UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 14A
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 COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
COMMUNITY FIRST 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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[GRAPHIC OMITTED]
COMMUNITY FIRST BANCORP, INC.
April 19, 2004
Dear Fellow Stockholder:
You are cordially invited to attend the 2004 Annual Meeting of Stockholders
of Community First Bancorp, Inc., the holding company for Community First Bank.
The Annual Meeting will be held at the main office of the Bank, 2420 North Main
Street, Madisonville, Kentucky on Thursday, May 20, 2004 at 8:00 a.m.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. During the meeting, we will
also report on the operations of the Company. Directors and officers of the
Company will be present to respond to any questions stockholders may have.
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. Your vote is
important, regardless of the number of shares you own. Voting by proxy will not
prevent you from voting in person but will assure that your vote is counted if
you are unable to attend the meeting. On behalf of your Board of Directors, we
thank you for your interest and support.
Sincerely,
/s/ William M. Tandy
William M. Tandy
President and Chief Executive Officer
2420 North Main Street, Madisonville, Kentucky 42431 o (270) 326-3500
COMMUNITY FIRST BANCORP, INC.
2420 NORTH MAIN STREET
MADISONVILLE, KENTUCKY 42431
(270) 326-3500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2004
NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders (the
"Annual Meeting") of Community First Bancorp, Inc. (the "Company") will be held
at the main office of Community First Bank, 2420 North Main Street,
Madisonville, Kentucky on Thursday, May 20, 2004 at 8:00 a.m., Central Time.
A proxy statement and proxy card for the Annual Meeting accompany this
notice.
The Annual Meeting is for the purpose of considering and acting upon the
following matters:
1. The election of three directors;
2. The approval of the Community First Bancorp, Inc. 2004 Stock Option
Plan;
3. The approval of the Community First Bank 2004 Restricted Stock Plan;
and
4. The consideration of such other matters as may properly 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. Only
stockholders of record at the close of business on April 12, 2004 are entitled
to vote at the Annual Meeting and any adjournments thereof.
You are requested to complete and sign the accompanying proxy card which is
solicited by the Board of Directors and to mail it promptly in the accompanying
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/ Michael D. Wortham
MICHAEL D. WORTHAM
Secretary
Madisonville, Kentucky
April 19, 2004
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. THE ENCLOSED PROXY
CARD IS ACCOMPANIED BY A SELF-ADDRESSED ENVELOPE FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
PROXY STATEMENT
OF
COMMUNITY FIRST BANCORP, INC.
2420 NORTH MAIN STREET
MADISONVILLE, KENTUCKY 42431
(270) 326-3500
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 2004
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GENERAL
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This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Community First Bancorp, Inc. (the
"Company") to be used at the 2004 Annual Meeting of Stockholders of the Company
and any adjournments or postponements thereof (the "Annual Meeting") which will
be held at the main office of Community First Bank (the "Bank"), 2420 North Main
Street, Madisonville, Kentucky on Thursday, May 20, 2004 at 8:00 a.m., Central
Time.
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VOTING AND REVOCABILITY OF PROXIES
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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 or postponements
thereof. Proxies may be revoked by written notice to Michael D. Wortham,
Secretary, at the address shown above, by filing a later-dated proxy prior to a
vote being taken on a particular proposal at the Annual Meeting or by attending
the Annual Meeting and voting in person. The presence of a stockholder at the
Annual Meeting alone will not revoke such stockholder's proxy.
Unless contrary instruction is given, proxies solicited by the Board of
Directors of the Company will be voted for the election as directors of the
nominees set forth below and for the approval of the 2004 Stock Option Plan and
the 2004 Restricted Stock Plan. 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 matters incident to the conduct of the Annual Meeting. If any other business
is properly 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.
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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 $0.01 per share (the "Common Stock").
Stockholders of record as of the close of business on April 12, 2004 (the
"Record Date") are entitled to one vote for each share then held. At the Record
Date, there were 277,725 shares of the Common Stock 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 is required for a quorum at the
Annual Meeting.
The following table sets forth, as of the Record Date, certain information
as to those persons who were known to be the beneficial owners of more than five
percent (5%) of the Company's outstanding shares of Common Stock and the shares
of Common Stock beneficially owned by all executive officers and directors of
the Company as a group.
PERCENT OF SHARES OF
NAME AND ADDRESS AMOUNT AND NATURE OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OUTSTANDING (2)
- ------------------- ----------------------- --------------------
Gary B. Kivett 18,800 6.77%
P.O. Box 707
Spruce Pine, NC 28777
All directors and executive officers 35,225 12.68%
as a group (10 persons)
<FN>
_________________
(1) For purposes of this table, a person is deemed to be the beneficial
owner of any shares of Common Stock if he or she has or shares voting
or investment power with respect to such Common Stock or has a right to
acquire beneficial ownership at any time within 60 days from the Record
Date. As used herein, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or
direct the disposition of shares. Except as otherwise noted, ownership
is direct, and the named persons exercise sole voting and investment
power over the shares of the Common Stock.
(2) In calculating the percentage ownership of an individual or group, the
number of shares outstanding is deemed to include any shares which the
individual or group may acquire through the exercise of options within
60 days of the Record Date.
</FN>
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PROPOSAL I -- ELECTION OF DIRECTORS
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The Company's Board of Directors is composed of nine members. Under the
Company's Articles of Incorporation, directors are divided into three classes,
as nearly equal in number as possible. Each class serves for a three-year
period, with approximately one-third of the directors elected each year. The
Board of Directors has nominated directors William M. Tandy, Steven E. Carson
and J. Craig Riddle to serve as directors for additional three-year terms.
If any nominee is unable to serve, the shares represented by all valid
proxies 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 any nominee might be
unavailable to serve.
Under the Company's Bylaws, directors are elected by a plurality of the
votes of the shares present in person or by proxy at the Annual Meeting. Votes
which are not cast at the Annual Meeting, either because of abstentions or
broker non-votes, are not considered in determining the number of votes which
have been cast for or withheld from a nominee. Unless otherwise specified on the
proxy, it is intended that the persons named in the proxies solicited by the
Board will vote for the election of the named nominees.
The following table sets forth the names of the Board's nominees for
election as directors of the Company and of those directors who will continue to
serve as such after the Annual Meeting. Also set forth is certain other
information with respect to each person's age, the year he or she first became a
director of the Company's wholly owned subsidiary, Community First Bank (the
"Bank" or "Community First"), the expiration of his or her term as a director,
and the number and percentage of shares of the Common Stock beneficially owned.
All of the directors were initially appointed as directors of the Company in
2003 in connection with the Company's incorporation.
2
YEAR FIRST SHARES OF
ELECTED AS CURRENT COMMON STOCK
DIRECTOR TERM BENEFICIALLY PERCENT
NAME AGE* OF THE BANK TO EXPIRE OWNED*(1) OF CLASS(2)
- ---- ---- ----------- --------- ----------- -----------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2007
William M. Tandy 48 2001 2004 425 0.15%
Steven E. Carson 52 1991 2004 4,000 1.44%
J. Craig Riddle 79 1970 2004 10,000 3.60%
DIRECTORS CONTINUING IN OFFICE
Michael D. Wortham 33 1998 2005 200 0.07%
Ralph T. Teague 85 1979 2005 5,000 1.80%
Charles G. Ramsey 52 2001 2005 5,000 1.80%
Paul W. Arison 52 1993 2006 4,600 1.66%
Charlotte E. Baldwin 72 1991 2006 2,000 0.72%
C. Barry Vaughn 56 1999 2006 3,000 1.08%
<FN>
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* As of the Record Date.
(1) Includes stock held in joint tenancy; stock owned as tenants in common;
stock owned or held by a spouse or other member of the individual's
household; stock allocated through certain employee benefit plans of
the Company; stock in which the individual either has or shares voting
and/or investment power and shares which the individual has the right
to acquire at any time within 60 days of the Record Date. Each person
or relative of such person whose shares are included herein exercises
sole or shared voting and dispositive power as to the shares reported.
(2) In calculating the percentage ownership of an individual or group, the
number of shares outstanding is deemed to include any share which the
individual or group may acquire through the exercise of options within
60 days of the Record Date.
</FN>
The principal occupation of each director and executive officer of the
Company for the last five years is set forth below.
WILLIAM M. TANDY has served as President and Chief Executive Officer of the
Bank from November 2001 to the present. From 1993 to 2001, Mr. Tandy served as
President of Hacienda Bank, Santa Maria, California. Mr. Tandy has been in the
banking industry since 1974 and has been brought in as Chief Executive Officer
by three different banks to successfully effect turnarounds. Mr. Tandy is a
member of the Madisonville Rotary Club and is past president of the Santa Maria
Valley Economic Association and a past board member of the Santa Maria Chamber
of Commerce and the Santa Barbara County Workforce Investment Board.
STEVEN E. CARSON is the owner/operator of Barnett-Strother Funeral Home,
Inc., in Madisonville. Mr. Carson has been active with the Lions Club and
Salvation Army.
