SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-12
HIGH COUNTRY BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LETTERHEAD OF HIGH COUNTRY BANCORP]
October 10, 2003
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders of High Country
Bancorp, Inc. to be held at High Country Bank, 7360 West US Highway 50, Salida,
Colorado on Monday, November 10, 2003 at 5:00 p.m., local time.
The accompanying notice and proxy statement describe the formal business to
be transacted at the Annual Meeting. Also enclosed is an Annual Report to
Stockholders for the 2003 fiscal year. Directors and officers of the Company
will be available to respond to any questions stockholders may have.
You are cordially invited to attend the Annual Meeting. REGARDLESS OF
WHETHER YOU PLAN TO ATTEND, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL
MEETING. This will not prevent you from voting in person but will assure that
your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ Larry D. Smith
Larry D. Smith
President and Chief Executive Officer
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HIGH COUNTRY BANCORP, INC.
7360 WEST US HIGHWAY 50
SALIDA, COLORADO 81201
(719) 539-2516
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 10, 2003
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of High Country Bancorp, Inc. (the "Company"), will be held at High
Country Bank, 7360 West US Highway 50, Salida, Colorado, at 5:00, local time, on
Monday, November 10, 2003.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of one director of the Company;
2. The approval of the amendment and restatement of the High
Country Bancorp, Inc. 1998 Stock Option and Incentive Plan as
the High Country Bancorp, Inc. 2003 Incentive Equity and
Deferred Compensation Plan; and
3. The transaction of such other matters as may properly come
before the Annual Meeting or any adjournments thereof.
Note: The Board of Directors is not aware of any other business to come
before the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. Stockholders
of record at the close of business on September 30, 2003, are the stockholders
entitled to vote at the Annual Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed Proxy Card which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The Proxy Card will not be used if you attend and vote at the Annual
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard A. Young
RICHARD A. YOUNG
SECRETARY
Salida, Colorado
October 10, 2003
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
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PROXY STATEMENT
OF
HIGH COUNTRY BANCORP, INC.
7360 WEST US HIGHWAY 50
SALIDA, COLORADO 81201
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 10, 2003
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of High Country Bancorp, Inc. (the "Company")
to be used at the 2003 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") which will be held at High Country Bank, 7360 West US Highway
50, Salida, Colorado on Monday, November 10, 2003, at 5:00 p.m., local time. The
accompanying Notice of Annual Meeting and form of proxy and this Proxy Statement
are being first mailed to stockholders on or about October 10, 2003.
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VOTING AND REVOCABILITY OF PROXIES
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Proxies solicited by the Board of Directors of the Company will be voted in
accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS SET FORTH BELOW.
The proxy confers discretionary authority on the persons named therein to vote
with respect to the election of any person as a director where the nominee is
unable to serve or for good cause will not serve, and with respect to matters
incident to the conduct of the Annual Meeting. If any other business is
presented at the Annual Meeting, proxies will be voted by those named therein in
accordance with the determination of a majority of the Board of Directors.
Proxies marked as abstentions will not be counted as votes cast. In addition,
shares held in street name which have been designated by brokers on proxy cards
as not voted will not be counted as votes cast. Proxies marked as abstentions or
as broker nonvotes, however, will be treated as shares present for purposes of
determining whether a quorum is present.
Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by properly executed proxies
will be voted at the Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to the Secretary of the Company at the address above
or the filing of a later-dated proxy prior to a vote being taken on a particular
proposal at the Annual Meeting. A proxy will not be voted if a stockholder
attends the Annual Meeting and votes in person. The presence of a stockholder at
the Annual Meeting will not in itself revoke such stockholder's proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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The securities entitled to vote at the Annual Meeting consist of the
Company's common stock, par value $.01 per share (the "Common Stock").
Stockholders of record as of the close of business on September 30, 2003 (the
"Record Date"), are entitled to one vote for each share of Common Stock then
held. As of the Record Date, there were 901,704 shares of Common Stock issued
and outstanding. The presence, in person or by proxy, of at least a majority of
the total number of shares of Common Stock outstanding and entitled to vote will
be necessary to constitute a quorum at the Annual Meeting.
Persons and groups beneficially owning more than 5% of the Common Stock are
required to file certain reports with respect to such ownership pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The following
table sets forth, as of the Record Date, certain information as to the Common
Stock beneficially owned by any person or group of persons who is known to the
Company to be the beneficial owner of more than 5% of the Company's Common Stock
and shares beneficially owned by all directors and executive
officers as a group. Other than as disclosed below, management knows of no
person who beneficially owned more than 5% of the Common Stock at the Record
Date.
PERCENT OF SHARES
NAME AND ADDRESS AMOUNT AND NATURE OF OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OUTSTANDING
- ------------------- ------------------------- -----------------
High Country Bancorp, Inc. 101,894 (2) 11.30%
Employee Stock Ownership Plan ("ESOP")
7360 West US Highway 50
Salida, Colorado 81201
Donald Leigh Koch 88,982 (3) 9.87
4 Muirfield Lane
St. Louis, Missouri 63141
Larry D. Smith 70,864 (4) 7.55
7360 West US Highway 50
Salida, Colorado 81201
Scott G. Erchul 49,036 (5) 5.27
7360 West US Highway 50
Salida, Colorado 81201
MidCountry Financial Corp. 45,595 (6) 5.06
P.O. Box 4164
Macon, Georgia 31208
All Directors and Executive Officers 223,171 (7) 22.57
as a Group (6 persons)
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(1) Includes all shares held directly as well as by spouses or as custodian or
trustee for minor children, and shares held by a group acting in concert,
over which shares the named individuals effectively exercise sole voting
and investment power, or for a group acting in concert, share voting and
investment power.
(2) These shares are held in a suspense account for future allocation among
participating employees as the loan used to purchase the shares is repaid.
The ESOP trustees, currently Directors Glenn, Young and Harsh vote all
allocated shares in accordance with instructions of the participants.
Unallocated shares and shares for which no instructions have been received
generally are voted by the ESOP trustees in the same ratio as participants
direct the voting of allocated shares or, in the absence of such direction,
as directed by the Company's Board of Directors. As of the Record Date,
58,030 shares had been allocated.
(3) Based on Amendment No. 5 to Schedule 13G filed on February 21, 2003.
Includes shares beneficially owned by Mr. Koch and his spouse and by Koch
Asset Management, L.L.C., an investment advisor to various individual
clients. Mr. Koch is sole Managing Member of Koch Asset Management, L.L.C.
(4) Includes 36,368 shares that may be acquired upon the exercise of options
exercisable within 60 days of the Record Date. The listed amount does not
include 17,254 shares held by the Salida Building and Loan Association
Long-Term Incentive Plan ("LTIP") trust for the benefit of Mr. Smith; Mr.
Smith bears the economic risk associated with such shares, but does not
have voting or investment power over such shares.
(5) Includes 29,095 shares that may be acquired upon the exercise of options
exercisable within 60 days of the Record Date. The listed amount does not
include 7,041 shares held by the LTIP trust for the benefit of Mr. Erchul;
Mr. Erchul bears the economic risk associated with such shares, but does
not have voting or investment power over such shares.
(6) Based on a Schedule 13D filed on September 9, 2002.
(7) Includes 87,282 shares that may be acquired upon the exercise of options
exercisable within 60 days of the Record Date. Excludes shares with respect
to which Directors Glenn, Young and Harsh may have "voting power" by virtue
of their positions as trustees of the trusts holding 101,894 shares under
the ESOP, and 50,767 shares under the 401(k) plan. Unallocated shares and
shares for which no instructions have been received generally are voted by
the trustees in the same ratio as participants direct the voting of
allocated shares or, in the absence of such direction, as directed by the
Company's Board of Directors.
2
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PROPOSAL I -- ELECTION OF DIRECTORS
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The Company's Board of Directors is currently composed of five members.
Under the Company's Articles of Incorporation, directors are divided into three
classes and elected for terms of three years each and until their successors are
elected and qualified. At the Annual Meeting in order to keep the number of
directors in each class equal, one director will be elected for terms expiring
at the Annual Meeting to be held in the year 2006. The Board of Directors has
nominated Director Timothy R. Glenn, to serve a term of three years, or until
his successor is elected and qualified. Under Colorado law, directors are
elected by a majority of the votes present in person or represented by proxy at
the Annual Meeting and entitled to vote in the election of directors.
Unless a contrary instruction is given, the persons named in the proxies
solicited by the Board of Directors will vote each such proxy for the election
of the named nominee. If the nominee is unable to serve, the shares represented
by all properly executed proxies which have not been revoked will be voted for
the election of such substitute as the Board of Directors may recommend or the
size of the Board may be reduced to eliminate the vacancy. At this time, the
Board knows of no reason why the nominee might be unavailable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE LISTED BELOW.
The following table sets forth, for the nominee and each continuing
director, his name, age as of the Record Date, the year he first became a
director of the Company's principal subsidiary, High Country Bank, formerly
Salida Building and Loan Association (the "Bank"), and the expiration of his
current term as a director of the Company. Except as noted below, all such
persons were initially appointed as directors of the Company in connection with
the incorporation and organization of the Company in August 1997 and remained as
such following the conversion of the Bank from mutual to stock form on December
11, 1997. Each director of the Company is also a member of the Board of
Directors of the Bank.
SHARES OF
YEAR FIRST COMMON STOCK
ELECTED AS BENEFICIALLY
AGE AT THE DIRECTOR CURRENT TERM OWNED AT THE PERCENT OF
NAME RECORD DATE OF THE BANK TO EXPIRE RECORD DATE (1) CLASS
---- ----------- ----------- --------- --------------- -----
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2006
Timothy R. Glenn 46 1991 2003 31,250 (2) 3.44%
DIRECTORS CONTINUING IN OFFICE
Philip W. Harsh 58 1995 2004 43,361 (2) 4.77
Scott G. Erchul 41 1997 2004 49,036 5.27
Richard A. Young 49 1992 2005 28,660 (2) 3.15
Larry D. Smith 46 1987 2005 70,864 7.55
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(1) Includes all shares held directly as well as by spouses or as custodian or
trustee for minor children, and shares held by a group acting in concert,
over which shares the named individuals effectively exercise sole voting
and investment power, or for a group acting in concert, share voting and
investment power. Amounts shown include 7,273, 7,273, 29,095, 7,273 and
36,368 shares which may be acquired by Directors Glenn, Harsh, Erchul,
Young and Smith, respectively, upon the exercise of options exercisable
within 60 days of the Record Date. Amounts shown do not include 4,298,
2,958, 7,041, 3,963 and 17,254 shares which are held by the LTIP trust for
the benefit of Directors Glenn, Harsh, Erchul, Young and Smith,
respectively; such individuals bear the economic risk associated with such
shares, but do not have voting or investment power over such shares.
(2) Excludes shares with respect to which Directors Young, Glenn and Harsh may
have "voting power" by virtue of their positions as trustees of the trusts
holding 101,894 shares under the ESOP and 50,767 shares under the 401(k)
plan. Unallocated ESOP shares and shares for which no instructions have
been received generally are voted by the trustees in the same ratio as
participants direct the voting of allocated shares or, in the absence of
such direction, as directed by the Company's Board of Directors. As of the
Record Date, 58,030 shares had been allocated. Shares held in the 401(k)
plan are voted as directed by the plan participants.
3
The principal occupation of each nominee for director and each continuing
director of the Company for the last five years is set forth below.
TIMOTHY R. GLENN has served as a Director of the Bank since 1991. He is the
Funeral Director and Owner of the Lewis & Glenn Funeral Home and Fairview
Cemetery. He currently is a County Commissioner for Chaffee County, Colorado and
a member of the Board of Education for the local school district. His civic
activities include the Salida Rotary Club, Elks Lodge, 4-H Club and the St.
Joseph Catholic Church. He has also served as President and a member of the
Board of Directors of the Colorado Association of Cemeteries.
PHILIP W. HARSH is a retired insurance executive and part-time consultant
and has been a Director of the Bank since 1995. Also, he has served as President
of the ruling group for the Salida Public Golf Course and is past president of
the Independent Insurance Agents of Colorado.
SCOTT G. ERCHUL has been a member of the Board of Directors of the Bank
since 1997. He currently serves as Vice President of the Company and the Bank,
and has been Vice President of the Bank since 1991. His past and current
community involvement include the Rotary Club, Academic Booster Club, Build a
Generation committee member and youth sports coach for football, baseball and
soccer.
RICHARD A. YOUNG currently serves as Secretary and Treasurer of the Company
and the Bank. He has served as a Director of the Bank since 1992. He is a
Certified Public Accountant and a partner in the accounting firm of Swartz &
Young P.C. He is a high school football coach, treasurer and board member of the
local Pop Warner Football League, and treasurer of Support our Schools Salida
nonprofit organization.
