Form S-8 (File No. 333-70209), Form S-8 (File No. 333-76301), Form
S-8 (File No. 333-76305), Form S-8 (File No. 333-76307), Form S-8 (File No. 333-
76309), Form S-8 (File No. 333-76311), Form S-8 (File No. 333-76303), Form S-8
(File No. 333-76313), Form S-8 (File No. 333-76315) and Form S-8 (File No. 333-
76317), of our report dated January 18, 2000, on our audits of ANB as of
December 31, 1999 and 1998 and for the three years in the period ended December
31, 1999, which report is included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
March 22, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 73,125
<INT-BEARING-DEPOSITS> 6,768
<FED-FUNDS-SOLD> 33,568
<TRADING-ASSETS> 2,701
<INVESTMENTS-HELD-FOR-SALE> 325,507
<INVESTMENTS-CARRYING> 19,616
<INVESTMENTS-MARKET> 19,738
<LOANS> 1,320,160
<ALLOWANCE> 18,068
<TOTAL-ASSETS> 1,921,884
<DEPOSITS> 1,442,155
<SHORT-TERM> 18,389
<LIABILITIES-OTHER> 61,003
<LONG-TERM> 124,005
0
0
<COMMON> 11,187
<OTHER-SE> 127,068
<TOTAL-LIABILITIES-AND-EQUITY> 1,921,884
<INTEREST-LOAN> 102,340
<INTEREST-INVEST> 20,456
<INTEREST-OTHER> 2,872
<INTEREST-TOTAL> 125,668
<INTEREST-DEPOSIT> 47,589
<INTEREST-EXPENSE> 11,694
<INTEREST-INCOME-NET> 66,385
<LOAN-LOSSES> 1,954
<SECURITIES-GAINS> 190
<EXPENSE-OTHER> 62,455
<INCOME-PRETAX> 32,533
<INCOME-PRE-EXTRAORDINARY> 32,533
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,271
<EPS-BASIC> 2.01
<EPS-DILUTED> 1.98
<YIELD-ACTUAL> 7.98
<LOANS-NON> 4,146
<LOANS-PAST> 0
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<LOANS-PROBLEM> 21,200
<ALLOWANCE-OPEN> 16,540
<CHARGE-OFFS> 1,277
<RECOVERIES> 851
<ALLOWANCE-CLOSE> 18,068
<ALLOWANCE-DOMESTIC> 18,068
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 18,068
</TABLE>