J. CRAIG RIDDLE is a retired insurance agent. Mr. Riddle was the owner and
principal of the J. Craig Riddle Insurance Co., a full-line insurance broker in
Madisonville, Kentucky. Mr. Riddle is a founding member of the Kentucky Lake
Sailing Club.
3
MICHAEL D. WORTHAM has been employed with the Bank since 1994 and currently
serves as the Bank's Chief Financial Officer, Compliance Officer, Secretary and
Treasurer. Mr. Wortham has served as a board member with the Madisonville
Chamber of Commerce and the United Way and as President of the Kiwanis Club.
RALPH T. TEAGUE is a retired coal company executive. He is active in the
Madisonville Kiwanis Club.
CHARLES G. RAMSEY is Vice President - Finance and Chief Financial Officer
of the Renshaw Automotive Group in Hopkinsville, Kentucky. He is active in the
Kiwanis Club and a member of the Chamber of Commerce. Mr. Ramsey is a Certified
Public Accountant.
PAUL W. ARISON has been employed in the Commissary at the Hopkins County
Detention Facility since 2001. Prior to that time, he managed Kuester's Hardware
Store in Madisonville. Mr. Arison is active in the local Kiwanis Club.
CHARLOTTE E. BALDWIN retired as Vice President - Municipal and Public Unit
Sales for Cadre Securities in 1993. She had previously been a trust officer at
the First National Bank of Louisville. Ms. Baldwin was the Mayor of Madisonville
from 1978 to 1984 and served as the Kentucky Secretary of Natural Resources from
1984 to 1987. She is a member of the Hopkins County Reapportionment Committee,
the Madisonville Chamber of Commerce and the Madisonville Community College --
Growth Committee. Ms. Baldwin is a trustee of the University of Evansville. She
is a member of the Finance and Visitation Committees of the First United
Methodist Church in Madisonville where she is also a Discipleship Class leader.
Ms. Baldwin is also a Bible Study Leader in a local Ecumenical Group.
C. BARRY VAUGHN is the President and co-owner of Happy's of Madisonville,
an office equipment dealer located in Madisonville. Mr. Vaughn is a member of
the board of the Madisonville Chamber of Commerce, is a member of the Kiwanis
Club and has been active with the United Way.
EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
MARILYN A. LOCKE has been employed by the Bank since 1974 and currently
serves as its Vice President and Mortgage Officer. She is active with the Rotary
Club and March of Dimes.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Company's Board of Directors holds regular and special meetings as
needed. The Board of Directors of the Bank held 12 regular meetings and met
informally on a weekly basis. During the year ended December 31, 2003, the
Company's Board of Directors met three times. No director attended fewer than
75% of the total number of meetings of the Board of Directors held during 2003
and the total number of meetings held by all committees on which the director
served during the year. The Company encourages directors to attend annual
meetings of stockholders. Since this is the Company's first annual meeting, no
annual meeting was held last year. Stockholders may send communications to the
Board of Directors by addressing them to the Corporate Secretary at the main
office.
AUDIT COMMITTEE. The Company's Audit Committee consists of all of the
directors other than Messrs. Tandy and Wortham. The Company has adopted a
written charter for the Audit Committee, a copy of which is attached as Appendix
A to this Proxy Statement. The members of the Audit Committee would be
considered independent under the listing standards of The Nasdaq Stock Market.
The Board of Directors has determined that Charles G. Ramsey is an audit
committee financial expert within the meaning of the regulations of the
Securities and Exchange Commission based on his credentials as a Certified
Public Accountant and his experience as a Chief Financial Officer. The Board of
Directors has determined that
4
Mr. Ramsey is independent within the meaning of the listing requirements of The
Nasdaq Stock Market. The Audit Committee met one time during 2003.
COMPENSATION COMMITTEE. The Company's Personnel Committee, consisting of
all directors other than Messrs. Tandy and Wortham, acts as a compensation
committee. The Personnel Committee annually reviews the compensation paid to the
Chief Executive Officer and other officers and makes recommendations to the full
Board of Directors. The Personnel Committee met one time during the 2003 fiscal
year.
NOMINATING COMMITTEE. The Company does not have a standing nominating
committee or committee performing similar functions. Instead, the full Board of
Directors acts as a nominating committee for the selection of management's
nominees for director and each director participates in the nomination process.
All nominees are approved by a majority of the independent directors. The Board
of Directors believes that its procedures provide adequate assurance that
nominations are approved by independent directors. The Board of Directors will
consider director candidates recommended by stockholders. Any such
recommendations must be submitted to the Secretary at least 120 days prior to
the date of the Annual Meeting and should include the nominee's name and
qualifications for board membership. The Board believes that all nominees for
director, including stockholder nominees, should have the highest personal and
professional ethics and integrity; substantial business or other professional
experience in the primary market area served by the Company and the Bank;
commitment to enhancing the business and prospects of the Company and the Bank;
ability to work with existing board members and management; ability to make
appropriate level of commitment of time and resources to their duties as
director; an understanding of banking and financial matters and the role of
directors in the management of the Company; and substantial personal investment
in the Company common stock. All Board nominees for election at this year's
annual meeting are incumbent directors standing for re-election. The Board of
Directors held one meeting as a nominating committee during 2003 in order to
make nominations for directors.
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DIRECTOR COMPENSATION
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Directors do not receive separate compensation for their service on the
Company's Board of Directors. Directors (including directors who are also
employees) of the Bank receive a monthly fee of $400. Total fees paid to the
directors for the year ended December 31, 2003 were $43,200.
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EXECUTIVE COMPENSATION
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SUMMARY COMPENSATION TABLE. The following table sets forth the cash and
noncash compensation awarded to or earned by the Chief Executive Officer of the
Company and the Bank and by each executive officer whose salary and bonus earned
in fiscal year 2003 exceeded $100,000 for services rendered in all capacities to
the Company and its subsidiaries (the "Named Executive Officers").
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------- ---- ------ ----- ------------ ------------
William M. Tandy 2003 $100,000 $7,340 $ -- $13,450 (1)
Chief Executive Officer 2002 100,000 500 -- 13,950
<FN>
_____________
(1) Consisted of $4,800 in directors fees, $6,000 automobile allowance and
$2,650 in unused sick leave.
</FN>
5
EMPLOYMENT AGREEMENT. We have entered into an employment agreement with our
President, William M. Tandy. The agreement has a term of three years which may
be extended for an additional one-year period on each anniversary date if the
Board of Directors determines that Mr. Tandy has met the requirements of the
Board. The Board of Directors has determined that Mr. Tandy has met its
requirements as of the most recent anniversary date and the term of the
agreement was extended accordingly. Mr. Tandy's base salary under the employment
agreement is $100,000. Mr. Tandy is also eligible to receive bonuses of 7% of
the Bank's quarterly net profits. His agreement is terminable by us for "just
cause" as defined in the agreement. If we terminate Mr. Tandy without just cause
or if Mr. Tandy terminates his employment for "good reason," he will be entitled
to a continuation of his salary from the date of termination through the
remaining term of the agreement, plus an additional 12 months. If Mr. Tandy
shall become disabled during the term of his agreement, he shall continue to
receive payment of 100% of the base salary for a period of up to 180 days. Such
payments shall not be reduced by any other benefit payments made under other
disability program in effect for our employees. If Mr. Tandy's employment
terminates for a reason other than just cause, he will be entitled to purchase
from us family medical insurance through any group health plan maintained by us.
Mr. Tandy's agreement also contains a provision stating that in the event of the
termination of employment in connection with any change in control of the
Company or us, Mr. Tandy will be paid a lump sum amount equal to 2.99 times his
five-year average annual taxable cash compensation. If such payment had been
made under the agreement as of December 31, 2003, such payment would have
equaled approximately $311,000.
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TRANSACTIONS WITH MANAGEMENT
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From time to time, the Bank engages in banking transactions with its
directors, officers and their associates in the ordinary course of business. At
December 31, 2003, approximately $544,000 of such loans were outstanding. Loans
to directors and executive officers are only made in the ordinary course of
business of the Bank and on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and do not involve more than the normal risk of
collectibility or present other unfavorable features.
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PROPOSAL II - APPROVAL OF COMMUNITY FIRST BANCORP, INC.
2004 STOCK OPTION PLAN
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GENERAL. The Board of Directors has adopted the Community First Bancorp,
Inc. 2004 Stock Option Plan (the "Option Plan"), subject to approval by the
Company's stockholders. Pursuant to the Option Plan, up to 27,772 shares of
Common Stock, are to be reserved from the Company's authorized but unissued
shares for issuance by the Company upon exercise of stock options to be granted
to officers, directors, employees, and other persons from time to time
("Options"). The purpose of the Option Plan is to attract and retain qualified
personnel for positions of substantial responsibility and to provide additional
incentive to certain officers, directors, employees and other persons to promote
the success of the business of the Company and the Bank. The Option Plan, which
will become effective upon the date of stockholder approval ("Effective Date"),
has a term of ten years, after which time no awards may be made. The following
summary of the material features of the Option Plan is qualified in its entirety
by reference to the complete provisions of the Option Plan which is attached
hereto as Appendix B. The Option Plan has been drafted to comply with
regulations of the Office of Thrift Supervision ("OTS") applicable to stock
benefit plans established or implemented within one year of the Bank's
conversion to stock form.