LARRY D. SMITH currently serves as President and Chief Executive Officer of
the Company and the Bank. Mr. Smith became President of the Bank in 1991 and has
been a Director of the Bank since 1987. From 1978 to 1991, he served as
Controller of the Bank. He is active in the Salida school system and youth
sports by serving as a coach for various sports teams and by serving on the High
School Building Accountability and Business Advisory Committees. He is also
involved with several organizations which promote the academic and athletic
development of the youth of Salida. He is a member of the Board of Directors of
the Midwest Conference for Community Banks, currently serving as its past
President.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Company's Board of Directors conducts its business through meetings of
the Board. The Board of Directors of the Company generally holds regular monthly
meetings and holds special meetings as needed. During the year ended June 30,
2003, the Board of Directors of the Company met 12 times. No director attended
fewer than 75% in the aggregate of the total number of Board meetings of the
Company held while he was a member during the year ended June 30, 2003 and the
total number of meetings held by committees on which he served during such
fiscal year.
The Compensation Committee consists of the full Board of Directors and
discusses compensation matters as required. The Board of Directors met two times
as the Compensation Committee during the year ended June 30, 2003.
The Board of Directors' Audit Committee consists of Directors Harsh, Glenn
and Young. The members of the Audit Committee are "independent," as
"independent" is defined in Rule 4200(a)(15) of the National Association of
Securities Dealers, Inc.'s listing standards. During the year ended June 30,
2003, the Audit Committee met five times to examine and approve the audit report
prepared by the independent auditors of the Bank, to review and recommend the
independent auditors to be engaged by the Bank, to review the internal audit
function and internal accounting controls, and to review and approve conflict of
interest and audit policies. The Company's Board of Directors has adopted a
written charter for the Audit Committee.
The Company's Nominating Committee consists of the entire Board of
Directors and is responsible for considering potential nominees to the Board of
Directors. The Board, in its capacity as the Nominating Committee, met once
during the year ended June 30, 2003. In its deliberations, the nominating
committee considers the
4
candidate's knowledge of the banking business and involvement in community,
business and civic affairs, and also considers whether the candidate would
provide for adequate representation of its market area. The Company's Articles
of Incorporation set forth procedures that must be followed by stockholders
seeking to make nominations for directors. In order for a stockholder of the
Company to make any nominations, he or she must give written notice thereof to
the Secretary of the Company not less than thirty days nor more than sixty days
prior to the date of any such meeting; provided, however, that if less than
forty days' notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the Company not
later than the close of business on the tenth day following the day on which
notice of the meeting was mailed to stockholders. Each such notice given by a
stockholder with respect to nominations for the election of directors must set
forth (i) the name, age, business address and, if known, residence address of
each nominee proposed in such notice; (ii) the principal occupation or
employment of each such nominee; and (iii) the number of shares of stock of the
Company which are beneficially owned by each such nominee. In addition, the
stockholder making such nomination must promptly provide any other information
reasonably requested by the Company.
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DIRECTORS' COMPENSATION
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Directors' Fees. The Company's directors receive fees of $1,500 per month.
Non-employee directors receive $100 per committee meeting attended, and all
directors receive $200 per High Country Title and Escrow Company meeting
attended. During fiscal year 2003, the Company's directors' fees totaled
$100,000.
Long-Term Incentive Plan. The Bank maintains the Salida Building and Loan
Association Long-Term Incentive Plan (the "LTIP") for the benefit of its
directors. Under the LTIP, on each June 30 each director has his account
credited with $12,000. Amounts credited to participants' accounts are fully
vested at all times. Until distributed in accordance with the terms of the LTIP,
each participant's account will be credited with a rate of return on any amounts
previously credited. This rate of return equals the highest rate of interest
paid by the Bank on certificates of deposit having a term of one year.
Alternatively, participants may elect that rate of return will equal the
dividend-adjusted rate of return on the Company's common stock.
In the event of an Employee Director's disability or death, his account
will be credited with an amount equal to the difference (if any) between (i) 50%
of the present value of all benefits which would have been credited to his
account if he had otherwise remained employed by the Bank to age 65, and (ii)
the benefits which are actually credited to his account at the time of his
termination. If his employment terminates in connection with or following a
"change in control", his account will be credited with an amount equal to the
difference (if any) between: (i) 100% of the present value of all benefits which
would have been credited to his account if he had otherwise remained employed by
the Bank to age 65, and (ii) the benefits which are actually credited to his
account at the time of his termination, subject to applicable "golden parachute"
limitations under ss.280G of the Internal Revenue Code. "Change in control" is
defined the same as under the Employment Agreements described above.
Participants' accounts under the LTIP will be paid, in cash, in ten
substantially equal annual installments, beginning during the first quarter of
the calendar year following the calendar year in which the participant ceases to
be a director. Notwithstanding the foregoing, a participant may elect to receive
LTIP benefits in a lump sum or over a period shorter than ten years. In the
event of a participants' death, the balance of his LTIP account will be paid in
a lump sum (unless the participant elects a distribution period up to ten years)
to his designated beneficiary, or if none, his estate. During the year ended
June 30, 2003, the Bank credited $12,000 to the accounts of each of Directors
Young, Smith, Glenn, Harsh and Erchul under the LTIP.
Equity Compensation Plans. Directors are also eligible to participate in
the Company's stock option plan and management recognition plan. During the year
ended June 30, 2003, no awards were made to directors under the option plan.
During the year ended June 30, 2003, each director received 1,000 shares of
restricted stock under the management recognition plan. All shares vested during
the year ended June 30, 2003. There are no shares available for future awards
under the management recognition plan.
5
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EXECUTIVE COMPENSATION AND OTHER BENEFITS
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Summary Compensation Table. The following table sets forth the cash and
noncash compensation for the last three fiscal years awarded to or earned by the
Company's Chief Executive Officer and Vice President. No other executive officer
of the Company earned salary and bonus in fiscal year 2003 exceeding $100,000
for services rendered in all capacities to the Company and the Bank.
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------------------
RESTRICTED SECURITIES
FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION(1) AWARDS OPTIONS(#) COMPENSATION
- ---- ---- ------ ----- --------------- ------ ---------- ------------
Larry D. Smith 2003 $119,600 $60,000 $18,800 $28,410 (2) -- $44,109(3)
Chief Executive Officer 2002 116,000 52,788 14,600 -- -- 39,660
2001 105,000 31,550 12,000 -- -- 34,842
Scott G. Erchul 2003 $80,000 $32,000 $18,800 $28,410 (2) -- $33,794(4)
Vice President 2002 77,500 28,075 14,600 -- -- 31,850
2001 70,400 17,500 12,000 -- -- 15,209
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(1) Executive officers of the Bank receive indirect compensation in the form of
certain perquisites and other personal benefits. The amount of such
benefits received by the named executive officer in fiscal 2003 did not
exceed 10% of each of the executive officer's salary and bonus. Amounts
shown represent compensation for serving on the Board of Directors.
(2) On August 22, 2002, Messrs. Smith and Erchul were awarded 1,000 shares of
restricted Common Stock, of which 500 shares vested on the date of grant
and 500 shares vested on January 1, 2003. The amount shown is based on the
closing sale price of the Common Stock on June 30, 2003 of $28.41, as
reported on the Nasdaq SmallCap Market. As of June 30, 2003, all shares of
restricted Common Stock awarded to Messrs. Smith and Erchul were vested,
and as a result such individuals held no shares of restricted Common Stock
at June 30, 2003. In the event the Company pays dividends with respect to
its Common Stock, when shares of restricted stock vest and/or are
distributed, the holder will be entitled to receive any cash dividends and
a number of shares of Common Stock equal to any stock dividends, declared
and paid with respect to a share of restricted Common Stock between the
date the restricted stock was awarded and the date the restricted is
distributed, plus interest on cash dividends.
(3) Consists of contributions for Mr. Smith's benefit of: (i) $12,000 under the
LTIP, and (ii) 1,130.20 ESOP shares valued at $32,109 as of June 30, 2003.
(4) Consists of contributions for Mr. Erchul's benefit of: (i) $12,000 under
the LTIP, and (ii) 767.11 ESOP shares valued at $21,794 as of June 30,
2003.
Year-End Option Values. The following table sets forth information
concerning the value as of June 30, 2003 of options held by the executive
officers named in the Summary Compensation Table set forth above. No options
were granted to or exercised by the named executive officer during fiscal year
2003.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
---------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Larry D. Smith 36,368 $ -- $555,885 $--
Scott G. Erchul 29,095 -- 444,717 --
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(1) Based on the difference between the fair market value of the underlying
Common Stock of $28.41 as quoted on the Nasdaq SmallCap Market on June 30,
2003 and the exercise price of $13.125 per share.
No options held by any executive officer of the Company repriced during the
past ten full fiscal years.
6
Employment Agreements. The Company and the Bank have entered into
employment agreements (the "Employment Agreements") under which Larry D. Smith
serves as President and Chief Executive Officer and Scott G. Erchul serves as
Vice President of the Bank and the Company (the "Employees"). In such
capacities, Mr. Smith and Mr. Erchul are responsible for overseeing all
operations of the Bank and the Company, and for implementing the policies
adopted by the Boards of Directors. The Boards believe that the Employment
Agreements assure fair treatment of the Employees in their careers with the
Company and the Bank by assuring them of some financial security.
Each Employment Agreement provides for a term of three years expiring on
August 13, 2004, with an annual base salary equal to the Employee's existing
base salary rate in effect on the effective date. On each anniversary date of
the commencement of each Employment Agreement, the term of the Employee's
employment may be extended for an additional one-year period beyond the then
effective expiration date, upon a determination by the Board of Directors that
his performance has met the required performance standards and that such
Employment Agreement should be extended. The Employment Agreements provide the
Employees with a salary review by the Board of Directors not less often than
annually, as well as with inclusion in any discretionary bonus plans, retirement
and medical plans, customary fringe benefits, vacation and sick leave. The
current base salaries under Mr. Smith's and Mr. Erchul's contracts are $140,000
and $88,000, respectively. The Employment Agreements terminate upon an
Employee's death, may terminate upon his disability and are terminable by the
Bank for "just cause" (as defined in the Employment Agreements). In the event of
termination for just cause, no severance benefits are available. If the Company
or the Bank terminates either Employee without just cause, he will be entitled
to a continuation of his salary and benefits from the date of termination
through the remaining term of the Employment Agreement plus an additional 12
month's salary and, at his election, either continued participation in benefit
plans which he would have been eligible to participate in through the Employment
Agreement's expiration date or the cash equivalent thereof. If an Employment
Agreement is terminated due to an Employee's "disability" (as defined in the
Employment Agreements), the Employee will be entitled to a continuation of his
salary and benefits through the date of such termination, including any period
prior to the establishment of his disability. In the event of an Employee's
death during the term of his Employment Agreement, his estate will be entitled
to receive his salary through the last day of the calendar month in which his
death occurred. The Employees are able to voluntarily terminate their Employment
Agreements by providing 90 days' written notice to the Boards of Directors of
the Bank and the Company, in which case they are entitled to receive only their
compensation, vested rights, and benefits up to the date of termination.
In the event of (i) either Employee's involuntary termination of employment
other than for "just cause" during the period beginning six months before a
change in control and ending on the later of the first anniversary of the change
in control or the expiration date of the Employment Agreement (the "Protected
Period"), (ii) the Employee's voluntary termination within 90 days of the
occurrence of certain specified events occurring during the Protected Period
which have not been consented to by him, or (iii) his voluntary termination of
employment for any reason within the 30-day period beginning on the date of the
change in control, he will be paid within 10 days of such termination (or the
date of the change in control, whichever is later) an amount equal to the
difference between (i) 2.99 times his "base amount," as defined in Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and
(ii) the sum of any other parachute payments, as defined under Section
280G(b)(2) of the Code, that he receives on account of the change in control.
"Change in Control" means any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25% of the voting
stock of the Bank or the Company thereof, (ii) the acquisition of the ability to
control the election of a majority of the Bank's or the Company's Directors,
(iii) the acquisition of a controlling influence over the management or policies
of the Bank or of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Exchange Act), or (iv) during any
period of two consecutive years, individuals (the "Continuing Directors") who at
the beginning of such period constitute the Board of Directors of the Bank or of
the Company (the "Existing Board") cease for any reason to constitute at least
two-thirds thereof, provided that any individual whose election or nomination
for election as a member of the Existing Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office shall be considered
a Continuing Director. Notwithstanding the foregoing, the Company's ownership of
the Bank shall not of itself constitute a Change in Control for the purpose of
each Agreement. For purposes of this paragraph only, the term "person" refers to
an individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole
7
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Board as to whether a Change in
Control has occurred is conclusive and binding.
The payments that would be made to Mr. Smith or Mr. Erchul assuming their
termination of employment under the foregoing circumstances at June 30, 2003
would have been approximately $440,413 and $316,307, respectively. These
provisions may have an anti-takeover effect by making it more expensive for a
potential acquiror to obtain control of the Company. In the event that the Mr.
Smith or Mr. Erchul prevails over the Company and the Bank, or obtains a written
settlement, in a legal dispute as to his Employment Agreement, he will be
reimbursed for his legal and other expenses.
