AMENDED AND RESTATED
SALEM TRUST BANK
1986 INCENTIVE STOCK OPTION PLAN
Effective January 9, 1986
SALEM TRUST BANK
1986 INCENTIVE STOCK OPTION PLAN
TABLE OF CONTENTS
Page
Section 1. Purpose 1
Section 2. Administration 1
Section 3. Stock Available for Options 2
Section 4. Nonqualified Options 3
Section 5 Eligibility 3
Section 6. Option Price 4
Section 7. Expiration of Options 5
Section 8. Terms and Conditions of Options 6
Section 9. Exercise of Options 7
Section 10. Termination of Employment -
Except by Death or Retirement 8
Section 11. Termination of Employment -
Retirement 8
Section 12. Termination of Employment -
Death 8
Section 13. Restrictions on Transfer 9
Section 14. Right of Repurchase by the Company 9
Section 15. Capital Adjustments Affecting
Common Stock 9
Section 16. Application of Funds 11
Section 17. No Obligation to Exercise Option 11
Section 18. Term of Plan 11
Section 19. Effective Date of Plan 12
Section 20. Time of Granting of Options 12
Section 21. Termination and Amendment 12
Section 22. Other Provisions 12
AMENDED AND RESTATED
SALEM TRUST BANK
1986 INCENTIVE STOCK OPTION PLAN
THIS IS THE 1986 INCENTIVE STOCK OPTION PLAN ("Plan") of SALEM
TRUST BANK ("the Bank"), a banking organization organized under
the laws of the State of North Carolina, with its principal
office in Forsyth County, North Carolina, effective January
9, 1985, under which options may be granted from time to time to
eligible employees of the Bank to purchase shares of common stock
of the Bank, subject to the provisions set forth as follows:
1. PURPOSE
The purpose of this Plan is to aid the Bank in attracting
capable executives and to provide a long range inducement for key
employees to remain in the management of the Bank, to perform at
increasing levels of effectiveness and to acquire a permanent
stake in the Bank with the interest and outlook of an owner.
These objectives will be promoted through the granting to key
employees of options to acquire shares of common stock of the
Bank pursuant to the terms of this Plan.
2. ADMINISTRATION
The Plan shall be administered by a committee to be
appointed from time to time by the Board of Directors of the Bank
(the "Committee"). If action is to be taken by the Committee
concerning the granting of options to any member of the Committee
or in any way affecting the options held by a Committee member,
then that interested Committee member shall abstain from voting
on these issues.
The Committee shall have full authority to award options, to
interpret the Plan, and to make such determinations as it deems
appropriate for the administration of the Plan, taking into
consideration the recommendations of management. The
determinations or the interpretation and construction of any
provision of the Plan by the Committee shall be final and
conclusive upon all persons affected thereby.
It shall be in the discretion of the Committee to grant
options which qualify as "incentive stock options" (as that term
is defined in Section 422A of the Internal Revenue Code of 1954,
as amended) or which will be given tax treatment as "nonqualified
stock options" (herein referred to collectively as "options";
however, whenever reference is specifically made only to
"incentive stock options" or "nonqualified stock options," such
reference shall be deemed to be made to the exclusion of the
other).
Any action of the Committee with respect to the Plan shall
be taken by a majority vote at a meeting of the Committee or by
written consent of all of the members of the Committee without a
meeting.
3. STOCK AVAILABLE FOR OPTIONS
(a) The stock to be subject to options under the Plan shall
be authorized but unissued shares of common stock of the Bank or,
in the discretion of the Committee, issued shares which have been
reacquired by the Bank. The total amount of stock for which
options may be granted under the Plan shall not exceed 159,523
shares. Such number of shares is subject to any capital
adjustments as provided in Section 14. In the event that an
option granted under the Plan expires or is terminated
unexercised as to any shares covered thereby, such
shares thereafter shall be available for the granting of options
under the Plan; however, if the expiration or termination date of
any option is beyond the term of existence of the Plan as
described in Section 16, then any shares covered by unexercised -
or terminated options shall not reactivate the existence of this
Plan and therefore may not be available for additional grants
under the Plan.
(b) No more then ten percent (10%) of the Bank's
outstanding shares may be committed to the Plan.
4. NONQUALIFIED OPTIONS
All eligible employees, nonemployee directors and advisory
directors of the Bank may receive nonqualified stock options.
Eligibility to receive nonqualified options shall be established
pursuant to Section 5 below. All characteristics of the
nonqualified options, including option prices, shall be
established as provided in the Plan.