The Option Plan will be administered by the Board of Directors or a
committee of not less than two non-employee directors appointed by the Company's
Board of Directors and serving at the pleasure of the Board (the "Option
Committee"). Members of the Option Committee shall be "Non-Employee Directors"
within the meaning of Rule 16b-3 under to the Securities Exchange Act of 1934
(the "Exchange Act"). The Option Committee may select the officers and employees
to whom options are to be granted
6
and the number of Options to be granted based upon several factors including
prior and anticipated future job duties and responsibilities, job performance,
the Company's financial performance and a comparison of awards given by other
institutions that have converted from mutual to stock form. A majority of the
members of the Option Committee shall constitute a quorum and the action of a
majority of the members present at any meeting at which a quorum is present
shall be deemed the action of the Option Committee.
Officers, directors, employees and other persons who are designated by the
Option Committee will be eligible to receive, at no cost to them, Options under
the Option Plan (the "Optionees"). Each Option granted pursuant to the Option
Plan shall be evidenced by an instrument in such form as the Option Committee
shall from time to time approve. It is anticipated that Options granted under
the Option Plan will constitute either Incentive Stock Options (options that
afford favorable tax treatment to recipients upon compliance with certain
restrictions pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"), and that do not normally result in tax deductions to the
Company) or Non-Incentive Stock Options (options that do not afford recipients
favorable tax treatment under Code Section 422). Option shares may be paid for
in cash, shares of Common Stock, or a combination of both. Common Stock used in
full or partial payment of the exercise price must have been owned by the person
exercising such Option not less than six months prior to the date of exercise.
The Company will receive no monetary consideration for the granting of stock
options under the Option Plan. Further, the Company will receive no
consideration other than the option exercise price per share for Common Stock
issued to Optionees upon the exercise of those Options.
Shares issuable under the Option Plan may be authorized but unissued
shares, treasury shares or shares purchased in the open market. An Option which
expires, becomes unexercisable, or is forfeited for any reason prior to its
exercise will again be available for issuance under the Option Plan. No Option
or any right or interest therein is assignable or transferable except by will or
the laws of descent and distribution. The Option Plan shall continue in effect
for a term of ten years from the Effective Date.
STOCK OPTIONS. The Option Committee may grant either Incentive Stock
Options or Non-Incentive Stock Options. Generally, except as may otherwise be
determined by the Option Committee at the time of the award, an Incentive Stock
Option may only be exercised while the Optionee serves as an employee of the
Company or within three months after termination of employment for a reason
other than death or disability (but in no event after the expiration date of the
Option). In the event of the disability or death of an Optionee during
employment, an exercisable Incentive Stock Option will continue to be
exercisable for one year and two years, respectively, to the extent exercisable
by the Optionee immediately prior to the Optionee's disability or death but only
if, and to the extent that, the Optionee was entitled to exercise such Incentive
Stock Options on the date of termination of employment. The terms and conditions
of Non- Incentive Stock Options relating to the effect of an Optionee's
termination of employment or service, disability, or death shall be such terms
as the Option Committee, in its sole discretion, shall determine at the time of
termination of service, disability or death, unless specifically determined at
the time of grant of such Options.
The exercise price for the purchase of Common Stock subject to an Option
may not be less than one hundred percent (100%) of the "Fair Market Value" of
the Common Stock covered by the Option on the date of grant of such Option. For
purposes of determining the Fair Market Value of the Common Stock, if the Common
Stock is traded otherwise than on a national securities exchange at the time of
the granting of an Option, then the exercise price per share of the Option shall
be not less than the mean between the last bid and ask price on the date the
Option is granted or, if there is no bid and ask price on that date, then on the
immediately prior business day on which there was a bid and ask price. If no
such bid and ask price is available, then the exercise price per share shall be
determined in good faith by the Option Committee. If an officer or employee owns
Common Stock representing more than ten percent of the outstanding Common Stock
at the time an Incentive Stock Option is granted, then the exercise price
7
shall be not less than one hundred and ten percent (110%) of the Fair Market
Value of the Common Stock at the time the Incentive Stock Option is granted. No
more than $100,000 of Incentive Stock Options can become exercisable for the
first time in any one year for any one person. The Option Committee may impose
additional conditions upon the right of an Optionee to exercise any Option
granted hereunder which are not inconsistent with the terms of the Option Plan
or the requirements for qualification as an Incentive Stock Option, if such
Option is intended to qualify as an Incentive Stock Option.
No shares of Common Stock may be issued upon the exercise of an Option
until the Company has received full payment of the exercise price, and no
Optionee shall have any of the rights of a stockholder of the Company until
shares of Common Stock are issued to such Optionee. Upon the exercise of an
Option by an Optionee (or the Optionee's personal representative), the Option
Committee, in its sole and absolute discretion, may make a cash payment to the
Optionee, in whole or in part, in lieu of the delivery of shares of Common
Stock. Such cash payment to be paid in lieu of delivery of Common Stock shall be
equal to the difference between the Fair Market Value of the Common Stock on the
date of the Option exercise and the exercise price per share of the Option. Such
cash payment shall be in exchange for the cancellation of such Option. Such cash
payment shall not be made in the event that such transaction would result in
liability to the Optionee and the Company under Section 16(b) of the Exchange
Act or any related regulations promulgated thereunder.
The Option Plan provides that the Board of Directors of the Company may
authorize the Option Committee to direct the execution of an instrument
providing for the modification, extension or renewal of any outstanding Option,
provided that no such modification, extension or renewal shall confer on the
Optionee any right or benefit which could not be conferred on the Optionee by
the grant of a new Option at such time, and shall not materially decrease the
Optionee's benefits under the Option without the Optionee's consent, except as
otherwise provided under the Option Plan.
AWARDS UNDER THE OPTION PLAN. The Board or the Option Committee shall from
time to time determine the officers, directors, employees and other persons who
shall be granted Options under the Option Plan, the number of Options to be
granted to any individual, and whether the Options granted will be Incentive
Stock Options and/or Non-Incentive Stock Options. In selecting Optionees and in
determining the number of Options to be granted, the Board or the Option
Committee may consider the nature of the services rendered by each such
individual, each individual's current and potential contribution to the Company
and such other factors as may be deemed relevant. Optionees may, if otherwise
eligible, be granted additional Options. In no event shall Common Stock subject
to Options granted to non-employee directors in the aggregate under the Option
Plan exceed 30% of the total number of shares reserved under the Option Plan,
and no more than 5% of the available shares of Common Stock may be awarded to
any individual non-employee director. In no event, shall Common Stock subject to
Options granted to any Employee exceed 25% of the total number of the available
shares of Common Stock.
Pursuant to the terms of the Option Plan, Non-Incentive Stock Options to
purchase shares of Common Stock as detailed below will be granted to each
non-employee director of the Company, as of the Effective Date, at an exercise
price equal to the Fair Market Value of the Common Stock on such date of grant.
Options may be granted to newly appointed or elected non-employee directors
within the sole discretion of the Option Committee, and the exercise price shall
be equal to the Fair Market Value of such Common Stock on the date of grant.
Twenty percent of the Options granted to non-employee directors on the Effective
Date will be first exercisable commencing on the one year anniversary of
stockholder approval of the Option Plan and 20% annually thereafter, during such
period of service as a director or a director emeritus. Such Options granted to
non-employee directors will remain exercisable for up to ten years from the date
of grant. Upon the death or disability of a director or director emeritus, such
Options shall be deemed immediately 100% exercisable for their remaining term.
All outstanding Options become immediately exercisable in the event of a change
in control (as defined in the Option Plan) of the Company or the Bank.
8
The table below presents information related to stock option awards
anticipated to be awarded upon stockholder approval of the Option Plan. No
Options are expected to be awarded to any associates of executive officers,
directors or nominees. No other person is expected to receive 5% or more of the
Options authorized under the Option Plan.
NUMBER OF OPTIONS
NAME AND POSITION TO BE GRANTED
- ----------------- -----------------
William M. Tandy, President and Chief Executive Officer 6,943 (1)(2)
Michael D. Wortham, Chief Financial Officer, Treasurer and Secretary 2,777 (1)
Steven E. Carson, Director 1,043 (2)(3)
J. Craig Riddle, Director 1,224 (2)(3)
Ralph T. Teague, Director 1,224 (3)
Charles G. Ramsey, Director 609 (3)
Paul W. Arison, Director 898 (3)
Charlotte E. Baldwin, Director 1,043 (3)
C. Barry Vaughn, Director 681 (3)
All executive officers as a group (3 Persons) 9,720 (1)
All current directors who are not executive officers as a group (7 Persons) 6,722 (3)
All employees, including current officers who are not executive officers, --
as a group (26 Persons)
<FN>
_______________
(1) Options awarded to officers and employees will be exercisable as
follows: options awarded at the time of stockholder approval are first
exercisable at the rate of 20% on the one year anniversary of the date
of grant and 20% annually thereafter during periods of continued
service as an employee, director or director emeritus. Such awards
shall be 100% exercisable in the event of death, disability, or upon a
change in control of the Company or the Bank. Options awarded to
employees shall continue to be exercisable during continued service as
an employee, director or director emeritus. Options not exercised
within three months of termination of service as an employee shall
thereafter be deemed non-incentive stock options.