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TRANSACTIONS WITH MANAGEMENT
- --------------------------------------------------------------------------------
The Bank offers loans to its directors and officers. By law, the Bank's
loans to directors and executive officers are required to be made on
substantially the same terms, including interest rates, as those prevailing for
comparable transactions and must not involve more than the normal risk of
repayment or present other unfavorable features. Furthermore, all loans to such
persons must be approved in advance by a disinterested majority of the Board of
Directors. At June 30, 2003, the Bank's loans to directors and executive
officers totaled $2.2 million, or 12.6% of the Company's stockholders' equity,
at that date. These loans are made in the ordinary course of business on
substantially the same terms, including interest rates, as those prevailing for
comparable transactions and do not involve more than the normal risk of
repayment or present other unfavorable features.
- --------------------------------------------------------------------------------
PROPOSAL II -- APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE HIGH
COUNTRY BANCORP, INC. 1998 STOCK OPTION AND INCENTIVE PLAN AS THE HIGH COUNTRY
BANCORP, INC. 2003 INCENTIVE EQUITY AND DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
INTRODUCTION
A proposal to approve the amendment and restatement of the High Country
Bancorp, Inc. 1998 Stock Option and Incentive Plan (the "Incentive Plan") will
be presented for stockholder approval at the Meeting. If the amendment and
restatement of the Incentive Plan is approved by stockholders at the Meeting,
such plan will be amended and restated as the High Country Bancorp, Inc. 2003
Incentive Equity and Deferred Compensation Plan (the "Amended Incentive Plan").
The Board of Directors of the Company unanimously approved, subject to
stockholder approval, the Amended Incentive Plan on September 24, 2003.
On December 15, 1998, the stockholders of the Company approved the
Incentive Stock, which provided for the grant of stock options ("Options") to
purchase up to 145,475 shares of Common Stock to directors and key employees of
the Company and its subsidiaries. The Amended Incentive Plan provides for the
grant of Options and the grant of stock appreciation rights ("SARs"), restricted
stock ("Restricted Stock") and unrestricted stock ("Unrestricted Stock") up to a
total of 190,475 shares of Common Stock. This proposal increases the number of
shares of Common Stock available for issuance under the Incentive Plan by 45,000
shares. As of September 30, 2003, a total of 29,099 shares of Common Stock
remained available for the grant of stock options under the Incentive Plan, and
if the Amended Incentive Plan is approved by stockholders at the Annual Meeting,
there would be a total of 74,099 shares available for future awards under the
Amended Incentive Plan. At September 30, 2003, the closing price of the
Company's Common Stock was $30.75 per share. Since the Company's directors and
named executive officers are eligible for awards under the Amended Incentive
Plan, they have an interest in this proposal.
The Board of Directors believes that approval of the Amended Incentive Plan
is necessary to continue to advance the interests of the Company and its
stockholders by providing an incentive to directors and key employees for
outstanding performance in order to generate superior returns to the
stockholders and to attract, motivate and retain the services of qualified
directors and employees. The additional forms of award that may be granted under
the Amended Incentive Plan provide flexibility to implement various compensation
strategies as those strategies may change over time.
8
No grant of Restricted Stock or Unrestricted Stock under the Amended
Incentive Plan will occur until stockholder approval of the Amended Incentive
Plan is obtained. The terms of the Amended Incentive Plan are summarized below.
The Amended Incentive Plan is attached hereto as Exhibit A and should be
consulted for additional information. All statements made herein regarding the
Amended Incentive Plan are only intended to summarize the Amended Incentive Plan
and are qualified in their entirety by reference to the Amended Incentive Plan.
PURPOSE OF THE AMENDED INCENTIVE PLAN
The purpose of the Amended Incentive Plan is to promote the success and
enhance the value of the Company by linking the personal interests of the
members of the Board and the Company's employees, officers and executives to
those of Company shareholders and by providing such individuals with an
incentive for outstanding performance in order to generate superior returns to
shareholders of the Company. The Amended Incentive Plan is further intended to
provide flexibility to the Company in its ability to motivate, attract, and
retain the services of members of the Board, employees, officers, and executives
of the Company upon whose judgment, interest, and special effort the successful
conduct of the Company's operation is largely dependent.
DESCRIPTION OF THE AMENDED INCENTIVE PLAN
Administration. The Amended Incentive Plan is administered by a committee
(the "Committee"), appointed by the Board of Directors, consisting of at least
two directors of the Company who are "Non-employee Directors" within the meaning
of the federal securities laws. To the extent necessary or desirable, each
member of the Committee shall also qualify as an "outside director" within the
meaning of the federal tax laws and shall meet such additional criteria as may
be necessary or desirable to comply with regulatory or stock exchange rules or
exemptions. At present, the Committee consists of Directors Harsh, Young and
Glenn.
Subject to the terms of the Amended Incentive Plan, the Committee has sole
discretionary authority to select participants and grant awards, to determine
the type of awards granted and the terms and conditions of awards (which terms
and conditions need not be the same in each case), to impose restrictions on any
award and to determine the manner in which such restrictions may be removed, to
interpret the Amended Incentive Plan and any award thereunder, to prescribe,
amend and rescind rules and regulations relating to the Amended Incentive Plan
and to make all other determinations deemed necessary or advisable in
administering the Amended Incentive Plan.
Eligible Persons. Under the Amended Incentive Plan, the Committee may grant
awards to directors of the Company or one of its subsidiaries (including members
of the Committee) and to key executives (which term is deemed to include among
others, the president, any vice president, the secretary, the treasurer or any
manager in charge of a principal business unit, division or function (such as
sales, administration or finance), any other officer who performs a
policy-making function, or any other person who performs similar policy-making
functions for the Company or any of its subsidiaries) and who on the grant date
is in the employ of the Company or one of its subsidiaries (the "subsidiaries"),
as defined in the Internal Revenue Code of 1986, as amended ("Code"). As of the
Record Date, the Company and its subsidiaries had eight directors and ten
employees whom it considered to be key executives eligible to participate in the
Amended Incentive Plan. The Committee is not obligated to treat participants in
the Amended Incentive Plan uniformly.
Shares Available for Grant. The Amended Incentive Plan reserves 190,475
shares of Common Stock for issuance pursuant to awards granted under the Amended
Incentive Plan. Such shares may be (i) authorized but unissued shares, (ii)
shares held in treasury or (iii) shares purchased by the Company in the open
market. Under the Amended Incentive Plan, the maximum number of shares for which
Options and SARs may be awarded to any one participant during any fiscal year is
15,000 shares. The aggregate number of shares of Common Stock available for
grant under the Amended Incentive Plan and the maximum number of shares of
Common Stock with respect to Options and SARs that may be awarded in any fiscal
year will be appropriately adjusted for any increase or decrease in the number
of shares of Common Stock of the Company resulting from a stock dividend or
split, recapitalization, merger, consolidation, combination or exchange of
shares or similar corporate change. In the event that any award under the
Amended Incentive Plan is terminated, cancelled, expires, lapses or is forfeited
for any reason, the shares subject to such award, or the unexercised portion
thereof, shall again become available for grant under the Amended Incentive
Plan.
9
Types of Awards and General Provisions. Under the Amended Incentive Plan,
the Committee may grant "Awards" to eligible persons, including:
o Incentive stock options ("ISOs") as defined in Section 422 of the
Code;
o Non-qualified stock options ("NSOs");
o Stock appreciation rights ("SARs");
o Restricted Stock; and
o Unrestricted Stock.
The terms and conditions of each Award will be reflected in an award agreement
between the Company and the participant ("Award Agreement"). Awards may be
granted either alone or in addition to or in tandem with another Award. The
number of shares covered by each outstanding Award and (if applicable) the
exercise price per share shall be proportionally adjusted for any increase or
decrease in the number of shares of Common Stock of the Company resulting from a
subdivision or consolidation of shares or the payment of a stock dividend or any
other increase or decrease in the number of shares outstanding effected without
receipt or payment of consideration by the Company. The Committee may offer to
exchange or buy out any Award previously granted to a participant for cash,
shares of Common Stock or another Award, on such terms and conditions as the
Committee shall determine.
Stockholder Rights. No Award shall give the participant any of the rights
of a stockholder of the Company unless and until the shares of Common Stock
subject to the Award are, in fact, issued to such person in connection with such
Award.
Options. ISOs and NSOs together are called "Options." The maximum term for
an Option is 10 years from the date of grant, except that the maximum term of an
ISO may not exceed five years if the optionee owns more than 10% of the Common
Stock on the date of grant. Each Option granted shall become exercisable at such
time and on such conditions as determined by the Committee in the Award
Agreement. The exercise price as to any Option shall be the fair market value
(determined under Section 422 of the Code) of the shares on the date of grant.
In the case of a participant who owns more than 10% of the combined voting power
of all classes of stock of the Company on the date of grant, such exercise price
for an ISO may not be less than 110% of fair market value of the shares. As
required by federal tax laws, if the aggregate fair market value (determined
when an Option is granted) of the Common Stock with respect to which ISOs are
first exercisable by an optionee in any calendar year (under all plans of the
Company and of any subsidiary) exceeds $100,000, the Options granted in excess
of $100,000 will be treated as NSOs.
Exercise of Options. The exercise of Options will be subject to such terms
and conditions as are established by the Committee in the Award Agreement. In
the absence of Committee action to the contrary, an otherwise unexpired Option,
except for NSOs granted to directors, shall cease to be exercisable upon (i) an
optionee's termination of employment or Board service for "cause" (as defined in
the Amended Incentive Plan), (ii) for ISOs, the termination of employment for
any reason other than death or "disability" (as defined in the Amended Incentive
Plan), unless provided otherwise in the Award Agreement, (iii) for NSOs, the
date three months after an optionee's termination of employment for a reason
other than cause, death, or disability, or earlier if the Option expires in
accordance with its terms, (iv) in the case of an optionee who becomes disabled,
the earlier of the date the Option expires in accordance with its terms or the
date one year after the optionee terminates service due to disability, or (v) in
the case of a deceased optionee, the earlier of the date the Option expires in
accordance with its terms or the date one year after the optionee's death in the
event of death of the optionee during employment or Board service.
An optionee may exercise Options, subject to provisions relative to their
termination and limitations on their exercise, only by (i) written notice to the
President of the Company of intent to exercise the Option with respect to a
specified number of shares of Common Stock, and (ii) payment to the Company
(contemporaneously with delivery of such notice) with a cashier's check,
certified check or existing holdings of Common Stock held for more than six
months of the amount of the exercise price for the number of shares with respect
to which the Option is then being exercised. Common Stock utilized in full or
partial payment of the exercise price for Options shall be valued at its market
value at the date of exercise.
10
Transferability of Options. Each Option granted under the Amended Incentive
Plan shall, by its terms, not be transferable otherwise than by will or the laws
of descent and distribution. Notwithstanding the foregoing, a participant who
holds Options may transfer such Options (but not ISOs) to his or her spouse,
lineal ascendants, lineal descendants, or to a duly established trust for the
benefit of one or more of these individuals. Options so transferred may
thereafter be transferred only to the participant who originally received the
grant or to an individual or trust to whom the participant could have initially
transferred the Options.
Stock Appreciation Rights. The Amended Incentive Plan permits the granting
of SARs by the Committee. Each SAR shall be subject to such terms and
conditions, including grant price, method of exercise, method of settlement and
form of consideration payable in settlement, as determined by the Committee in
the Award Agreement at the time of the grant. The Committee shall determine the
term of each SAR; however, the term of any SAR granted in tandem with an ISO may
not exceed ten (10) years. If the SAR is granted in connection with an ISO, the
grant price of the SAR shall not be less than the fair market value of a share
of Common Stock on the date of grant. Upon exercise of a SAR, the participant
has the right to receive the excess, if any, of the fair market value on the
date of exercise of the number of shares of Common Stock to which such SAR
relates, over the grant price of such SAR for the number of shares of Common
Stock to which such SAR relates. The grant price of an SAR related to an ISO
cannot be less than the fair market value of a share of Common Stock on the date
of grant.
Stock Awards. Restricted Stock and Unrestricted Stock are together called
"Stock Awards." Each Stock Award shall be subject to such terms and conditions
as determined by the Committee in the Award Agreement at the time of the grant.
Unrestricted Stock awards may be granted by the Committee with or without
conditions and may provide for an immediate or deferred transfer of shares to
the participant. Restricted Stock awards shall be subject to such restrictions
on transferability and risks of forfeiture as the Committee may determine. If
the participant terminates employment with the Company during the restriction
period related to any Restricted Stock award, the shares of Common Stock subject
to the restriction shall be forfeited; however, the Committee may waive any
restriction or forfeiture condition related to such shares of Common Stock.
Performance-Based Awards. The Amended Incentive Plan permits the Committee
to grant Stock Awards intended to qualify as "performance-based compensation"
under Section 162(m) of the Code to certain participants that qualify as
"covered employees" under Section 162(m) of the Code. The terms and conditions
of each Performance-Based Award, including the type of Performance-Based Award,
the performance goals to be achieved, and the performance period (as defined in
the Amended Incentive Plan) during which the performance goals are to be
achieved, shall be determined by the Committee in the Award Agreement at the
time of grant. The participant must be employed by the Company or one of its
subsidiaries on the last day of the performance period to be eligible to receive
the Performance-Based Award. Each Performance-Based Award must be disclosed to
and approved by the stockholders of the Company before any shares of Common
Stock subject to the Performance-Based Award are transferred to a participant or
any restrictions on such shares lapse.