5. ELIGIBILITY
Options shall be granted only to individuals who meet the
following eligibility requirements:
(a) Except for grants of nonqualified stock options to
directors and advisory directors, such individual must be an
employee of the Bank. An individual shall be considered to
be an "employee" only if there exists between the Bank and
the individual the legal and bona fide relationship of
employer and employee. In determining whether such
relationship exists, the regulations of the United states
Treasury Department relating to the determination of such
relationship for the purpose of collection of income tax at
the source on wages shall be applied;
(b) Except for grants of nonqualified stock options to
directors and advisory directors, such employees must be
"key employees" of the Bank. For this purpose, "key
employees" shall be considered to be those employees who, in
the judgment of the Committee, are in a position materially
to affect the operations and profitability of the Bank by
reason of the nature and extent of their duties and
responsibilities.
(c) Such individual must have such knowledge and experience
in financial and business matters that he is capable of
evaluating the merits and risks of the investment involved
in the exercise of the options;
(d) Such individual, being otherwise eligible under this
Section 4, shall have been selected by the Committee as a
person to whom an option shall be granted under the Plan;
(e) Nonqualified options may be granted to (i) key
employees as further defined in (a)and (b) above, (ii)
directors of the Bank, and (iii) advisory directors of the
Bank. Individuals who are not key employees of the Bank,
will not be eligible to receive incentive stock options; and
(f) In determining the individuals to whom options shall be
granted and the number of shares to be covered by each
option, the Committee shall take into account the nature of
the services rendered by the respective individuals, their
present and potential contributions to the success of the
Bank and such other factors as the Committee shall deem
relevant. An individual who has been granted an option
under the Plan may be granted an additional option or
options under the Plan if the Committee shall so determine.
(g) No more than forty percent (40%) of the shares set
aside for option pursuant to the Plan may be allocated to
any one participant in the Plan.
6. OPTION PRICE
(a) Except in the case where options are granted to an
individual who owns stock possessing more than 10 percent
(10%) of the total combined voting power of all classes of
stock of the Bank or its subsidiary corporations ("ten
percent shareholder"), the option price of each option
granted under the Plan shall be not less than one hundred
percent (100%) of the market value of the stock on the date
of grant of the incentive stock option. In the case of
incentive stock options granted to a ten percent
shareholder, the option price of each incentive stock
option granted under the Plan shall not be less than one
hundred ten percent (110%) of the market value of the stock
on the date of grant of the incentive stock option. "Market
value" shall be determined by the Committee in its dis
cretion as of the time of the granting of each option upon
the consideration by the Committee of such factors that it
shall deem pertinent. By way of illustration and not of
limitation, such factors may be (i) recent sales prices of
the Bank's stock; (ii) recent results of the Bank's
business operations; (iii) current book value and net
worth; (iv) various financial ratios which the Committee may
deem appropriate; (v) projections of the bank's future
business operations and opportunities; and (vi) such other
factors which may be relevant under applicable Federal tax
laws and Internal Revenue Service rules and regulations.
The option price is subject to any capital adjustment as
provided in Section 14.
(b) The option price for nonqualified stock options shall
be established by the Committee in its discretion and shall
not be less than the market value of the stock on date of
grant.
(c) The option price shall be payable to the Bank either
(i) in cash or by check, bank draft or money order payable
to the order of the Bank, or (ii) at the discretion of the
Committee, through the delivery of shares of the common
stock of the Bank owned by the optionee with a value equal
to the option price, or (iii) at the discretion of the
Committee by a combination of (i) and (ii) above. No shares
shall be delivered until full payment has been made. The -
Committee may not approve a reduction of such purchase price
in any such option, or the cancellation of any such option
and the regranting thereof to the same optionee at a lower
purchase price, at a time when the market value of the
shares is lower than it was when such option was granted.
7. EXPIRATION OF OPTIONS
The Committee shall determine the expiration date or dates
of each option, but such expiration date shall be not later than
ten (10) years after the date an incentive stock option is
granted or later than eleven (11) years after the date a
nonqualified stock option is granted. The Board, in its
discretion, may extend the expiration date or dates of an option
after such date was originally set; however, such expiration date
may not exceed the maximum expiration date described above.