(2) Nominee for reelection as a director of the company.
(3) Options awarded to directors are first exercisable at a rate of 20% one
year after the date of grant and 20% annually thereafter, during such
period of service as a director or director emeritus, and shall remain
exercisable for ten years without regard to continued service as a
director or director emeritus. Upon disability, death, or a change in
control of the Company or the Bank, such awards shall be 100%
exercisable.
</FN>
EFFECT OF MERGERS, CHANGE OF CONTROL AND OTHER ADJUSTMENTS. Subject to any
required action by the stockholders of the Company, within the sole discretion
of the Option Committee, the aggregate number of shares of Common Stock for
which Options may be granted hereunder or the number of shares of Common Stock
represented by each outstanding Option will be proportionately adjusted for any
increase or decrease in the number of issued and outstanding shares of Common
Stock 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 of
Common Stock effected without the receipt or payment of consideration by the
Company. Subject to any required action by the stockholders of the Company, in
the event of any change in control, recapitalization, merger, consolidation,
exchange of shares, spin-off, reorganization, tender offer, partial or complete
liquidation or other extraordinary corporate action or event (including a
special or non-recurring dividend that has the effect of a return of capital
distribution to stockholders), the Option Committee, in its sole discretion,
shall have the power, prior to or subsequent to such action or events, to (i)
appropriately adjust the number of shares of Common Stock subject to Options,
the exercise price per share of such Option, and the consideration to be given
or received by the Company upon the exercise of any outstanding Options; (ii)
cancel any or all previously granted Options, provided that appropriate
consideration is paid to the Optionee in connection therewith; and/or (iii) make
such other adjustments in connection with the Option Plan as the Option
Committee, in its sole discretion, deems necessary, desirable, appropriate or
advisable. However, no action may be taken by the Option Committee which
9
would cause Incentive Stock Options granted pursuant to the Option Plan to fail
to meet the requirements of Section 422 of the Code without the consent of the
Optionee.
The Option Committee will at all times have the power to accelerate the
exercise date of all Options granted under the Option Plan. In the case of a
Change in Control of the Bank or the Company as determined by the Option
Committee, all outstanding Options shall become immediately exercisable. A
Change in Control is defined to include (i) the sale of all, or a material
portion, of the assets of the Company or the Bank; (ii) the merger or
recapitalization of the bank or the Company whereby the Bank or the Company is
not the surviving entity; (iii) a change in control of the Bank or the Company
as otherwise defined or determined by the OTS or its regulations; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of Section 13(d) of the Exchange Act and rules and regulations
promulgated thereunder) of 25% or more of the outstanding voting securities of
the Company by any person, trust, entity, or group. This limitation shall not
apply to the purchase of shares by underwriters in connection with a pubic
offering of Company stock or the purchase of shares of up to 25% of any class of
securities of the Company by a tax-qualified employee stock benefit plan which
is exempt from the approval requirements set forth under Section
574.3(c)(1)(vii) of OTS Regulations (12 C.F.R. ss.574.3(c)(1)(vii)).
In the event of a Change in Control, the Option Committee and the Board of
Directors will take one or more of the following actions to be effective as of
the date of such Change in Control: (i) provide that such Options shall be
assumed, or equivalent Options shall be substituted, ("Substitute Options") by
the acquiring or succeeding corporation (or an affiliate thereof), provided
that: (A) any such Substitute Options exchanged for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, and (B) the shares of
stock issuable upon the exercise of such Substitute Options shall constitute
securities registered in accordance with the Securities Act of 1933, as amended,
("1933 Act") or such securities shall be exempt from such registration in
accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act (collectively,
"Registered Securities"), or in the alternative, if the securities issuable upon
the exercise of such Substitute Options shall not constitute Registered
Securities, then the Optionee will receive upon consummation of the Change in
Control a cash payment for each Option surrendered equal to the difference
between (1) the Fair Market Value of the consideration to be received for each
share of Common Stock in the Change in Control times the number of shares of
Common Stock subject to such surrendered Options, and (2) the aggregate exercise
price of all such surrendered Options, or (ii) in the event of a transaction
under the terms of which the holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment (the "Merger Price") for each
share of Common Stock exchanged in the Change in Control transaction, to make or
to provide for a cash payment to the Optionees equal to the difference between
(A) the Merger Price times the number of shares of Common Stock subject to such
Options held by each Optionee (to the extent then exercisable at prices not in
excess of the Merger Price) and (B) the aggregate exercise price of all such
surrendered Options in exchange for such surrendered Options.
The power of the Option Committee to accelerate the exercise of Options and
the immediate exercisability of Options in the case of a Change in Control of
the Company could have an anti-takeover effect by making it more costly for a
potential acquiror to obtain control of the Company due to the higher number of
shares outstanding following such exercise of Options. The power of the Option
Committee to make adjustments in connection with the Option Plan, including
adjusting the number of shares subject to Options and canceling Options, prior
to or after the occurrence of an extraordinary corporate action, allows the
Option Committee to adapt the Option Plan to operate in changed circumstances,
to adjust the Option Plan to fit a smaller or larger institution, and to permit
the issuance of Options to new management following such extraordinary corporate
action. However, this power of the Option Committee also has an anti-takeover
effect, by allowing the Option Committee to adjust the Option Plan in a manner
to allow the present management of the Company to exercise more options and hold
more shares of the Company's
10
Common Stock, and to possibly decrease the number of Options available to new
management of the Company.
Although the Option Plan may have an anti-takeover effect, the Company's
Board of Directors did not adopt the Option Plan specifically for anti-takeover
purposes. The Option Plan could render it more difficult to obtain support for
stockholder proposals opposed by the Company's Board and management in that
recipients of Options could choose to exercise such Options and thereby increase
the number of shares for which they hold voting power. Also, the exercise of
such Options could make it easier for the Board and management to block the
approval of certain transactions. In addition, the exercise of such Options
could increase the cost of an acquisition by a potential acquiror.
In the event that the Bank shall be deemed critically undercapitalized (as
defined at 12 C.F.R. ss. 565.4), is subject to enforcement action by the OTS, or
receives a capital directive under 12 C.F.R. ss. 565.7, then all Options awarded
to executive officers or directors of the Company or its subsidiaries must
exercise such options or forfeit such Options.
AMENDMENT AND TERMINATION OF THE OPTION PLAN. The Board of Directors may
alter, suspend or discontinue the Option Plan, except that no action of the
Board shall increase the maximum number of shares of Common Stock issuable under
the Option Plan, materially increase the benefits accruing to Optionees under
the Option Plan or materially modify the requirements for eligibility for
participation in the Option Plan unless such action of the Board shall be
subject to approval or ratification by the stockholders of the Company.
In accordance with OTS regulations applicable to stock benefit plans
established or implemented within one year following the completion of a
mutual-to-stock conversion of a federally chartered savings institution such as
the Bank, the Option Plan contains certain restrictions and limitations,
including among others, provisions requiring the vesting of Options granted to
occur no more rapidly than ratably over a five-year period and the resultant
prohibition against accelerated vesting of option grants upon the occurrence of
an event other than the death or disability of the Option holder or a Change in
Control of the Company or the Bank. The Company does not have any present
intention to engage in any transaction that would result in the accelerated
vesting of Options as permitted by the Option Plan, however, the Board has
determined that the implementation of such plan provisions is in the best
interests of the stockholders of the Company, as well as the officers, directors
and employees of the Company.
POSSIBLE DILUTIVE EFFECTS OF THE OPTION PLAN. The Common Stock to be issued
upon the exercise of Options awarded under the Option Plan may either be
authorized but unissued shares of Common Stock or shares purchased in the open
market. Because the stockholders of the Company do not have preemptive rights,
to the extent that the Company funds the Option Plan, in whole or in part, with
authorized but unissued shares, the interests of current stockholders may be
diluted. If upon the exercise of all of the Options, the Company delivers newly
issued shares of Common Stock (i.e., 27,772 shares of Common Stock), then the
dilutive effect to current stockholders would be approximately 9.1%. The Company
can avoid dilution resulting from awards under the Option Plan by delivering
shares repurchased in the open market upon the exercise of Options.
FEDERAL INCOME TAX CONSEQUENCES. Under present federal tax laws, awards
under the Option Plan will have the following consequences:
1. The grant of an Option will not by itself result in the recognition of
taxable income to an Optionee nor entitle the Company to a tax deduction at
the time of such grant.
2. The exercise of an Option which is an "Incentive Stock Option" within the
meaning of Section 422 of the Code generally will not, by itself, result in
the recognition of taxable income to an Optionee
11
nor entitle the Company to a deduction at the time of such exercise.