Conditions on Issuance of Shares. The Committee shall not be required to
issue shares of Common Stock under an Award unless the issuance complies with
applicable laws, regulation of government authorities and the requirements of
any exchange on which shares of Common Stock are traded. In addition, the
Committee will have the discretionary authority to impose such restrictions on
shares of Common Stock issued pursuant to an Award as it may deem appropriate or
desirable, and to that end may require that a participant make certain
representations or warranties.
Limits on Transfers of Awards. No right or interest of a participant in any
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company, or shall be subject to any lien, obligation, or
liability of the participant to any other party other than the Company. No Award
shall be assignable or transferable by a participant other than by will or the
laws of descent and distribution, except that the Committee, in its discretion,
may permit a participant to make a gratuitous transfer of an Award that is not
an ISO to his or her spouse, lineal descendants, lineal ascendants, or a duly
established trust for the benefit of one or more of these individuals.
Elections to Defer Compensation. The Amended Incentive Plan permits
participants to elect to defer receipt of all or any part of the following forms
of compensation:
11
o Annual salary;
o Fiscal year bonus;
o Director's fees (if the participant is a Director of the
Company); or
o Common Stock or cash deliverable pursuant to an Award (if
permitted by the Committee in its discretion).
All elections by a participant shall remain in full force for all future
years until modified or revoked. Upon becoming eligible to participate, a
participant has thirty (30) days to make an election to defer salary earned
after such election. Any increase or decrease in such deferral amount during a
calendar year must be made prior to such calendar year. An election to defer a
fiscal year bonus (or increase or decrease the amount to be deferred) must be
made prior to the fiscal year.
Deferred Compensation Account. The Company shall establish a special ledger
account ("Deferred Compensation Account") on the books of the Company for each
participant who elects to defer compensation. Deferred salary shall be credited
to the participant's Deferred Compensation Account on the last day of each
calendar month. The amount of any deferred salary, director's fees, fiscal year
bonus or Award will be credited to the participant's Deferred Compensation
Account on the last day of the month in which such salary, director's fees,
fiscal year bonus or Award would have become payable or transferable to the
participant.
Investment Election. Each participant may elect that the deferred
compensation be credited to his or her Deferred Compensation Account in the form
of cash, shares of the Company's Common Stock or such deemed investment options
as are offered by the Board of Directors or the Committee. In the absence of a
participant election, the amount credited to the Deferred Compensation Account
shall be credited as cash. Any deferred compensation credited to a participant's
Deferred Compensation Account as cash shall accrue interest at a rate that is no
less than the prime rate charged to the Company by its principal bank, but shall
not exceed the highest rate paid on Individual Retirement Accounts ("IRA") by
the Bank plus two percent (2%) (based on the weighted average daily prime rate
or IRA rate for the three-month period ending on the last day of the quarter).
If a participant elects for a deferred amount to be credited as shares of
the Company's Common Stock, his or her Deferred Compensation Account shall be
credited with the number of shares of Common Stock equal in value to the
deferred amount, with the value of such Common Stock determined in accordance
with a valuation methodology approved by the Board of Directors or the
Committee. The Common Stock credited to the Deferred Compensation Account shall
merely constitute a bookkeeping entry of the Company and the participant shall
have no voting, dividend or other legal or economic rights with respect to such
Common Stock. No actual shares of Common Stock will be issued until the
participant receives a distribution from the Deferred Compensation Plan. At the
end of each fiscal quarter, dividends that would have been payable with respect
to such Common Stock shall be credited to the Deferred Compensation Account as
additional shares of Common Stock. No participant will be granted the right to
take payment of the Common Stock in cash rather than shares of Common Stock. If
a participant who has elected to receive deferred compensation in the form of
shares of Common Stock shall be deemed to have violated the short-swing profit
rules of the federal securities laws, then such election shall be void and such
deferred amount shall be credited to the participant's Deferred Compensation
Account as cash.
Trust. The Company may establish one or more trusts to fund deferred
compensation obligations under the Amended Incentive Plan. Each trust shall be
permitted to hold cash, Common Stock of the Company, or other assets to the
extent of the Company's obligations. Although the assets of such a trust would
be intended to be used for the exclusive purpose of paying the deferred
compensation obligations under the Amended Incentive Plan, the assets of the
trust would remain subject to the Company's general creditors. As a result, the
rights of participants in any assets of such a trust shall be no greater than
the rights of an unsecured creditor of the Company.
Distributions. Except in the case of financial hardship, a participant will
not receive a distribution from his or her Deferred Compensation Account until
the earlier of (1) termination of the participant's employment or directorship
with the Company or (2) the death or legal incapacitation of the participant
(each a "Distribution Event"). In addition, a Director may, at the time he first
becomes eligible to participate in the Deferred Compensation Plan, specify an
age (not less than 55 years) to receive distributions of his Deferred
Compensation Account. The Committee has the authority, in its sole discretion,
to allow an early distribution from a participant's Deferred Compensation
Account in the event of severe financial hardship due to the sudden illness of
the participant
12
or a participant's family member, or the loss of the participant's property due
to casualty or other extraordinary circumstance.
Each participant's Deferred Compensation Account shall be distributed in
either a lump sum or in annual installments over a period of up to ten years as
specified by the participant at the time of his initial election to defer
compensation ("Distribution Election"). A participant may change his
Distribution Election at any time prior to sixty (60) days before a Distribution
Event. If a participant dies prior to distribution of the entire balance of the
Deferred Compensation Account, the undistributed balance shall be paid to the
beneficiary designated by the participant or in the absence of such designation,
to the legal representative or the person or entity identified in the deceased
participant's last will.
If the participant fails to provide a Distribution Election, the Board of
Directors, in its sole discretion, shall determine the Distribution Election. In
addition, the Board of Directors may, in its sole discretion, distribute the
balance of a participant's Deferred Compensation Account in a lump sum, even if
the participant had elected installment payments, in the event a participant
whose employment with the Company has been terminated continues to be affiliated
with a direct competitor of the Company after reasonable notice from the Board.
Change in Control. In the event of a "change in control" of the Company,
each participant will be permitted to elect, during the thirty (30) day period
immediately prior to the change in control, to receive a distribution of all or
a portion of his or her Deferred Compensation Account during the seven (7) day
period after the change in control. For purposes of the Amended Incentive Plan,
"change in control" means:
(i) the acquisition by a person or persons acting in concert of the power
to vote twenty-five percent (25%) or more of a class of the Company's voting
securities;
(ii) the acquisition by a person of the power to direct the Company's or
the Bank's management or policies, if the Board of Directors or the Office of
Thrift Supervision has made a determination that such acquisition constitutes or
will constitute an acquisition of control of the Bank or Company for the
purposes of the Savings & Loan Holding Company Act or the Change in Bank Control
Act and the regulations thereunder;
(iii) during any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
cease, for any reason, to constitute at least a majority thereof, unless the
election of each Director who was not a Director at the beginning of such period
has been approved in advance by Directors representing at least two-thirds (2/3)
of the Directors then in office who were Directors in office at the beginning of
the period; provided, however, that for purposes of this clause (iii), each
Director who is first elected to the Board (or first nominated by the Board for
election by the shareholders) with the approval of at least two-thirds (2/3) of
the Directors who were Directors at the beginning of the period shall be deemed
to be a Director at the beginning of the two-year period;
(iv) the Company shall have merged into or consolidated with another
corporation, or merged another corporation into the Company, on a basis whereby
less than fifty percent (50%) of the total voting power of the surviving
corporation is represented by shares held by persons who were shareholders of
the Company immediately before the merger or consolidation; or
(v) the Company shall have sold to another person (a) substantially all of
the Company's assets or (b) the Bank.
The term "person" refers to an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or other entity.
Non-Transferability of Deferred Compensation. A participant's right to
receive payments of deferred compensation are not assignable or transferable,
shall not be subject to alienation, anticipation, sale, pledge, encumbrance or
other legal process, and shall not be in any manner subject to the debts or
liabilities of such participant. In the event a participant attempts such a
transfer, the Committee may, in its discretion, terminate such participant's
interest in such deferred compensation to the extent the Committee deems
necessary or advisable to prevent or limit the effects of such transfer. Any
deferred compensation effected by such termination shall be
13
retained by the Company or the trust and the Committee may, in its sole
discretion, pay to such participant, his or her spouse or children in such a
manner as the Committee deems proper.
Effect of Dissolution and Related Transactions. Subject to any required
action by the stockholders, if the Company shall be the surviving corporation in
any merger or consolidation (except a merger or consolidation in which the
stockholders of the Company receive the securities of another corporation), each
Award shall pertain to and apply to the securities which a holder of the number
of shares of Common Stock subject to the Award would have been entitled. Upon a
dissolution of the Company, a sale of all or substantially all of the Company's
assets, a merger or consolidation in which the Company is not the surviving
corporation, a merger or consolidation in which the Company is the surviving
corporation but the stockholders of the Company receive securities of another
corporation or other property, or the sale or disposition of all or
substantially all of the Company's assets, the Committee, in its sole
discretion, shall have the authority (a) to cancel each outstanding Award and
pay to the participant, for each share of Common Stock subject to the cancelled
Award, an amount in cash equal to the difference between the value of the
securities or other property to be received by the holder of a share of Common
Stock and the exercise price of the Award, or (b) to provide for the exchange of
each outstanding Award with a substitute award of the same type with respect to
the property for which such Award is exchanged, with such adjustments to the
exercise price or number of shares or amount of property subject to the
substitute award as the Committee deems appropriate.
Duration of Amended Incentive Plan. If the Amended Incentive Plan is
approved by stockholders at the Annual Meeting, the Amended Incentive Plan will
expire by its terms on November 10, 2013, after which date no Award may be
granted, except that the Amended Incentive Plan may be terminated at an earlier
date by action of the Board of Directors. The expiration of the Amended
Incentive Plan, or its termination by the Board of Directors, will not affect
any Award then outstanding.
Amendment and Termination of Amended Incentive Plan. The Board of Directors
shall have complete power and authority to amend the Amended Incentive Plan,
provided, however, the Board of Directors may not, without the affirmative vote
of the holders of a majority of the voting stock of the Company, make any
amendment which would (a) abolish the Committee without designating such other
committee, change the qualifications of its members, or withdraw the
administration of the Amended Incentive Plan from its supervision, (b) increase
the maximum number of shares for which Awards may be granted, (c) amend the
formula for determination of the exercise price of Options, (d) extend the term
of the Amended Incentive Plan or (e) amend the requirements as to the employees
eligible to receive Awards. In addition, the Board of Directors shall not make
any other amendment to the Amended Incentive Plan without stockholder approval
to the extent necessary or desirable to comply with any applicable law,
regulation or stock exchange rule. Without the written consent of the
participant, except as provided in the Amended Incentive Plan, no termination or
amendment of the Amended Incentive Plan shall adversely affect in any material
way any Award previously granted.
Financial Considerations. The Company will receive no monetary
consideration for the granting of Awards under the Amended Incentive Plan. It
will receive no monetary consideration other than the exercise price for shares
of Common Stock issued to participants upon exercise of an Award that is an
Option.
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the grant of ISOs. If
the optionee holds the shares purchased upon exercise of an ISO for at least two
years from the date the ISO is granted, and for at least one year from the date
the ISO is exercised, any gain realized on the sale of the shares received upon
exercise of the ISO is taxed as long-term capital gain. However, the difference
between the fair market value of the Common Stock on the date of exercise and
the exercise price of the ISO will be treated by the optionee as current income
in the year of exercise for purposes of the alternative minimum tax. If an
optionee disposes of the shares before the expiration of either of the two
special holding periods noted above, the disposition is a "disqualifying
disposition." In this event, the optionee will be required, at the time of the
disposition of the Common Stock, to treat the lesser of the gain realized or the
difference between the exercise price and the fair market value of the Common
Stock at the date of exercise as ordinary income, and the excess, if any, as
capital gain.
14
The Company will not be entitled to any deduction for federal income tax
purposes as the result of the grant or exercise of an ISO, regardless of whether
or not the exercise of the ISO results in liability to the optionee for
alternative minimum tax. However, if an optionee has ordinary income taxable as
compensation as a result of a disqualifying disposition, the Company will be
entitled to deduct an equivalent amount.
NSOs. In the case of a NSO, an optionee will recognize ordinary income upon
the exercise of the NSO in an amount equal to the difference between the fair
market value of the shares on the date of exercise and the option price (or, if
the optionee is subject to certain restrictions imposed by the federal
securities laws, upon the lapse of those restrictions unless the optionee makes
a special tax election within 30 days after the date of exercise to have the
general rule apply). Upon a subsequent disposition of such shares, any amount
received by the optionee in excess of the fair market value of the shares as of
the exercise will be taxed as capital gain. The Company will be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount as the ordinary income recognized by the optionee in connection with the
exercise of a NSO.
SARs. A participant recognizes no taxable income upon the grant of an SAR.
Upon the exercise of the SAR, the participant will recognize ordinary income in
an amount equal to excess of the fair market value of the shares received over
the grant price of such shares under the SAR. The Company will be entitled to
deduct for federal income tax purposes the same amount as the ordinary income
recognized by the participant at the time of the exercise.