8. TERMS AND CONDITIONS OF OPTIONS
(a) All options must be granted within ten (10) years of
the Effective Date of this Plan as provided in Section 18;
(b) The Committee may grant incentive stock options and
nonqualified stock options, either separately or jointly, to
an eligible employee;
(c) The grant of options shall be evidenced by a written
instrument containing terms and conditions established by
the Committee consistent with the provisions of this Plan;
(d) The Committee may grant an option or options to an
optionee and stipulate that a portion of such option expires
or becomes exercisable at a stated interval or that portions
of such option expires or becomes exercisable at several
stated intervals;
(e) An optionee shall have no rights as a stockholder with
respect to any shares covered by his option until payment in
full by him for the shares being purchased. No adjustment
shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or
distributions or other rights for which the record date is
prior to the date such stock is fully paid for, except as
provided in Section 13 hereof; and
(f) The aggregate fair market value (determined as of the
time the option is granted) of the stock for which an
optionee may be granted incentive stock options in any cal
endar year (including incentive stock options granted under
all option plans of the Bank or any of its subsidiary
corporations) shall not exceed $100,000 plus any unused
limit carryover (as that term is defined in Section 422A of
the Internal Revenue Code of 1954, as amended) to such
year; provided, however, that such $100,000 limit of this
subsection (f) shall not apply to the grant of nonqualified
stock options.
9. EXERCISE OF OPTIONS
(a) As to options granted to an employee, such optionee
must have been continuously employed or remain in the employ
of the Bank for such period of time prior to or from the
date of grant before the right to exercise any part of the
option granted to such employee will accrue as shall be
determined by the Committee. Each option granted under the
Plan shall be exercisable at such time or in such annual
installments as may be determined by the Committee at the
time of the grant. The right to exercise options in annual
installments may be cumulative. Except as provided in
Sections 10 and 11, no option may be exercised at any time
unless the holder thereof is then an employee of the Bank.
The exercise of any stock option must be evidenced by
written notice to the Bank that the optionee intends to
exercise his stock option. In no event shall an option
granted pursuant to the terms of the Plan be exercised until
the Plan has been approved by the shareholders of the Bank
and by the Commissioner of Banks of the State of North
Carolina.
(b) No option may be exercised and no shares may be
acquired under the Plan prior to the timely filing by both
the optionee and the Bank of all appropriate documents that
may be required by applicable federal and state securities
laws and state corporate laws.
(c) No incentive stock options granted pursuant to the Plan
may be exercised by an individual unless all incentive stock
options granted to such individual pursuant to the Plan
prior to the date of grant of the incentive stock options in
question have been exercised in full or have expired by
reason of lapse of time.
10. TERMINATION OF EMPLOYMENT - EXCEPT BY DEATH OR RETIREMENT
If any optionee ceases to be employed by the Bank or ceases
to be a director or advisory director of the Bank for any reason
other than his death, disability retirement or normal retirement
(age 65), his option shall immediately terminate. Whether a leave
of absence shall constitute a termination of employment shall be
determined by the Committee, whose decision shall be final and
conclusive.
11. TERMINATION OF EMPLOYMENT - RETIREMENT
If any optionee ceases to be employed by the Bank due to his
retirement upon attaining normal retirement age (age 65), he may,
at any time within three (3) months after his date of retirement,
but not later than the date of expiration of the option,
exercise the option to the extent the employee was entitled to do
so on his date of retirement. If any optionee ceases to be
employed by the Bank due to his becoming disabled, he may, at any
time within twelve (12) months after his date of retirement, but
not later than the date of expiration of the option, exercise the
option to the same extent the employee was entitled to do so on
his date of retirement. Any options or portions of options of
retired optionees not so exercised shall terminate.
12. TERMINATION OF EMPLOYMENT - DEATH
If any optionee dies while in the employment of the Bank,
the person or persons to whom the option is transferred by will
or by the laws of descent and distribution may exercise the same
option to the same extent and upon the same terms and conditions
the optionee would have been entitled to do so had he lived until
the term of the option had expired. Any options or portions of
options of deceased optionees not so exercised shall terminate.
13. RESTRICTIONS ON TRANSFER
An option granted under this Plan may not be transferred
except by will or the laws of descent and distribution and,
during the lifetime of the optionee to whom it was granted, may
be exercised only by such optionee.
14. RIGHT OF REPURCHASE BY THE BANK
As to any option granted to an employee of the Bank, if an
optionee exercises any option pursuant to the Plan and ceases to
be employed by the Bank for any reason (other than death or
retirement) during a period of one year subsequent to the
exercise of the option, then the Bank, or its appointee, shall
have the right for a period of 45 days after the date the
optionee ceases to be employed by the Bank to repurchase from the
optionee the same number of shares acquired by the optionee
through the exercise of the option at the same price the optionee
paid for such shares.