However, the difference between the Option exercise price and the Fair
Market Value of the Common Stock on the date of Option exercise is an item
of tax preference which may, in certain situations, trigger the alternative
minimum tax for an Optionee. An Optionee will recognize capital gain or
loss upon resale of the shares of Common Stock received pursuant to the
exercise of Incentive Stock Options, provided that such shares are held for
at least one year after transfer of the shares or two years after the grant
of the Option, whichever is later. Generally, if the shares are not held
for that period, the Optionee will recognize ordinary income upon
disposition in an amount equal to the difference between the Option
exercise price and the Fair Market Value of the Common Stock on the date of
exercise, or, if less, the sales proceeds of the shares acquired pursuant
to the Option.
3. The exercise of a Non-Incentive Stock Option will result in the recognition
of ordinary income by the Optionee on the date of exercise in an amount
equal to the difference between the exercise price and the Fair Market
Value of the Common Stock acquired pursuant to the Option.
4. The Company will be allowed a tax deduction for federal tax purposes equal
to the amount of ordinary income recognized by an Optionee at the time the
Optionee recognizes such ordinary income.
5. In accordance with Section 162(m) of the Code, the Company's tax deductions
for compensation paid to the most highly paid executives named in the
Company's Proxy Statement may be limited to no more than $1 million per
year, excluding certain "performance-based" compensation. The Company
intends for the award of Options under the Option Plan to comply with the
requirement for an exception to Section 162(m) of the Code applicable to
stock option plans so that the amount of the Company's deduction for
compensation related to the exercise of Options would not be limited by
Section 162(m) of the Code.
ACCOUNTING TREATMENT. The Company expects to use the "intrinsic value based
method" as prescribed by Accounting Principles Board Opinion No. 25.
Accordingly, neither the grant nor the exercise of an Option under the Option
Plan currently requires any charge against earnings under accounting principles
generally accepted in the United States of America. Common Stock issuable
pursuant to outstanding Options under the Option Plan will be considered
outstanding for purposes of calculating earnings per share on a diluted basis.
STOCKHOLDER APPROVAL. Stockholder approval of the Option Plan is being
sought in accordance with OTS regulations. Additional purposes of requesting
stockholder approval of the Option Plan are to qualify the Option Plan for the
granting of Incentive Stock Options in accordance with the Code, to enable
Optionees to qualify for certain exempt transactions related to the short-swing
profit recapture provisions of Section 16(b) of the Exchange Act, and to meet
the requirements for the tax-deductibility of certain compensation items under
Section 162(m) of the Code. An affirmative vote of the holders of a majority of
the total votes eligible to be cast at the Annual Meeting in person or by proxy
is required for stockholder approval of this Proposal II in accordance with OTS
regulations. The OTS does not endorse or approve the Option Plan in any way.
Abstentions and broker non-votes will not be counted as votes for Proposal II.
Accordingly, an abstention or broker non-vote will have the same effect as a
vote against Proposal II.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE OPTION
PLAN.
12
- --------------------------------------------------------------------------------
PROPOSAL III - APPROVAL OF COMMUNITY FIRST BANK
2004 RESTRICTED STOCK PLAN
- --------------------------------------------------------------------------------
GENERAL. The Board of Directors has adopted the Community First Bank 2004
Restricted Stock Plan (the "RSP") as a method of providing directors, officers,
and employees of the Bank with a proprietary interest in the Company in a manner
designed to encourage such persons to remain in the employment or service of the
Bank. The Bank will contribute sufficient funds to the RSP to purchase Common
Stock representing up to 8,331 shares of Common Stock. The RSP may purchase such
shares in the open market or from the Company from authorized but unissued
shares of Common Stock or treasury shares. All of the Common Stock to be
purchased by the RSP will be purchased at the Fair Market Value of such stock on
the date of purchase. Awards under the RSP will be made in recognition of
expected future services to the Bank by its directors, officers and employees
responsible for implementation of the policies adopted by the Bank's Board of
Directors and as a means of providing a further retention incentive. The
following is a summary of the material features of the RSP which is qualified in
its entirety by reference to the complete provisions of the RSP which is
attached hereto as Appendix C. The RSP has been drafted to comply with OTS
regulations applicable to stock benefit plans implemented within one year of the
Bank's conversion to stock form.
AWARDS UNDER THE RESTRICTED STOCK PLAN. Benefits under the RSP ("Plan Share
Awards") may be granted at the sole discretion of a committee comprised of not
less than two directors who are not employees of the Bank (the "RSP Committee")
appointed by the Bank's Board of Directors. The RSP is managed by trustees (the
"RSP Trustees") who are non-employee directors of the Bank and who have the
responsibility to invest all funds contributed by the Bank to the trust created
for the RSP (the "RSP Trust"). Unless the terms of the RSP or the RSP Committee
specifies otherwise, awards under the RSP will be in the form of restricted
stock payable as the Plan Share Awards shall be earned and non- forfeitable.
Twenty percent (20%) of such awards shall be earned and non-forfeitable on the
one year anniversary of the date of grant of such awards, and 20% annually
thereafter, provided that the recipient of the award remains an employee,
director or director emeritus during such period. A recipient of such restricted
stock will not be entitled to voting rights associated with such shares prior to
the applicable date such shares are earned. Dividends paid on Plan Share Awards
shall be held in arrears and distributed upon the date the Plan Share Awards are
earned. Any shares held by the RSP Trust which are not yet earned shall be voted
by the RSP Trustees, as directed by the RSP Committee. If a recipient of such
restricted stock terminates employment or service for reasons other than death,
disability or a Change in Control of the Company or the Bank, the recipient
forfeits all rights to the awards under restriction. If the recipient's
termination of employment or service is caused by death, disability or a Change
in Control of the Company or the Bank, all restrictions expire and all shares
allocated shall become unrestricted. Plan Share Awards to directors shall be
immediately non-forfeitable in the event of the death, disability or a Change in
Control of the Company or the Bank, of such director and distributed as soon as
practicable thereafter. The Board of Directors can terminate the RSP at any
time, and if it does so, any shares not allocated will revert to the Bank.
Plan Share Awards under the RSP will be determined by the RSP Committee. In
no event shall any employee receive Plan Share Awards in excess of 25% of the
aggregate Common Stock authorized under the RSP ("Plan Share Reserve"). Plan
Share Awards may be granted to newly elected or appointed non-employee directors
subsequent to the effective date of the RSP, provided that the Plan Share Awards
made to non-employee directors shall not exceed 30% of the Plan Share Reserve in
the aggregate or 5% of the total Plan Share Reserve to any individual
non-employee director.
The aggregate number of Plan Shares available for issuance pursuant to the
Plan Share Awards and the number of shares to which any Plan Share Award relates
shall be proportionately adjusted for any increase or decrease in the total
number of outstanding shares of Common Stock issued subsequent to the
13
effective date of the RSP, resulting from any split, subdivision or
consolidation of the Common Stock or other capital adjustment, change or
exchange of Common Stock, or other increase or decrease in the number or kind of
shares effected without receipt or payment of consideration by the Company.
The following table presents information related to the anticipated award
of Common Stock under the RSP as authorized pursuant to the terms of the RSP or
the anticipated actions of the RSP Committee. No Plan Share Awards are expected
to be granted to any associates of executive officers, directors or nominees. No
other person is expected to receive 5% or more of the Plan Share Awards
authorized under the RSP.
NUMBER OF SHARES
TO BE
NAME AND POSITION GRANTED (1)
- ----------------- ----------------
William M. Tandy, President and Chief Executive Officer 2,082 (2)
Michael D. Wortham, Chief Financial Officer, Treasurer and Secretary 833
Steven E. Carson, Director 354 (2)
J. Craig Riddle, Director 416 (2)
Ralph T. Teague, Director 416
Charles G. Ramsey, Director 206
Paul W. Arison, Director 305
Charlotte E. Baldwin, Director 354
C. Barry Vaughn, Director 231
All executive officers as a group (3 persons) 2,915
All current directors who are not executive officers as a group (7 persons) 2,282
All employees, including all current officers who are not executive officers, --
as a group (26 persons)
<FN>
_____________
(1) All Plan Share Awards presented herein shall be earned at the rate of 20%
one year after the date of grant and 20% annually thereafter. All awards
shall become immediately 100% vested upon death or disability or
termination of service following a change in control of the Company or the
Bank (as defined in the RSP). Plan Share Awards shall continue to vest
during periods of service as an employee, director, or director emeritus.
(2) Nominee for re-election.
</FN>
AMENDMENT AND TERMINATION OF THE RESTRICTED STOCK PLAN. The Board may amend
or terminate the RSP at any time. However, no action of the Board may increase
the maximum number of Plan Shares permitted to be awarded under the RSP, except
for adjustments in the Common Stock of the Company, materially increase the
benefits accruing to Participants under the RSP or materially modify the
requirements for eligibility for participation in the RSP unless such action of
the Board shall be subject to approval by the stockholders of the Company.