Restricted Stock. Generally, except as described in the following
paragraph, a participant recognizes no taxable income upon the grant or purchase
of Restricted Stock that is subject to a "substantial risk of forfeiture," as
defined in Section 83 of the Code, until such time as the Restricted Stock is no
longer subject to the substantial risk of forfeiture. At that time, the
participant will be taxed, at ordinary income rates, on the difference between
the fair market value of the shares and the amount the participant paid, if any,
for the Restricted Stock. The Company will be eligible for a tax deduction at
the time the participant recognizes the income in an amount equal to the income
recognized.
A participant may elect, under Section 83(b) of the Code, to recognize
taxable ordinary income at the time the Restricted Stock is awarded in an amount
equal to the fair market value of the shares at the time of the grant,
determined without regard to any forfeiture restrictions. If such an election is
made, the Company will be entitled to a deduction at that time in the same
amount. Future appreciation of the shares will be taxed at either the long-term
or short-term capital gains rate when the shares are sold depending upon the
length of time the participant held the shares. However, if, after making such
an election, the shares are forfeited, the participant will be unable to claim a
deduction.
Unrestricted Stock. If the Unrestricted Stock award provides for the
immediate transfer of shares to the participant, the participant will recognize
ordinary income in an amount equal to the fair market value of the shares at the
time of grant. If the Unrestricted Stock award provides for a deferred transfer
of shares to the participant, the participant will recognize taxable ordinary
income at the time the Unrestricted Stock is actually transferred to the
participant. The Company will be entitled to a deduction at such time and in the
same amount as the participant recognizes income.
Deferred Compensation. For purposes of the federal income tax laws, it is
intended that participants will not realize taxable income on any compensation
that is deferred under the Amended Incentive Plan at the time such compensation
is earned. When a participant receives any distributions from his or her
Deferred Compensation Account, any cash and the fair market value of any shares
of Common Stock distributed to the participant will be treated as ordinary
income. The Company will be entitled to a deduction for federal income tax
purposes at the same time and in the same amount as the ordinary income
recognized by the participant in connection with a distribution from the
participant's Deferred Compensation Account.
NEW PLAN BENEFITS
The grant of an Award, the types of Awards and the number of shares of
Common Stock subject to such Awards under the Amended Plan are subject to the
discretion of the Committee; therefore, the benefits or amounts that will be
received by any participant or group of participants in the Amended Incentive
Plan, if approved,
15
including directors and key employees, are not currently determinable. To date,
only Options have been granted to participants.
Similarly, because the grant of an Award, the types of Awards and the
number of shares of Common Stock subject to such Awards under the Amended Plan
are subject to the discretion of the Committee, the benefits or amounts that
would have been received by any participant or group of participants in the
Amended Incentive Plan, including directors and key employees, had the Amended
Incentive Plan been in effect during the year ended June 30, 2003, are not
currently determinable.
The amount of benefits payable in the future as a result of deferred
compensation under the Amended Incentive Plan, if approved, is not currently
determinable because such benefits depend on the number of participants in the
Amended Incentive Plan, the amount of compensation each participant elects to
defer, and the fair market value of the Company's Common Stock as it changes
over time.
EQUITY COMPENSATION PLANS
The following table sets forth certain information as of June 30, 2003 with
respect to the Company's equity compensation plans under which equity securities
of the Company are authorized for issuance:
(a) (b) (c)
NUMBER OF SECURITIES REMAINING
AVAILABLE FOR FUTURE ISSUANCE
NUMBER OF SECURITIES TO BE ISSUED WEIGHTED-AVERAGE EXERCISE UNDER EQUITY COMPENSATION
UPON EXERCISE OF OUTSTANDING PRICE OF OUTSTANDING PLANS (EXCLUDING SECURITIES
PLAN CATEGORY OPTIONS, WARRANTS AND RIGHTS OPTIONS, WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
- ------------- --------------------------------- ---------------------------- ------------------------------
Equity compensation plans 116,376 $13.125 29,099
approved by security holders
Equity compensation plans not -- -- --
approved by security holders
Total 116,376 $13.125 29,099
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Amended Incentive Plan is
desirable, cost effective, and produces incentives which will benefit the
Company and its stockholders. The Board of Directors is seeking stockholder
approval of the Amended Incentive Plan, in order to satisfy the requirements of
the Code for favorable tax treatment of ISOs, to comply with Nasdaq requirements
and to exempt certain option transactions from the short-swing trading rules of
the Securities and Exchange Commission ("SEC").
Stockholder approval of the Incentive Plan requires the affirmative vote of
the holders of a majority of the votes cast by stockholders of the Company at
the Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDED INCENTIVE PLAN.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Grimsley, White & Company, which was the Company's independent auditors for
the 2003 fiscal year, has been retained by the Board of Directors to be the
Company's auditors for the 2004 fiscal year. A representative of Grimsley, White
& Company is expected to be present at the Annual Meeting to respond to
stockholders' questions and will have the opportunity to make a statement if he
so desires.
For the years ended June 30, 2003 and 2002, the Company was billed by
Grimsley, White & Company for fees aggregating $61,831 and $56,475,
respectively. Such fees comprised of the following:
16
AUDIT FEES
During the fiscal years ended June 30, 2003 and 2002, the aggregate fees
billed for professional services rendered for the audit of the Company's annual
financial statements and the reviews of the financial statements included in the
Company's Quarterly Reports on Form 10-QSB filed during the fiscal year ended
June 30, 2003 and 2002 were $55,036 and $51,893, respectively, which were paid
to Grimsley, White & Company.
AUDIT-RELATED FEES
There were no fees billed for audit-related services for the fiscal year
ended June 30, 2003 or 2002.
TAX FEES
The aggregate fees billed for tax services for the fiscal year ended June
30, 2003 and 2002 were $6,795 and $4,580, respectively. For both years, such
fees were for tax return preparation.
ALL OTHER FEES
No other fees were billed for services other than as set forth above for
the fiscal years ended June 30, 2003 and 2002.
- --------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
- --------------------------------------------------------------------------------
The Audit Committee of the Board of Directors (the "Audit Committee") has:
1. Reviewed and discussed the audited financial statements for the fiscal
year ended June 30, 2003 with the management of the Company.
2. Discussed with the Company's independent auditors the matters required
to be discussed by Statement of Accounting Standards No. 61, as the
same was in effect on the date of the Company's financial statements;
and
3. Received the written disclosures and the letter from the Company's
independent auditors required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), as the same
was in effect on the date of the Company's financial statements, and
discussed with the independent accountants the independent
accountants' independence.
Based on the foregoing materials and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements for
the fiscal year ended June 30, 2003 be included in the Company's Annual Report
on Form 10-KSB for the year ended June 30, 2003.
Members of the Audit Committee
Richard A. Young, Chairman
Philip W. Harsh
Timothy R. Glenn
17
- -------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------------------------------
Pursuant to regulations promulgated under the Exchange Act, the Company's
officers, directors and persons who own more than 10% of the outstanding Common
Stock are required to file reports detailing their ownership and changes of
ownership in such Common Stock, and to furnish the Company with copies of all
such reports. Based solely on the Company's review of such reports which the
Company received during the last fiscal year, or written representations from
such persons that no annual report of change in beneficial ownership was
required, the Company believes that, during the last fiscal year, all persons
subject to such reporting requirements have complied with the reporting
requirements, except that Director Harsh filed one late Form 4 reporting one
transaction.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy Statement
and matters incident to the conduct of the Annual Meeting. However, if any other
matters should properly come before the Annual Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the determination of a majority of the Board of Directors.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
The Company's 2003 Annual Report to Stockholders, including financial
statements, accompanies this Proxy Statement, which has been mailed to all
stockholders of record as of the close of business on the Record Date. Any
stockholder who has not received a copy of such Annual Report may obtain a copy
by writing to the Secretary of the Company. Such Annual Report is not to be
treated as a part of the proxy solicitation material or as having been
incorporated herein by reference.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
Under the Company's Articles of Incorporation, stockholder proposals must
be submitted in writing to the Secretary of the Company at the address stated
later in this paragraph no less than 30 days nor more than 60 days prior to the
date of such meeting; provided, however, that if less than 40 days' notice of
the meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Company not later than the close
of business on the tenth day following the day on which notice of the meeting
was mailed to stockholders. For consideration at the Annual Meeting, a
stockholder proposal must be delivered or mailed to the Company's Secretary no
later than October 20, 2003. In order to be eligible for inclusion in the
Company's proxy materials for next year's Annual Meeting of Stockholders, any
stockholder proposal to take action at such meeting must be received at the
Company's executive office at 7360 West US Highway 50, Salida, Colorado 81201 no
later than June 10, 2004. Any such proposals shall be subject to the
requirements of the proxy rules adopted under the Exchange Act.
18
- --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-KSB
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
JUNE 30, 2003 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE
FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO THE SECRETARY, HIGH COUNTRY BANCORP, INC., 7360 WEST US HIGHWAY 50,
SALIDA, COLORADO 81201.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard A. Young
RICHARD A. YOUNG
SECRETARY
Salida, Colorado
October 10, 2003
EXHIBIT A
HIGH COUNTRY BANCORP, INC.
2003 INCENTIVE EQUITY
AND
DEFERRED COMPENSATION PLAN
ARTICLE 1
PURPOSE
1.1 GENERAL. This High Country Bancorp, Inc. 2003 Incentive Equity and
--------
Deferred Compensation Plan (the "Plan") is an amendment and restatement of the
High Country Bancorp, Inc. 1998 Stock Option and Incentive Plan. The purpose of
the Plan is to promote the success and enhance the value of High Country
Bancorp, Inc. (the "Company") by linking the personal interests of the members
of the Board and the Company's employees, officers and executives to those of
Company shareholders and by providing such individuals with an incentive for
outstanding performance in order to generate superior returns to shareholders of
the Company. The Plan is further intended to provide flexibility to the Company
in its ability to motivate, attract, and retain the services of members of the
Board, employees, officers, and executives of the Company upon whose judgment,
interest, and special effort the successful conduct of the Company's operation
is largely dependent. For purposes of this Plan, "Company" shall be deemed to
include subsidiaries of High Country Bancorp, Inc., unless the context requires
otherwise.
ARTICLE 2
EFFECTIVE DATE AND TERM
2.1 EFFECTIVE DATE. The Plan was originally effective as of December 15,
----------------
1998. The Plan, as hereby amended and restated, will be effective as of the date
it is approved by the shareholders of the Company (the "Effective Date"). No
Awards which could not have been granted under the prior version of the Plan
shall be made prior to shareholder approval of this amended and restated version
of the Plan.
2.2 TERM. Unless sooner terminated by the Board, the Plan shall terminate
-----
on the tenth (10th) anniversary of the Effective Date, and no Awards may be
granted under the Plan thereafter. The termination of the Plan shall not affect
any Award that is outstanding on the termination date, without the consent of
the Participant.
ARTICLE 3
DEFINITIONS AND CONSTRUCTION
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
------------
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Award" means any Option, Stock Appreciation Right, Restricted Stock
Award, Unrestricted Stock Award, or Performance-Based Award granted to a
Participant under the Plan.
(b) "Award Agreement" means a writing, in such form as the Committee in its
discretion shall prescribe, evidencing an Award.
(c) "Bank" means High Country Bank.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means, in the good faith determination of the Board, the
Participant's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. No act, or
failure to act, on the Participant's part shall be considered "willful" unless
he has acted, or failed to act, with an absence of good faith and without a
reasonable belief that his action or failure to act was in the best interest of
the Company.
(f) "Change in Control" means:
(1) the acquisition by a person or persons acting in concert of the
power to vote twenty-five percent (25%) or more of a class of the Company's
voting securities;
(2) the acquisition by a person of the power to direct the Bank's or
Company's management or policies, if the Board of Directors or the OTS has
made a determination that such acquisition constitutes or will constitute
an acquisition of control of the Bank or the Company for the purposes of
the Savings & Loan Holding Company Act or the Change in Bank Control Act
and the regulations thereunder;
(3) during any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the members of the Board cease, for
any reason, to constitute at least a majority thereof, unless the election
of each director who was not a director at the beginning of such period has
been approved in advance by directors representing at least two-thirds
(2/3) of the directors then in office who were directors in office at the
beginning of the period; provided, however, that for purposes of this
clause (3), each director who is first elected to the Board (or first
nominated by the Board for election by the shareholders) with the approval
of at least two-thirds (2/3) of the directors who were directors at the
beginning of the period shall be deemed to be a director at the beginning
of the two-year period;
(4) the Company shall have merged into or consolidated with another
corporation, or merged another corporation into the Company, on a basis
whereby less than fifty percent (50%) of the total voting power of the
surviving corporation is represented by shares held by persons who were
shareholders of the Company immediately before the merger or consolidation;
or
(5) the Company shall have sold to another person (i) substantially
all of the Company's assets or (ii) the Bank.
The term "person" refers to an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or other entity.
(g) "Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
(h) "Committee" means the committee of the Board described in Article 4.
(i) "Covered Employee" means an Employee who is a "covered employee" within
the meaning of Section 162(m) of the Code.