The above restriction as set forth in the Section 14 shall
be included in each option granted under this Plan, and in the
discretion of the Committee, the following legend may be placed
on the stock certificate representing shares transferred to
optionees pursuant to the exercise of options under the Plan:
These securities are subject to the Bank's right of
repurchase contained in the Salem em Trust Bank 1986
Incentive Stock Option Plan, effective January 9,
1986, at the option price stated in the optionee's
Stock Option Grant and Agreement.
15. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK
(a) If the outstanding shares of the common stock of the
Bank are increased, decreased, changed into or exchanged for
a different number or kind of shares or securities of the
Bank or shares of a different par value or without par value
through reorganization, recapitalization, reclassification,
stock dividend, stock split, amendment to the Bank's
Articles of Incorporation or reverse stock split, an
appropriate adjustment shall be made in the number and/or
kind of securities allocated to the options previously and
subsequently granted under the Plan, without change in the
aggregate purchase price applicable to the unexercised
portion of the outstanding options but with a corresponding
adjustment in the price for each share or other unit of any
security covered by the options.
(b) Upon the effective date of the dissolution or
liquidation of the Bank, or of a reorganization, merger or
consolidation of the Bank with one or more corporations in
which the Bank is not the surviving corporation ration, or
of a transfer of substantially all the property or more than
eighty percent (80%) of the then outstanding shares of the
Bank to another corporation, the Plan and any option
previously granted hereunder shall terminate unless
provision is made in writing in connection with such
transaction for the continuance of the Plan and for the
assumption of options theretofore granted, or the
substitution for such options of new options covering the
shares of a successor employer corporation, or of a parent
or subsidiary thereof, with appropriate adjustments as to
number and kind of shares and prices in which event the Plan
and the options theretofore granted or the new options
substituted therefor, shall continue in the manner and under
the terms so provided. In the event of such dissolution,
liquidation, reorganization, merger, consolidation, transfer
of assets or transfer of shares, and if provision is not
made in such transaction for the continuance of the Plan and
for the assumption of options theretofore granted or for the
substitution of such options or new options covering the
shares of a successor employer corporation or a parent or
subsidiary thereof, then such optionee under the Plan shall
be entitled, prior to the effective date of any such
transaction, to purchase the full number of shares under his
option which he would otherwise have been entitled to
purchase during the remaining term of such option.
(c) To the extent that the foregoing adjustments relate to
particular stock or securities of the Bank subject to option
under this Plan, such adjustments shall be made by the
Committee, whose determination in that respect shall be
final and conclusive.
(d) The grant of an option pursuant to this Plan shall not
affect in any way the right or power of the Bank to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
(e) No fractional shares of stock shall be issued under the
Plan for any such adjustment.
16. APPLICATION OF FUNDS
The proceeds received by the Bank from the sale of common
stock pursuant to options will be used for general corporate
purposes.
17. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon
the optionee to exercise such option.
18. TERM OF PLAN
Options may be granted pursuant to this Plan from time to
time within a period of ten (10) years from the date this Plan is
approved by the Board of Directors.
19. EFFECTIVE DATE OF PLAN
This Plan shall become effective January 9, 1986, following
approval thereof by the Board of Directors. Pursuant to federal
tax law and North Carolina banking law, the Board shall submit
the Plan to the shareholders of the Bank and the Commissioner of
Banks for their respective approvals. No options granted prior
to receipt of such approvals shall be exercisable until both such
approvals shall have been obtained.
20. TIME OF GRANTING OF OPTIONS
Nothing contained in the Plan or in any resolution adopted
or to be adopted by the Board or the shareholders of the Bank and
no action taken by the Board shall constitute the granting of any
options hereunder. The granting of an option pursuant to the
Plan shall take place only when a written option agreement shall
have been duly executed and delivered by and on behalf of the
Bank.
21. TERMINATION AND AMENDMENT
The Board may at any time alter, suspend, terminate or
discontinue the Plan, but may not, without the consent of the -
holder of an option previously granted, make any alteration which
would deprive him of his rights with respect thereto or, without
the approval of the stockholders, make any alteration which would
(a) increase the number of aggregate shares subject to the option
under this Plan or decrease the minimum option price except as
provided in Section 14; or (b) extend the term of this Plan as
provided in Section 18 or the maximum period during which an
option may be exercised as provided in Section 7.
22. OTHER PROVISIONS
The option agreements authorized under this Plan shall
contain such other provisions not inconsistent with the forego
ing, including, without limitation, increased restrictions upon
the exercise of the option, as the Board may deem advisable.