Pursuant to OTS regulations applicable to stock benefit plans established
or implemented within one year following the completion of a mutual-to-stock
conversion of a federally chartered savings institution such as the Bank, the
RSP contains certain restrictions and limitations, including among others,
provisions requiring the vesting of awards granted to occur no more rapidly than
ratably over a five-year period and the resultant prohibition against
accelerated vesting of award grants upon the occurrence of an event other than
the death or disability of the Plan Share Award recipient or upon a Change in
Control of the Company or the Bank. The Company does not have any present
intention to engage in any transaction that would result in the accelerated
vesting of Plan Share Awards as permitted by the RSP, however, the Board has
determined that the implementation of such plan provisions is in the best
interests of the stockholders of the Company, as well as the officers, directors
and employees of the Company.
14
POSSIBLE DILUTIVE EFFECTS OF THE RESTRICTED STOCK PLAN. It is the Company's
present intention to fund the RSP through open-market purchases of Common Stock,
which will cause no dilutive effect. The RSP provides, however, that Common
Stock to be awarded may be acquired by the RSP through open- market purchases or
from authorized but unissued shares of Common Stock from the Company. In that
stockholders do not have preemptive rights, to the extent that the Company
utilizes authorized but unissued shares to fund Plan Share Awards, the interests
of current stockholders may be diluted. If all Plan Share Awards (i.e., 8,331
shares of Common Stock) are funded with newly issued shares, the dilutive effect
to existing stockholders would be approximately 2.9%.
FEDERAL INCOME TAX CONSEQUENCES. Common Stock awarded under the RSP is
generally taxable to the recipient at the time that such awards become earned
and non-forfeitable, based upon the Fair Market Value of such stock at the time
of such vesting. Alternatively, a recipient may make an election pursuant to
Section 83(b) of the Code within 30 days of the date of the transfer of such
Plan Share Award to elect to include in gross income for the current taxable
year the Fair Market Value of such award. Such election must be filed with the
Internal Revenue Service within 30 days of the date of the transfer of the stock
award. The Bank will be allowed a tax deduction for federal tax purposes as a
compensation expense equal to the amount of ordinary income recognized by a
recipient of Plan Share Awards at the time the recipient recognizes taxable
ordinary income. A recipient of a Plan Share Award may elect to have a portion
of such award withheld by the RSP Trust in order to meet any necessary tax
withholding obligations.
ACCOUNTING TREATMENT. For accounting purposes, the Bank will recognize
compensation expense for Common Stock subject to Plan Share Awards over the
vesting period at the fair market value of the shares on the date they are
awarded.
STOCKHOLDER APPROVAL. The Bank is submitting the RSP to stockholders for
approval in accordance with OTS regulations. The RSP and awards made thereunder
will not be effective until receipt of stockholder approval of Proposal III.
Additionally, stockholder approval of the RSP will enable recipients of Plan
Share Awards to qualify for certain exemptive treatment from the short-swing
profit recapture provisions of Section 16(b) of the Exchange Act. The
affirmative vote of holders of a majority of the total votes eligible to be cast
at the Annual Meeting in person or by proxy is required for stockholder approval
of this Proposal III in accordance with OTS regulations. The OTS does not
endorse or approve the RSP in any way. Abstentions and broker non-votes will not
be counted as votes for Proposal III. Accordingly, an abstention or broker
non-vote will have the same effect as a vote against Proposal III.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
RESTRICTED STOCK PLAN.
15
- --------------------------------------------------------------------------------
NEW PLAN BENEFITS
- --------------------------------------------------------------------------------
The following table sets forth certain information regarding the benefits
expected to be received under the Option Plan and RSP.
OPTION PLAN RSP
-------------------------- -------------------------
DOLLAR NUMBER DOLLAR NUMBER
NAME AND POSITION VALUE (1) OF UNITS VALUE (2) OF UNITS
- ----------------- --------- -------- --------- --------
William M. Tandy -- 6,943 $38,392 2,082
President and Chief
Executive Officer
Executive Group -- 9,120 71,695 3,888
Non-Executive Director Group -- 6,722 42,080 2,282
Non-Executive Officer -- -- -- --
Employee Group
<FN>
- -------------
(1) Based on fair market value of the Common Stock on the date of grant less
the exercise price. All options will be granted with an exercise price
equal to the fair market value of the Common Stock on the date of grant.
(2) Based on the last sale price of the Common Stock as reported on the OTC
Electronic Bulletin Board as of April 8, 2004 ($18.44 per share).
</FN>
- --------------------------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
BKD, LLP served as the Company's independent public accountants for the
last fiscal year and the Board of Directors has appointed BKD, LLP to serve as
the Company's independent public accountants for the current fiscal year. The
engagement of BKD, LLP was approved in advance by the Audit Committee of the
Board of Directors. A representative of BKD, LLP is expected to attend the
Annual Meeting and will have an opportunity to make a statement and will be
available to respond to appropriate questions from stockholders.
Fees paid to the Company's principal accountant for each of the last two
fiscal years are set forth below:
FISCAL AUDIT AUDIT-RELATED TAX ALL OTHER
YEAR FEES FEES FEES FEES
- ---- ------ ------------- ------ ---------
2003 $23,900 $43,887 $2,950 --
2002 25,900 -- -- --
AUDIT FEES include fees billed by the Company's independent auditors for
professional services rendered for the audit of the Company's annual financial
statements and reviews of the financial statements included in the Company's
Quarterly Reports on Form 10-QSB filed during the fiscal year ended December 31,
2003.
AUDIT-RELATED FEES include fees billed by the Company's independent
auditors for services provided for the year ended December 31, 2003. The
services comprising these fees consisted of
16
consultation concerning financial accounting and reporting standards and
services related to the various registration statements filed with the
Securities and Exchange Commission in connection with the stock conversion of
the Company.
TAX FEES primarily include fees associated with tax audits, tax compliance,
tax consulting, as well as tax planning. This category also includes services
related to tax disclosure and filing requirements.
The Audit Committee has pre-approved all audit and non-audit services
provided by the independent auditor and has not adopted pre-approval procedures
for this purpose. No portion of non-audit fees during the past two years were
approved pursuant to paragraph (c)(7)(i)(c) of Rule 2-01 of Regulation S-X.
- --------------------------------------------------------------------------------
AUDIT COMMITTEE REPORT
- --------------------------------------------------------------------------------
The Audit Committee has reviewed and discussed the audited financial
statements of the Company with management and has discussed with BKD, LLP, the
Company's independent auditors, the matters required to be discussed under
Statement of Auditing Standards No. 61 ("SAS 61"). In addition, the Audit
Committee received from BKD, LLP the written disclosures and the letter required
to be delivered by BKD, LLP under Independence Standards Board Standard No. 1
("ISB Standard No. 1") and has discussed with representatives of BKD, LLP their
independence.
The Audit Committee has reviewed the non-audit services currently provided
by the Company's independent auditor and has considered whether the provision of
such services is compatible with maintaining the independence of the Company's
independent auditors.
Based on its review of the financial statements, its discussion with BKD,
LLP regarding SAS 61, and the written materials provided by BKD, LLP under ISB
Standard No. 1 and the related discussion with BKD, LLP of their independence,
the Audit Committee has recommended that the audited financial statements of the
Company be included in its Annual Report on Form 10-KSB for the year ended
December 31, 2003, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
CHARLES G. RAMSEY J. CRAIG RIDDLE
PAUL W. ARISON RALPH T. TEAGUE
CHARLOTTE E. BALDWIN C. BARRY VAUGHN
STEVEN E. CARSON
- --------------------------------------------------------------------------------
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 its review of the copies of such reports received
during the past fiscal year or with respect to the last fiscal year or written
representations from such persons that no annual reports of change in beneficial
ownership were required, the Company believes that during 2003, all of its
officers, directors and all of its stockholders owning in excess of 10% of the
outstanding Common Stock have complied with the reporting requirements.
17
- --------------------------------------------------------------------------------
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.
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 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, is being mailed to all stockholders of record as of the Record Date.
Any stockholder who has not received a copy of the Annual Report may obtain a
copy by writing to the Secretary of the Company. The Annual Report is not to be
treated as a part of the proxy solicitation materials or as having been
incorporated herein by reference. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB 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, COMMUNITY FIRST BANCORP, INC., 2420 NORTH MAIN STREET,
MADISONVILLE, KENTUCKY 42431.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
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 main office at 2420 North Main
Street, Madisonville, Kentucky 42431 no later than December 21, 2004. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Exchange Act.
Stockholder proposals, other than those submitted pursuant to the Exchange
Act, to be considered at such Annual Meeting, must be stated in writing,
delivered or mailed to the Secretary of the Company, not less than 90 days
before the first anniversary of the mailing of notice of this year's annual
meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael D. Wortham
MICHAEL D. WORTHAM
Secretary
Madisonville, Kentucky
April 19, 2004
18
APPENDIX A
COMMUNITY FIRST BANCORP, INC.
AUDIT COMMITTEE CHARTER
This Audit Committee Charter (Charter) has been adopted by the Board of
Directors (the Board) of Community First Bancorp, Inc. (the Company). The Audit
Committee of the Board (the Committee) shall review and reassess this charter
annually and recommend any proposed changes to the Board for approval.