(j) "Deferred Compensation Account" means the bookkeeping account
established for each Participant pursuant to Section 12.2 of this Plan.
(k) "Disability" shall have the meaning set forth in Section 22(e)(3) of
the Code.
(l) "Distribution Event" means an event as a result of which a Participant
is entitled to receive the balance of his or her Deferred Compensation Account
pursuant to Section 12.3 of this Plan, namely (i) with respect to a Participant
who is an employee of the Company and the portion of his or her Deferred
Compensation Account attributable to an Award or other compensation earned as an
employee, the date the Participant terminates his or her employment with the
Company, and (ii) with respect a Participant who is a member
A-2
of the Board and the portion of his or her Deferred Compensation Account
attributable to an Award or other compensation earned as a member of the Board,
the earlier of (A) the date the Participant terminates his or her service as a
member of the Board, or (B) the Participant's attainment of the age specified
(not younger than age 55) in an election form filed by the Participant with the
Committee at such time as he or she first becomes eligible to defer compensation
pursuant to Article 12 of this Plan.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder.
(n) "Fair Market Value" means, as of any given date, the fair market value
of Stock on a particular date determined in accordance with the requirements of
Section 422 of the Code.
(o) "Incentive Stock Option" means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.
(p) "Non-Employee Director" means a member of the Board who qualifies as a
"Non-Employee Director" as defined in Rule 16b-3(b)(3) under the Exchange Act,
or any successor definition adopted by the Board.
(q) "Non-Qualified Stock Option" means an Option that is not intended to be
an Incentive Stock Option.
(r) "Option" means a right granted to a Participant under Article 7 of the
Plan to purchase Stock at a specified price during specified time periods. An
Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.
(s) "Participant" means a person who, as a member of the Board, an
employee, officer, or executive of the Company, has been granted an Award under
the Plan, or who has been designated as eligible to make an election to defer
compensation under this Plan.
(t) "Performance-Based Awards" means Stock Awards granted to selected
Covered Employees pursuant to Article 9, but which are subject to the terms and
conditions set forth in Article 10. All Performance-Based Awards are intended to
qualify as "performance-based compensation" under Section 162(m) of the Code.
(u) "Performance Criteria" means the criteria that the Committee selects
for purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria that will be used
to establish Performance Goals may include, but shall not be limited to, one or
more of the following: pre- or after-tax net earnings, sales growth, operating
earnings, operating cash flow, working capital, return on net assets, return on
stockholders' equity, return on assets, return on capital, Stock price growth,
stockholder returns, gross or net profit margin, earnings per share, price per
share of Stock, and market share, any of which may be measured either in
absolute terms or as compared to any incremental increase or as compared to
results of a peer group. The Committee shall, within the time prescribed by
Section 162(m) of the Code, define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for such Performance
Period for such Participant.
(v) "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period based upon
the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, or an individual. The Committee, in its discretion, may, within the time
prescribed by Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution
or enlargement of the rights of Participants (i) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (ii) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the
A-3
Company, or the financial statements of the Company, or in response to, or in
anticipation of, changes in applicable laws, regulations, accounting principles,
or business conditions.
(w) "Performance Period" means the one or more periods of time, which may
be of varying and overlapping durations, as the Committee may select, over which
the attainment of one or more Performance Goals will be measured for the purpose
of determining a Participant's right to, and the payment of, a Performance-Based
Award.
(x) "Plan" means the High Country Bancorp, Inc. 2003 Incentive Equity and
Deferred Compensation Plan as set forth herein.
(y) "Restricted Stock Award" means Stock granted to a Participant under
Article 9 that is subject to certain restrictions and to risk of forfeiture.
(z) "Stock" means the common stock of the Company and such other securities
of the Company that may be substituted for Stock pursuant to Article 13.
(aa) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the difference between
the Fair Market Value of a share of Stock as of the date of exercise of the SAR
over the grant price of the SAR, all as determined pursuant to Article 8.
(bb) "Stock Award" means a Restricted Stock Award or an Unrestricted Stock
Award.
(cc) "Unrestricted Stock Award" means Stock granted to a Participant under
Article 9 that is not subject to restrictions or a risk of forfeiture.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by a Committee appointed by,
----------
and which serves at the discretion of, the Board. The Committee shall consist of
at least two individuals, each of whom qualifies as a Non-Employee Director. To
the extent necessary or desirable each member of the Committee shall also
qualify as an "outside director" under Code Section 162(m) and the regulations
issued thereunder. The members of the Committee shall meet such additional
criteria as may be necessary or desirable to comply with regulatory or stock
exchange rules or exemptions. The Company will pay all reasonable expenses of
the Committee.
4.2 AUTHORITY OF COMMITTEE. Subject to any specific designation in the
------------------------
Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of shares
of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the Plan
including but not limited to, the exercise price, grant price, or purchase
price, any restrictions or limitations on the Award, any schedule for lapse of
forfeiture restrictions or restrictions on the exercisability of an Award, and
accelerations or waivers thereof, based in each case on such considerations as
the Committee in its sole discretion determines;
(e) Amend, modify, or terminate any outstanding Award, with the
Participant's consent unless the Committee has the authority to amend, modify,
or terminate an Award without the Participant's consent under any other
provision of the Plan.
A-4
(f) Determine whether, to what extent, and under what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in, cash,
Stock, other Awards, or other property, or an Award may be canceled, forfeited,
or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be identical
for each Participant;
(h) Decide all other matters that must be determined in connection with an
Award;
(i) Establish, adopt, revise, amend or rescind any guidelines, rules and
regulations as it may deem necessary or advisable to administer the Plan; and
(j) Interpret the terms of, and rule on any matter arising under, the Plan
or any Award Agreement;
(k) Make all other decisions and determinations that may be required under
the Plan or as the Committee deems necessary or advisable to administer the
Plan, including but not limited to, the determination of whether and to what
extent any Performance Goals have been achieved; and
(l) Retain counsel, accountants and other consultants to aid in exercising
its powers and carrying out its duties under the Plan.
4.3 DECISIONS BINDING. The Committee's interpretation of the Plan, any
-------------------
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties and any other persons claiming an
interest in any Award or under the Plan.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 13.1, the
-----------------
aggregate number of shares of Stock reserved and available for grant under the
Plan shall be one hundred ninety thousand four hundred seventy-five (190,475).
5.2 LAPSED AWARDS. To the extent that an Award terminates, is cancelled,
--------------
expires, lapses or is forfeited for any reason, including, but not limited to,
the failure to achieve any Performance Goals, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan; however,
shares subject to an Award granted prior to the Effective Date may not again be
available for the grant of an Award after December 15, 2008.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
-------------------
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS. Notwithstanding any
-------------------------------------------------
provision in the Plan to the contrary, and subject to the adjustment in Section
13.1, the maximum number of shares of Stock with respect to Options and Stock
Appreciation Rights that may be granted to any one Participant during the
Company's fiscal year shall be fifteen thousand (15,000).
ARTICLE 6
ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
------------
members of the Board and any key executive of the Company (which term shall be
deemed to include among others, the president, any vice president, secretary,
treasurer or any manager in charge of a principal business unit, division or
function (such as sales, administration or finance), any other officer who
performs a policy making function, or any other person who
A-5
performs similar policy making functions for the Company or any of its
subsidiaries) and who on the date of any Award is in the employ of the Company
or one of its then subsidiary corporations, as defined in Section 424 of the
Code.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
----------------------
Committee may, from time to time, select from among all eligible individuals,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No individual shall have any right to be granted an Award under
this Plan.
ARTICLE 7
STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to Participants
--------
on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an Option
shall be the Fair Market Value as of the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. Except as provided herein, the
Committee shall determine the time or times at which an Option may be exercised
in whole or in part. The Committee shall also determine the performance or other
conditions, if any, that must be satisfied before all or part of an Option may
be exercised. An Option will lapse immediately if a Participant's employment or
Board service is terminated for Cause.
(1) The Option of any Participant whose employment or Board service is
terminated for any reason, other than for death, Disability or Cause shall
be exercisable to the extent provided therein, through the earlier of the
date which is three months after termination of employment or the date that
such Option expires in accordance with its terms, and shall expire
thereafter.
(2) In the event of the death of a Participant while an employee or
member of the Board of the Company or within three months after the
termination of employment or Board service of the Participant for other
than Cause, or in the event of the termination of employment or Board
service by a Participant for Disability, the Option may be exercised as
follows:
(A) In the event of the death of a Participant during employment
or Board service or the death of the Participant within three months
after the termination of employment or Board service for other than
Cause, each Option granted to such Participant shall be exercisable to
the extent provided therein but not later than one year after his or
her death (but not beyond the stated duration of the Option). Any such
exercise shall be made only by or to the executor or administrator of
the estate of the deceased Participant or person or persons to whom
the deceased Participant's rights under the Option shall pass by will
or the laws of descent and distribution and to the extent, if any,
that the deceased Participant was entitled at the date of his or her
death.
(B) In the case of a Participant whose employment or Board
service is terminated on account of Disability, the Option shall be
exercisable or payable to the extent provided therein on the earlier
of one year after termination of employment or Board service or the
date that such Option expires in accordance with its terms. During
such period, the Option may be exercised by the Participant with
respect to the same number of shares, in the same manner and to the
same extent as if the Participant had continued employment or Board
service during such period.
(3) Each Option granted under the Plan shall, by its terms, not be
transferable otherwise than by will or the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds Options may transfer such Options (but not
Incentive Stock Options) to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more
of these individuals. Options so transferred may thereafter be transferred
only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially
transferred the Options pursuant to this Section 7.1(b)(3). Options which
are transferred pursuant to this Section 7.1(b)(3) shall be exercisable by
the transferee according to the same terms and conditions as applied to the
Participant.
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(c) PAYMENT. An Option shall be exercised by giving a written notice to the
President of the Company stating the number of shares of Stock with respect to
which the Option is being exercised and containing such other information as the
President may request and by tendering payment therefore with a cashier's check,
certified check, or with existing holdings of Common Stock held for more than
six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by an Award
Agreement. The Award Agreement shall include such additional provisions as may
be specified by the Committee.
7.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be granted only
------------------------
to employees and the terms of any Incentive Stock Options granted under the Plan
must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be set by
the Committee, provided that the exercise price for any Incentive Stock Option
may not be less than the Fair Market Value as of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be exercisable for
more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the
following circumstances.
(1) The Incentive Stock Option shall lapse ten years from the date it
is granted, unless an earlier time is set in the Award Agreement.
(2) The Incentive Stock Option shall lapse upon termination of
employment for Cause or for any other reason, other than the Participant's
death or Disability, unless otherwise provided in the Award Agreement.
(3) If the Participant terminates employment on account of Disability
or death before the Option lapses pursuant to paragraph (1) or (2) above,
the Incentive Stock Option shall lapse, unless it was previously exercised,
on the earlier of (i) the date on which the Option would have lapsed had
the Participant not become Disabled or lived and had his employment status
(i.e., whether the Participant was employed by the Company on the date of
his Disability or death or had previously terminated employment) remained
unchanged; or (ii) 12 months after the date of the Participant's
termination of employment on account of Disability or death.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with respect
to which Incentive Stock Options are first exercisable by a Participant in any
calendar year may not exceed $100,000.00 or such other limitation as imposed by
Section 422(d) of the Code, or any successor provision. To the extent that
Incentive Stock Options are first exercisable by a Participant in excess of such
limitation, the excess shall be considered Non-Qualified Stock Options.
(e) TEN PERCENT OWNERS. An Incentive Stock Option shall be granted to any
individual who, at the date of grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of Stock of the
Company only if such Option is granted at a price that is not less than 110% of
Fair Market Value on the date of grant and the Option is exercisable for no more
than five years from the date of grant.
(f) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive Stock
Option may be exercised only by the Participant.
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ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 GRANT OF SARS. The Committee is authorized to grant SARs to
----------------
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation Right, the
Participant to whom it is granted has the right to receive the excess, if any,
of:
(1) The Fair Market Value of a share of Stock on the date of exercise;
over
(2) The grant price of the Stock Appreciation Right as determined by
the Committee, which shall not be less than the Fair Market Value of a
share of Stock on the date of grant in the case of any SAR related to any
Incentive Stock Option.
(b) OTHER TERMS. All such Awards shall be evidenced by an Award Agreement.
The terms, methods of exercise, methods of settlement, form of consideration
payable in settlement, and any other terms and conditions of any Stock
Appreciation Right shall be determined by the Committee at the time of the grant
of the Award and shall be reflected in the Award Agreement.
ARTICLE 9
STOCK AWARDS
9.1 GRANT OF STOCK. The Committee is authorized to grant Unrestricted Stock
---------------
Awards and Restricted Stock Awards to Participants in such amounts and subject
to such terms and conditions as determined by the Committee. All such Awards
shall be evidenced by an Award Agreement.
9.2 ISSUANCE AND RESTRICTIONS. An Unrestricted Stock Award may provide for
--------------------------
a transfer of shares of Stock to a Participant at the time the Award is granted,
or it may provide for a deferred transfer of shares of Stock subject to
conditions prescribed by the Committee. Restricted Stock Awards shall be subject
to such restrictions on transferability and risks of forfeiture as the Committee
may impose. These restrictions and risks may lapse separately or in combination
at such times, under such circumstances, in such installments, or otherwise, as
the Committee determines at the time of the grant of the Award or thereafter.
9.3 FORFEITURE. Except as otherwise determined by the Committee at the time
-----------
of the grant of the Award or thereafter, upon termination of employment during
the applicable restriction period, Stock subject to a Restricted Stock Award
that is at that time subject to restrictions shall be forfeited, provided,
however, that the Committee may provide in any Restricted Stock Award that
restrictions or forfeiture conditions relating to the Stock will be waived in
whole or in part in the event of terminations resulting from specified causes,
and the Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to the Stock.
9.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock Awards granted
------------------------------------
under the Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing shares of Stock subject to Restricted Stock Awards
are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such shares, and the Company may, at its discretion, retain
physical possession of the certificate until such time as all applicable
restrictions lapse.
ARTICLE 10
PERFORMANCE-BASED AWARDS
10.1 PURPOSE. The purpose of this Article 10 is to provide the Committee
--------
the ability to qualify the Awards under Article 9 as "performance-based
compensation" under Section 162(m) of the Code. If the Committee, in its
discretion, decides to grant a Performance-Based Award to a Covered Employee,
the provisions of this Article 10 shall control over any contrary provision
contained in Article 10.
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10.2 APPLICABILITY. This Article 10 shall apply only to those Covered
--------------
Employees selected by the Committee to receive Performance-Based Awards. The
Committee may, in its discretion, grant Stock Awards to Covered Employees that
do not satisfy the requirements of this Article 10. The designation of a Covered
Employee as a Participant for a Performance Period shall not in any manner
entitle the Participant to receive an Award for the period. Moreover,
designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant
in any subsequent Performance Period and designation of one Covered Employee as
a Participant shall not require designation of any other Covered Employees as a
Participant in such period or in any other period.
10.3 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS. With
---------------------------------------------------------------
regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company or any
division or business unit thereof.
10.4 PAYMENT OF PERFORMANCE-BASED AWARDS. Unless otherwise provided in the
-------------------------------------
relevant Award Agreement, a Participant must be employed by the Company on the
last day of the Performance Period to be eligible for a Performance-Based Award
for such Performance Period. In determining the actual size of an individual
Performance-Based Award, the Committee may reduce or eliminate the amount of the
Performance-Based Award earned for the Performance Period, if in its sole and
absolute discretion, such reduction or elimination is appropriate.
10.5 SHAREHOLDER APPROVAL. The Board shall disclose to the shareholders of
---------------------
the Company the material terms of any Performance - Based Award, and shall seek
approval of the shareholders of the Performance - Based Award before any Stock
is transferred to a Participant, or before any restrictions with respect to same
lapse, pursuant to such Award. The Committee shall certify that the Performance
Goals with respect to any Performance - Based Award have been achieved before
any Stock is transferred to a Participant, or before any restrictions with
respect to same lapse. Such disclosure, approval and certification shall be
effected in accordance with the requirements of Section 162(m)(4)(C) of the
Code.
ARTICLE 11
PROVISIONS APPLICABLE TO AWARDS
11.1 STAND-ALONE AND TANDEM AWARDS. Awards granted under the Plan may, in
------------------------------
the discretion of the Committee, be granted either alone, in addition to, or in
tandem with, any other Award granted under the Plan. Awards granted in addition
to or in tandem with other Awards may be granted either at the same time as or
at a different time from the grant of such other Awards.
11.2 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange
---------------------
or buy out any previously granted Award for a payment in cash, Stock, or another
Award, based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made.
11.3 TERM OF AWARD. The term of each Award shall be for the period as
---------------
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant.
11.4 LIMITS ON TRANSFER. No right or interest of a Participant in any Award
-------------------
may be pledged, encumbered, or hypothecated to or in favor of any party other
than the Company, or shall be subject to any lien, obligation, or liability of
such Participant to any other party other than the Company. No Award shall be
assignable or transferable by a Participant other than by will or the laws of
descent and distribution, except that the Committee, in its discretion, may
permit a Participant to make a gratuitous transfer of an Award that is not an
Incentive Stock Option to his or her spouse, lineal descendants, lineal
ascendants, or a duly established trust for the benefit of one or more of these
individuals.
11.5 BENEFICIARIES. Notwithstanding Section 11.4, a Participant may, in the
--------------
manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution
A-9
with respect to any Award upon the Participant's death. A beneficiary, legal
guardian, legal representative, or other person claiming any rights under the
Plan is subject to all terms and conditions of the Plan and any Award applicable
to the Participant, except to the extent the Plan and Award otherwise provide,
and to any additional restrictions deemed necessary or appropriate by the
Committee. If no beneficiary has been designated or survives the Participant,
payment shall be made to the Participant's estate. Subject to the foregoing, a
beneficiary designation may be changed or revoked by a Participant at any time
provided the change or revocation is filed with the Committee.
11.6 STOCK CERTIFICATES. Notwithstanding anything herein to the contrary,
-------------------
the Company shall not be required to issue or deliver any certificates
evidencing shares of Stock pursuant to the exercise of any Awards, unless and
until the Board has determined, with advice of counsel, that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities and, if applicable, the requirements of
any exchange on which the shares of Stock are listed or traded. All Stock
certificates delivered under the Plan are subject to any stop-transfer orders
and other restrictions as the Committee deems necessary or advisable to comply
with Federal, state, or foreign jurisdiction, securities or other laws, rules
and regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The Committee
may place legends on any Stock certificate to reference restrictions applicable
to the Stock. In addition to the terms and conditions provided herein, the Board
may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to
comply with any such laws, regulations, or requirements.
11.7 LOAN AGREEMENTS. Each Award shall be subject to the condition that the
----------------
Company shall not be obligated to issue or transfer any Stock or cash to the
holder of the Award, upon the exercise or vesting thereof, if at any time the
Committee or the Board shall determine that the issuance or transfer of such
Stock or cash would be in violation of any covenant in any of the Company's loan
agreements or other contracts.
ARTICLE 12
DEFERRAL OF COMPENSATION
12.1 RIGHT TO DEFER COMPENSATION.
----------------------------
(a) TYPES OF DEFERRALS. Any Participant designated by the Board or by the
Committee may elect to defer (i) all or any portion of the Participant's salary,
(ii) any percentage of a fiscal year bonus determined by the Board or other duly
constituted authority or delegate to be paid to such Participant, or (iii) all
or any portion of the Participant's director's fees. Such election shall remain
in force for all future years until modified or revoked. In addition, the
Committee, in its discretion, may permit a Participant to elect to defer his or
her receipt of the payment of cash or the delivery of shares of Stock that would
otherwise be due to such Participant pursuant to an Award. Any election under
this Section 12.1 shall be made by written notice delivered to the Board or
Committee, specifying the amount (or percentage) of salary and/or bonus and/or
directors' fees and/or the award to be deferred.
(b) TIMING OF ELECTIONS. A Participant may, at any time within 30 days of
first becoming eligible to participate in this Plan, make an election to defer
salary or director's fees earned after such election. Any increase or decrease
in future deferrals of salary or director's fees earned during a calendar year
must be made prior to such calendar year. A Participant may make an initial
election to defer a bonus for a fiscal year, or may elect to increase or
decrease the amount of a fiscal year bonus to be deferred, if such election is
made prior to such fiscal year. A Participant may make an election to defer the
receipt of cash or shares of Stock otherwise payable or transferable to the
Participant pursuant to an Award in accordance with the terms of such Award.
12.2 DEFERRED COMPENSATION ACCOUNTS.
-------------------------------
(a) ESTABLISHMENT OF ACCOUNTS. A Deferred Compensation Account in the name
of each Participant who has elected to defer compensation under the Plan shall
be established and maintained as a special ledger account on the books of the
Company. On the last day of each calendar month in which salary or director's
fees deferred under this Plan would have become payable to a Participant (in the
absence of an election to defer payment thereof), the amount of such deferred
salary or director's fees shall be credited to the Participant's
3
Deferred Compensation Account. On the last day of the month in which the bonuses
deferred under this Plan would have become payable to a Participant in the
absence of an election to defer payment thereof, the amount of such deferred
bonus shall be credited to the Participant's Deferred Compensation Account. On
the last day of the month in which an Award would have otherwise become payable
or transferable to a Participant in the absence of an election to defer receipt
thereof, the amount of such deferred Award shall be credited to the
Participant's Deferred Compensation Account.
(b) DEEMED INVESTMENT OF ACCOUNT BALANCE.
(i) Except as otherwise provided by the terms of an Award, the
Participant shall, at the time of making a deferred compensation election
under this Plan, make an election directing the Company to credit to the
Deferred Compensation Account in that calendar year based upon the options
made available by the Board or designated Committee which options may
include either cash, Stock, or a combination of cash and Stock equal in
value to the amount of the current year's salary or bonus deferred under
the Plan. In addition to cash or Stock, the Board or the Committee may
offer to the Participant such deemed investment options as it shall decide
are appropriate. Such investment options may include deemed investments in
individual stocks or bonds, mutual funds, and such other investment options
as the Board or Committee may choose. The Board or Committee shall not be
required to offer the same deemed investment options to each Participant
but may restrict certain investment options to designated Participants. In
the absence of a contrary election by a Participant, the amount credited to
a Deferred Compensation Account shall be credited as cash.
(ii) If the Participant directs that any amount credited to the
Deferred Compensation account be credited in the form of Stock, the Board
shall credit to the Deferred Compensation Account sufficient shares of
Stock equal in value to the Deferred Compensation Account balance, or such
lesser amount as the Participant shall direct. The value of such Stock
shall be determined in accordance with a valuation methodology approved by
the Board or by the Committee. Except as provided in Section 12.6, such
Stock credited to the Deferred Compensation Account shall merely constitute
a bookkeeping entry of the Company, and (except as provided herein) the
Participant shall have no voting, dividend, or other legal or economic
rights with respect to such Stock. At the end of each fiscal quarter, an
amount equivalent to all dividends which would otherwise have been payable
with respect to such Stock shall be credited to the Deferred Compensation
Account as additional Stock. The amount of the Participant's Deferred
Compensation Account that is credited as cash shall accrue interest at a
rate no less than the prime rate charged the Company by its principal bank
and shall not exceed the highest rate paid on Individual Retirement
Accounts ("IRAs") by the Bank plus two percent (2%). Such interest with
respect to a Deferred Compensation Account shall be credited to such
account quarterly, based on the weighted average daily prime rate or the
IRA rate for the three (3) month period ending on the last day of the
quarter.
(iii) The Participant shall elect the portion of their deferral to be
allocated to Stock or cash or such other option as made available by the
Board at the time of making such election to defer compensation. Such
allocation may not be amended with respect to such deferral. Any allocation
to Stock shall be paid in the form of Stock. No Participant will be granted
the right to take payment of the Stock in cash rather than in shares.
(iv) If, at any time, the deferral of a Participant is allocated to
Stock, and such Participant shall be deemed to have violated the
short-swing profit rules of Section 16(b) of the Exchange Act through such
allocation, the allocation to Stock shall be void and such allocation shall
default to cash.
12.3 PAYMENT OF DEFERRED COMPENSATION.
---------------------------------
(a) IN GENERAL. Amounts credited to a Participant's Deferred Compensation
Account shall be payable upon the Participant's Distribution Event. The
Participant shall determine the method of distributing the amounts in the
Deferred Compensation Account at the time the first election to participate in
the Plan is made, which shall be either a single distribution or a series of up
to ten (10) consecutive, substantially equal annual installments paid to such
Participant or his or her beneficiary, as the case may be, on or before January
15 of each year, commencing in the year following the Distribution Event. If no
such election is made, the method of distribution shall be determined solely by
the Board. If the Participant has elected to receive installment distributions,
and less than the full value of the Participant's Deferred Compensation Account
balance has been distributed as of the date of his or her death, the balance
shall be paid to the Participant's beneficiary in accordance
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with the same method in effect at the Participant's death, except that the
beneficiary may elect, with the consent of the Committee, to receive the balance
of the Deferred Compensation Account in a single lump sum. For purposes of this
Article 12, a Participant's "beneficiary" shall mean the person or persons
designated by the Participant pursuant to Section 11.5 of this Plan, or, in the
absence of such designation or if no such person survives the Participant, the
Participant's estate. If any portion of the Participant's Deferred Compensation
Account is credited with Stock, then distributions from that portion of the
Deferred Compensation Account shall be made directly in the form of Stock.
Undistributed amounts shall continue to earn interest or accrue dividends, as
the case may be.
(b) MODIFICATION OF PAYMENT TERMS. A Participant may change a Distribution
Election at any time at least sixty (60) days prior to a Distribution Event. If
a Participant electing to participate in the Plan ceases to be an employee of
the Company or a member of the Board, prior to full payment of the entire amount
in the Deferred Compensation Account, shall, after reasonable warning from the
Board, persist in an affiliation with any business that is a principal
competitor with a significant portion of the business conducted by the Company,
the entire balance of such Deferred Compensation Account may, if directed by the
Board in its sole discretion, be paid immediately to such Participant in a lump
sum. In the event a Participant dies prior to receiving payment of the entire
amount in the Deferred Compensation Account, the unpaid balance shall be paid to
such beneficiary as may have been designated by the Participant in writing to
the Company as the person, firm or trust to receive any post-death distribution
under this Plan, or, in the absence of such written designation, to the legal
representative or any person, firm or organization designated in the
Participant's last will to receive such distributions.