ROLE AND INDEPENDENCE
The Committee assists the Board in fulfilling its responsibility for oversight
of the quality and integrity of the accounting, auditing, internal control and
financial reporting practices of the Company. It may also have such other duties
as may from time to time be assigned to it by the Board. The membership of the
Committee shall consist of at least three directors, who are each free of any
material relationship that, in the opinion of the Board, may interfere with such
member's individual exercise of independent judgment. Each Committee member
shall also be "independent" as such term is defined in Item 7(d)(3)(iv) of
Schedule 14A under the Securities Exchange Act of 1934 ("Exchange Act") and by
the applicable rules of the Nasdaq Stock Market, OTC Bulletin Board or any
exchange on which the Company's securities are listed. The Company's annual
report on Form 10-KSB shall disclose the inclusion or absence of an audit
committee financial expert, as such term is defined in Item 401(e) of Regulation
S-B under the Exchange Act.
The Committee shall maintain free and open communication with the independent
auditors, the internal auditors and Company management. In discharging its
oversight role, the Committee is empowered to investigate any matter relating to
the Company's accounting, auditing, internal control or financial reporting
practices brought to its attention, with full access to all Company books,
records, facilities and personnel.
ADMINISTRATION
One member of the Committee shall be appointed as chair. The chair shall be
responsible for leadership of the Committee, including scheduling and presiding
over meetings, preparing agendas, and making regular reports to the Board. The
chair will also maintain regular liaison with the CEO, CFO, the lead independent
audit partner and, if applicable, the internal auditor.
The Committee shall meet approximately four times a year, or more frequently as
the Committee considers necessary. At least once each year the Committee shall
have separate private meetings in executive sessions with the independent
auditors, management and, if applicable, the internal auditors. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Committee or
to meet with any members of, or consultants to, the Committee.
The Audit Committee may establish written policies and procedures for the
pre-approval of audit and non- audit services to be performed by the outside
auditor provided that these policies and procedures are detailed as to the
particular service and do not result in the delegation of the Audit Committee's
responsibilities to management. The Audit Committee may, in its discretion,
delegate to one or more of
A-1
its members the authority to pre-approve audit or non-audit services to be
performed by the outside auditor provided that any such approvals are presented
to the full Committee at its next scheduled meeting.
RESPONSIBILITIES
Although the Committee may wish to consider other duties from time to time, the
general recurring activities of the Committee in carrying out its oversight role
are described below. The responsibilities of the Committee shall include, but
not be limited to:
o Recommend to the Board of Directors, and evaluate, the firm of
independent certified public accountants to be appointed as auditors of
the Company, which firm shall be ultimately accountable to the Board of
Directors through the Committee.
o Be directly responsible for the appointment, compensation and oversight
of the Company's independent auditors and internal auditors.
o Review and discuss with the outside auditors their audit procedures,
including the scope, fees and timing of the audit, and the results of
the annual audit examination and any accompanying management letters,
and any reports of the outside auditors with respect to interim
periods.
o Review and discuss the written statement from the outside auditor of
the Company concerning any relationships between the auditor and the
Company or any other relationships that may adversely affect the
independence of the auditor and, based on such review, assess the
independence of the outside auditor.
o Review and discuss with management and the outside auditors the
financial statements of the Company, including an analysis of the
auditors' judgment as to the quality of the Company's accounting
principles.
o Recommend to the Board of Directors whether, based on the review and
discussions described in the paragraphs above, that the financial
statements should be included in the Annual Report on Form 10-KSB.
o Review and discuss with management and the outside auditors: (a) any
material financial or non- financial arrangements of the Company which
do not appear on the financial statements of the Company; and (b) any
transactions or courses of dealing with parties related to the Company
which transactions are significant in size or involve terms or other
aspects that differ from those that would likely be negotiated with
independent parties, and which arrangements or transactions are
relevant to an understanding of the Company's financial statements.
o Review and discuss with management and the outside auditors the
adequacy of the Company's internal controls.
o Review and discuss with management and the outside auditors the
accounting policies which may be viewed as critical, and review and
discuss any significant changes in the accounting policies of the
Company and accounting and financial reporting proposals that may have
a significant impact on the Company's financial reports.
A-2
o Establish policies and procedures for the engagement of the outside
auditor to provide non-audit services, and consider whether the outside
auditor's performance of information technology and other non-audit
services is compatible with the auditor's independence.
o Review material pending legal proceedings involving the Company and
other contingent liabilities.
o Obtain reports from management, the Company's senior internal auditing
executive and independent auditor that the Company and its subsidiary
affiliated entities are in conformity with applicable legal
requirements and the Company's Code of Ethics for Senior Financial
Officers. Review reports and disclosures of insider and affiliated
party transactions. Advise the Board with respect to the Company's
policies and procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Ethics for Senior Financial
Officers.
o Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters.
o Establish procedures to coordinate the procedures of the Committee with
the Company's Disclosure Committee responsible for overseeing the
accuracy of the Company's filings under the Exchange Act.
o Prior to the filing of audited financial statements with the Securities
and Exchange Commission, obtain a report from the auditor of: (1) all
critical accounting policies and practices to be used; (2) all
alternative treatments within generally accepted accounting principles
and practices related to material items that have been discussed with
management, including: (i) ramifications of the use of such alternative
disclosures and treatments; and (ii) the treatment preferred by the
auditor; and (3) other material written communications between the
auditor and the management, such as any management letter or schedule
of unadjusted differences.
The Committee's job is one of oversight. Management is responsible for the
preparation of the Company's financial statements and the independent auditors
are responsible for auditing those financial statements. The Committee and the
Board recognize that management and the independent auditors have more resources
and time, and more detailed knowledge and information regarding the Company's
accounting, auditing, internal control and financial reporting practices than
the Committee does; accordingly the Committee's oversight role does not provide
any expert or special assurance as to the financial statements and other
financial information provided by the Company to its shareholders and others.
OUTSIDE ADVISORS AND FUNDING
The Committee shall have the appropriate funding and authority to
retain such outside counsel, experts, and other advisors as it determines
appropriate to assist in the full performance of its functions.
INVESTIGATIONS
The Audit shall have the authority to conduct or authorize
investigations into any matters within its scope of responsibilities and shall
have the authority to retain outside advisors to assist it in the conduct of any
investigation.
A-3
APPENDIX B
COMMUNITY FIRST BANCORP, INC.
2004 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The Plan shall be known as the Community First
--------------------
Bancorp, Inc. ("Company") 2004 Stock Option Plan (the "Plan"). The purpose of
the Plan is to attract and retain qualified personnel for positions of
substantial responsibility and to provide additional incentive to officers,
directors, employees and other persons providing services to the Company, or any
present or future parent or subsidiary of the Company to promote the success of
the business. The Plan is intended to provide for the grant of "Incentive Stock
Options," within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and Non-Incentive Stock Options, options that do
not so qualify. The provisions of the Plan relating to Incentive Stock Options
shall be interpreted to conform to the requirements of Section 422 of the Code.
2. DEFINITIONS. The following words and phrases when used in this Plan with
-----------
an initial capital letter, unless the context clearly indicates otherwise, shall
have the meaning as set forth below. Wherever appropriate, the masculine pronoun
shall include the feminine pronoun and the singular shall include the plural.
"Award" means the grant by the Committee of an Incentive Stock Option or
a Non-Incentive Stock Option, or any combination thereof, as provided in the
Plan.
"Bank" shall mean Community First Bank, or any successor corporation
thereto.
"Board" shall mean the Board of Directors of the Company, or any
successor or parent corporation thereto.
"Change in Control" shall mean: (i) the sale of all, or a material
portion, of the assets of the Company or its Subsidiaries; (ii) the merger or
recapitalization of the Company whereby the Company is not the surviving entity;
(iii) a change in control of the Company, as otherwise defined or determined by
the Office of Thrift Supervision or regulations promulgated by it; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the outstanding voting securities of the Company by any
person, trust, entity or group. This limitation shall not apply to the purchase
of shares by underwriters in connection with a public offering of Company stock,
or the purchase of shares of up to 25% of any class of securities of the Company
by a tax-qualified employee stock benefit plan which is exempt from the approval
requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vii) as now in effect or
as may hereafter be amended. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
B-1
"Committee" shall mean the Board or the Stock Option Committee appointed
by the Board in accordance with Section 5(a) of the Plan.
"Common Stock" shall mean common stock of the Company, or any successor
or parent corporation thereto.
"Company" shall mean the Community First Bancorp, Inc., the parent
corporation of the Bank, or any successor or Parent thereof.
"Continuous Employment" or "Continuous Status as an Employee" shall mean
the absence of any interruption or termination of employment with the Company or
any present or future Parent or Subsidiary of the Company. Employment shall not
be considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Company or in the case of transfers between
payroll locations, of the Company or between the Company, its Parent, its
Subsidiaries or a successor.
"Director" shall mean a member of the Board of the Company, or any
successor or parent corporation thereto.