(c) CHANGE IN CONTROL. In the event of a Change in Control, a Participant
shall be permitted to elect to receive a distribution of all or a portion of his
or her Deferred Compensation Account, provided that any such election hereunder
must be made within the period commencing thirty days prior to such Change in
Control and ending on the date of such Change in Control. Any distribution
pursuant to this Section 12.3(c) shall be made (i) in the form of cash and/or
Stock as his or her Deferred Compensation Account is allocated and (ii) within
seven (7) days subsequent to the Change in Control.
(d) HARDSHIP DISTRIBUTION IN THE CASE OF FINANCIAL EMERGENCY. Prior to the
time a Deferred Compensation Account of a Participant would otherwise become
payable, the Committee, in its sole discretion, may elect to distribute all or a
portion of the Deferred Compensation Account in the event such Participant
requests a distribution by reason of severe financial hardship. For purposes of
this Plan, severe financial hardship shall be deemed to exist in the event the
Committee determines that a Participant needs a distribution to meet immediate
and heavy financial needs resulting from a sudden or unexpected illness or
accident of the Participant, or a member of his or her family, loss of the
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. A distribution based on financial hardship shall not exceed the
amount required to meet the immediate financial need created by the hardship. In
the event the Participant is a member of the Committee making such
determination, the Participant shall not participate in the decision by the
Committee.
12.4 TRUST PROVISIONS.
-----------------
(a) ESTABLISHMENT OF TRUST. The Company may in its sole discretion
establish one or more trusts to provide a source of payment for its obligations
under the Plan and such trust shall be permitted to hold cash, Stock, or other
assets to the extent of the Company's obligations hereunder. The Company may,
but is not required to, utilize a single trust with respect to its obligations
to Participants who are members of the Board and Participants who are not
members of the Board.
(b) CLAIMS OF THE COMPANY'S CREDITORS. All assets held by any trust created
hereunder and all distributions to be made by any trustee pursuant to this Plan
and any trust agreement shall be subject to the claims of general creditors of
the Company, including judgment creditors and bankruptcy creditors. The rights
of a Participant or his or her beneficiaries in or to any assets of the trust
shall be no greater than the rights of an unsecured creditor of the Company.
(c) NOTIFICATION OF INSOLVENCY. In the event the Company becomes insolvent,
the Chief Executive Officer and Chairman of the Board of the Company shall
immediately notify the trustees of all
A-12
trusts created hereunder of that fact. The trustees shall make no distributions
to any Participant or any beneficiary from any assets held in trust pursuant to
the Plan after such notification is received or at any time after the trustee
has actual knowledge that the Company is insolvent. Under any such circumstance,
the trustee shall dispose of property held in trust pursuant to the Plan only as
a court of competent jurisdiction may direct. For purposes of this Plan, the
Company shall be deemed "insolvent" by the trustee if the Company is subject to
a pending voluntary or involuntary proceeding as a debtor under the United
States Bankruptcy Code, as the same may be amended from time to time, whether or
not the Company has provided the trustee with the notification required by this
Section 12.4(c), or if the trustee has been notified pursuant to this Section
12.4(c) that the Company is insolvent.
12.5 NON-ASSIGNMENT. No right or interest of any Participant or any person
---------------
claiming through or under such Participant in the Participant's Deferred
Compensation Account shall be assignable or transferable in any manner or be
subject to alienation, anticipation, sale, pledge, encumbrance or other legal
process (including execution, levy, garnishment, attachment, bankruptcy, or
otherwise) or in any manner be subject to the debts or liabilities of such
Participant. If any Participant or any such person shall attempt to or shall
transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his
or her benefits hereunder or any part thereof, or if by reason of his or her
bankruptcy or other event happening at any time such benefits would devolve upon
anyone else or would not be enjoyed by him or her, then the Committee, in its
discretion, may terminate his or her interest in any such benefit to the extent
the Committee considers necessary or advisable to prevent or limit the effects
of such occurrence. Termination shall be effected by filing a written
declaration of termination with the Committee's records and making reasonable
efforts to deliver a copy to such Participant or any such other person or his or
her legal representative. As long as any Participant is alive, any amounts
affected by the termination shall be retained by the Company or the trustee of
any trust established pursuant to Section 12.4 of this Plan and, in the
Committee's sole and absolute discretion, may be paid to or expended for the
benefit of such Participant, his or her spouse, his or her children, or any
other person or persons in fact dependent upon him or her in such a manner as
the Committee shall deem proper.
ARTICLE 13
CHANGES IN CAPITAL STRUCTURE
13.1 GENERAL.
--------
(a) SHARES AVAILABLE FOR GRANT. In the event of any change in the number of
shares of Stock outstanding by reason of any stock dividend or split,
recapitalization, merger, consolidation, combination or exchange of shares or
similar corporate change, the maximum aggregate number of shares of Stock with
respect to which the Committee may grant Awards shall be appropriately adjusted
by the Committee. In the event of any change in the number of shares of Stock
outstanding by reason of any other event or transaction, the Committee may, but
need not, make such adjustments in the number and class of shares of Stock with
respect to which Awards may be granted as the Committee may deem appropriate.
(b) OUTSTANDING AWARDS - INCREASE OR DECREASE IN ISSUED SHARES WITHOUT
CONSIDERATION. Subject to any required action by the shareholders of the
Company, in the event of any increase or decrease in the number of issued shares
of Stock resulting from a subdivision or consolidation of shares of Stock or the
payment of a stock dividend (but only on the shares of Stock), or any other
increase or decrease in the number of such shares effected without receipt or
payment of consideration by the Company, the Committee shall proportionally
adjust the number of shares of Stock subject to each outstanding Award and the
exercise price per share of Stock of each such Award.
(c) OUTSTANDING AWARDS - CERTAIN MERGERS. Subject to any required action by
the shareholders of the Company, in the event that the Company shall be the
surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Stock receive
securities of another corporation), each Award outstanding on the date of such
merger or consolidation shall pertain to and apply to the securities which a
holder of the number of shares of Stock subject to such Award would have
received in such merger or consolidation.
(d) OUTSTANDING AWARDS - CERTAIN OTHER TRANSACTIONS. In the event of (i) a
dissolution or liquidation of the Company, (ii) a sale of all or substantially
all of the Company's assets, (iii) a
A-13
merger or consolidation involving the Company in which the Company is not the
surviving corporation or (iv) a merger or consolidation involving the Company in
which the Company is the surviving corporation but the holders of shares of
Stock receive securities of another corporation and/or other property, including
cash, the Committee shall, in its absolute discretion, have the power to:
(1) cancel, effective immediately prior to the occurrence of such
event, each Award outstanding immediately prior to such event (whether or
not then exercisable), and, in full consideration of such cancellation, pay
to the Participant to whom such Award was granted an amount in cash, for
each share of Stock subject to such Award, respectively, equal to the
excess of (A) the value, as determined by the Committee in its absolute
discretion, of the property (including cash) received by the holder of a
share of Stock as a result of such event over (B) the exercise of such
Award; or
(2) provide for the exchange of each Award outstanding immediately
prior to such event (whether or not then exercisable) for an option, a
stock appreciation right, restricted stock award, performance share award
or performance-based award with respect to, as appropriate, some or all of
the property for which such Award is exchanged and, incident thereto, make
an equitable adjustment as determined by the Committee in its absolute
discretion in the exercise price or value of the option, stock appreciate
right, restricted stock award, performance share award or performance-based
award or the number of shares or amount of property subject to the option,
stock appreciation right, restricted stock award, performance share award
or performance-based award or, if appropriate, provide for a cash payment
to the Participant to whom such Award was granted in partial consideration
for the exchange of the Award, or any combination thereof.
(e) OUTSTANDING AWARDS - OTHER CHANGES. In the event of any other change in
the capitalization of the Company or corporate change other than those
specifically referred to in this Article, the Committee may, in its absolute
discretion, make such adjustments in the number and class of shares subject to
Awards outstanding on the date on which such change occurs and in the per share
exercise price of each Award as the Committee may consider appropriate to
prevent dilution or enlargement of rights.
(f) NO OTHER RIGHTS. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to an Award or the exercise
price of any Award.
ARTICLE 14
AMENDMENT, MODIFICATION, AND TERMINATION
14.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from time to
-----------------------------------------
time, the Board may terminate, amend or modify the Plan; provided, however, that
the Board shall not, without the affirmative vote of the holder of a majority of
the voting stock of the Company, make any amendment which would (i) abolish the
Committee without designating such other committee, change the qualifications of
its members, or withdraw the administration of the Plan from its supervision,
(ii) increase the maximum number of shares of Stock for which Awards may be
granted under the Plan, (iii) amend the formula for determination of the
exercise price Options, (iv) extend the term of the Plan, and (v) amend the
requirements as to the employees eligible to receive Awards; and further
provided that no other amendment shall be made without shareholder approval to
the extent necessary or desirable to comply with any applicable law, regulations
or stock exchange rule.
14.2 AWARDS PREVIOUSLY GRANTED. Except as otherwise provided in the Plan,
---------------------------
including without limitation, the provisions of Article 13, no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant.
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ARTICLE 15
GENERAL PROVISIONS
15.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person shall
--------------------
have any claim to be granted any Award under the Plan, and neither the Company
nor the Committee is obligated to treat Participants, employees, and other
persons uniformly.
15.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the
-------------------------
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
15.3 WITHHOLDING. The Company shall have the authority and the right to
------------
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan. A Participant may elect to
have the Company withhold from those Stock that would otherwise be received upon
the exercise of any Option, a number of shares having a Fair Market Value equal
to the minimum statutory amount necessary to satisfy the Company's applicable
federal, state, local and foreign income and employment tax withholding
obligations.
15.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Award
------------------------------------
Agreement shall interfere with or limit in any way the right of the Company to
terminate any Participant's employment or services at any time, nor confer upon
any Participant any right to continue in the employ of the Company.
15.5 INDEMNIFICATION. To the extent allowable under applicable law, each
----------------
member of the Committee or of the Board shall be indemnified and held harmless
by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action or failure to act under
the Plan and against and from any and all amounts paid by him or her in
satisfaction of judgment in such action, suit, or proceeding against him or her
provided he or she gives the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
15.6 FRACTIONAL SHARES. No fractional shares of stock shall be issued and
-------------------
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.
15.7 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
-----------------------------------
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended, any of the shares of Stock paid under the
Plan. If the shares paid under the Plan may in certain circumstances be exempt
from registration under the Securities Act of 1933, as amended, the Company may
restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
15.8 GOVERNING LAW. The Plan and the terms of all Awards shall be construed
--------------
in accordance with and governed by the laws of the State of Colorado.
A-15
REVOCABLE PROXY
HIGH COUNTRY BANCORP, INC.
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ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 10, 2003
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The undersigned hereby appoints Philip W. Harsh, Richard A. Young and Larry
D. Smith powers of substitution to act, as attorneys and proxies for the
undersigned, to vote all shares of Common Stock of High Country Bancorp, Inc.
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
(the "Annual Meeting"), to be held at High Country Bank, 7360 West US Highway
50, Salida, Colorado on Monday, November 10, 2003 at 5:00 p.m., local time, and
at any and all adjournments thereof, as indicated below and in accordance with
the determination of a majority of the Board of Directors with respect to other
matters which come before the Annual Meeting.
VOTE
FOR WITHHELD
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1. The election as director of the nominee listed below
(except as marked to the contrary below).
Timothy R. Glenn [ ] [ ]
INSTRUCTION: To withhold your vote for any
individual nominee, insert that nominee's name on
the line provided below.
-------------------------------------------------
FOR AGAINST ABSTAIN
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2. Approval of the amendment and restatement of the
High Country Bancorp, Inc. 1998 Stock Option
and Incentive Plan as the High Country Bancorp, [ ] [ ] [ ]
Inc. 2003 Incentive Equity and Deferred Compensation Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE LISTED ABOVE AND
"FOR" THE OTHER PROPOSITION STATED.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE NOMINEE LISTED ABOVE AND FOR THE OTHER PROPOSITION
--- ---
STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY
WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE WITH THE DETERMINATION
OF A MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. THIS
PROXY CONFERS DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH
RESPECT TO THE ELECTION OF ANY PERSONS AS DIRECTORS WHERE THE NOMINEES ARE
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE
CONDUCT OF THE ANNUAL MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the
Company at the Annual Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect. The undersigned hereby revokes any and all
proxies heretofore given with respect to the shares of Common Stock held of
record by the undersigned.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting, the Company's Proxy
Statement for the Annual Meeting, dated October 10, 2003, and an Annual Report
to Stockholders for the 2003 fiscal year.
Dated: , 2003
------------------------
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PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
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SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should
sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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