"Director Emeritus" shall mean a person serving as a director emeritus,
advisory director, consulting director or other similar position as may be
appointed by the Board of Directors of the Bank or the Company from time to
time.
"Disability" means (a) with respect to Incentive Stock Options, the
"permanent and total disability" of the Employee as such term is defined at
Section 22(e)(3) of the Code; and (b) with respect to Non-Incentive Stock
Options, any physical or mental impairment which renders the Participant
incapable of continuing in the employment or service of the Bank or the Parent
in his then current capacity as determined by the Committee.
"Effective Date" shall mean the date specified in Section 15 hereof.
"Employee" shall mean any person employed by the Company or any present
or future Parent or Subsidiary of the Company.
"Fair Market Value" shall mean: (i) if the Common Stock is traded
otherwise than on a national securities exchange, then the Fair Market Value per
Share shall be equal to the mean between the last bid and ask price of such
Common Stock on such date or, if there is no bid and ask price on said date,
then on the immediately prior business day on which there was a bid and ask
price. If no such bid and ask price is available, then the Fair Market Value
shall be determined by the Committee in good faith; or (ii) if the Common Stock
is listed on a national securities exchange, including the Nasdaq National
Market, then the Fair Market Value per Share shall be not less than the average
of the highest and lowest selling price of such Common Stock on such exchange on
such date, or if there were no sales on said date, then the Fair Market Value
shall be not less than the mean between the last bid and ask price on such date.
"Incentive Stock Option" or "ISO" shall mean an option to purchase
Shares granted by the Committee pursuant to Section 8 hereof which is subject to
the limitations and restrictions of Section 8 hereof and is intended to qualify
as an incentive stock option under Section 422 of the Code.
B-2
"Non-Incentive Stock Option" or "Non-ISO" shall mean an option to
purchase Shares granted pursuant to Section 9 hereof, which option is not
intended to qualify under Section 422 of the Code.
"Option" shall mean an Incentive Stock Option or Non-Incentive Stock
Option granted pursuant to this Plan providing the holder of such Option with
the right to purchase Common Stock.
"Optioned Stock" shall mean stock subject to an Option granted pursuant
to the Plan.
"Optionee" shall mean any person who receives an Option or Award
pursuant to the Plan.
"Parent" shall mean any present or future corporation which would be a
"parent corporation" of the Bank or the Company as defined in Sections 424(e)
and (g) of the Code.
"Participant" means any Director, officer or employee of the Company or
any Parent or Subsidiary of the Company or any other person providing a service
to the Company who is selected by the Committee to receive an Award, or who by
the express terms of the Plan is granted an Award.
"Plan" shall mean the Community First Bancorp, Inc. 2004 Stock Option
Plan.
"Share" shall mean one share of the Common Stock.
"Subsidiary" shall mean any present or future corporation which
constitutes a "subsidiary corporation" of the Company as defined in Sections
424(f) and (g) of the Code, including the Bank.
3. SHARES SUBJECT TO THE PLAN. Except as otherwise required by the
-----------------------------
provisions of Section 13 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed 27,772 Shares.
Such Shares may either be from authorized but unissued shares, treasury shares
or shares purchased in the market for Plan purposes. If an Award shall expire,
become unexercisable, or be forfeited for any reason prior to its exercise, new
Awards may be granted under the Plan with respect to the number of Shares as to
which such expiration has occurred.
4. SIX MONTH HOLDING PERIOD.
------------------------
Subject to vesting requirements, if applicable, except in the event of
death or disability of the Optionee, a minimum of six months must elapse between
the date of the grant of an Option and the date of the sale of the Common Stock
received through the exercise of such Option.
5. ADMINISTRATION OF THE PLAN.
--------------------------
(a) COMPOSITION OF THE COMMITTEE. The Plan shall be administered by the
Board of Directors of the Company or a Committee which shall consist of not less
than two Directors of the
B-3
Company appointed by the Board and serving at the pleasure of the Board. All
persons designated as members of the Committee shall meet the requirements of a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, as found at 17 CFR ss.240.16b-3.
(b) POWERS OF THE COMMITTEE. The Committee is authorized (but only to
the extent not contrary to the express provisions of the Plan or to resolutions
adopted by the Board) to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the form and content of
Awards to be issued under the Plan and to make other determinations necessary or
advisable for the administration of the Plan, and shall have and may exercise
such other power and authority as may be delegated to it by the Board from time
to time. A majority of the entire Committee shall constitute a quorum and the
action of a majority of the members present at any meeting at which a quorum is
present shall be deemed the action of the Committee. In no event may the
Committee revoke outstanding Awards without the consent of the Participant.
The President of the Company and such other officers as shall be
designated by the Committee are hereby authorized to execute written agreements
evidencing Awards on behalf of the Company and to cause them to be delivered to
the Participants. Such agreements shall set forth the Option exercise price, the
number of shares of Common Stock subject to such Option, the expiration date of
such Options, and such other terms and restrictions applicable to such Award as
are determined in accordance with the Plan or the actions of the Committee.
(c) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all persons
affected thereby.
6. ELIGIBILITY FOR AWARDS AND LIMITATIONS.
--------------------------------------
(a) The Committee shall from time to time determine the officers,
Directors, Employees and other persons who shall be granted Awards under the
Plan, the number of Awards to be granted to each such persons, and whether
Awards granted to each such Participant under the Plan shall be Incentive and/or
Non-Incentive Stock Options. In selecting Participants and in determining the
number of Shares of Common Stock to be granted to each such Participant, the
Committee may consider the nature of the prior and anticipated future services
rendered by each such Participant, each such Participant's current and potential
contribution to the Company and such other factors as the Committee may, in its
sole discretion, deem relevant. Participants who have been granted an Award may,
if otherwise eligible, be granted additional Awards.
(b) The aggregate Fair Market Value (determined as of the date the
Option is granted) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by each Employee during any calendar year
(under all Incentive Stock Option plans, as defined in Section 422 of the Code,
of the Company or any present or future Parent or Subsidiary of the Company)
shall not exceed $100,000. Notwithstanding the prior provisions of this Section
6, the Committee may grant Options in excess of the foregoing limitations,
provided said Options shall be clearly and specifically designated as not being
Incentive Stock Options.
(c) In no event shall Shares subject to Options granted to non-employee
Directors in the aggregate under this Plan exceed more than 30% of the total
number of Shares authorized for delivery under this Plan pursuant to Section 3
herein or more than 5% to any individual non-employee
B-4
Director. In no event shall Shares subject to Options granted to any Employee
exceed more than 25% of the total number of Shares authorized for delivery under
the Plan.
7. TERM OF THE PLAN. The Plan shall continue in effect for a term of ten
----------------
(10) years from the Effective Date, unless sooner terminated pursuant to Section
18 hereof. No Option shall be granted under the Plan after ten (10) years from
the Effective Date.
8. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS. Incentive Stock Options
-----------------------------------------------
may be granted only to Participants who are Employees. Each Incentive Stock
Option granted pursuant to the Plan shall be evidenced by an instrument in such
form as the Committee shall from time to time approve. Each Incentive Stock
Option granted pursuant to the Plan shall comply with, and be subject to, the
following terms and conditions:
(a) OPTION PRICE.
(i) The price per Share at which each Incentive Stock Option granted
by the Committee under the Plan may be exercised shall not, as to any particular
Incentive Stock Option, be less than the Fair Market Value of the Common Stock
on the date that such Incentive Stock Option is granted.
(ii) In the case of an Employee who owns Common Stock representing
more than ten percent (10%) of the outstanding Common Stock at the time the
Incentive Stock Option is granted, the Incentive Stock Option exercise price
shall not be less than one hundred and ten percent (110%) of the Fair Market
Value of the Common Stock on the date that the Incentive Stock Option is
granted.
(b) PAYMENT. Full payment for each Share of Common Stock purchased upon
the exercise of any Incentive Stock Option granted under the Plan shall be made
at the time of exercise of each such Incentive Stock Option and shall be paid in
cash (in United States Dollars), Common Stock or a combination of cash and
Common Stock. Common Stock utilized in full or partial payment of the exercise
price must have been owned by the party exercising such Option for not less than
six months prior to the date of exercise of such Option, and such Common Stock
shall be valued at the Fair Market Value at the date of exercise. The Company
shall accept full or partial payment in Common Stock only to the extent
permitted by applicable law. No Shares of Common Stock shall be issued until
full payment has been received by the Company, and no Optionee shall have any of
the rights of a stockholder of the Company until Shares of Common Stock are
issued to the Optionee.
(c) TERM OF INCENTIVE STOCK OPTION. The term of exercisability of each
Incentive Stock Option granted pursuant to the Plan shall be not more than ten
(10) years from the date each such Incentive Stock Option is granted, provided
that in the case of an Employee who owns stock representing more than ten
percent (10%) of the Common Stock outstanding at the time the Incentive Stock
Option is granted, the term of exercisability of the Incentive Stock Option
shall not exceed five (5) years.
(d) EXERCISE GENERALLY. Except as otherwise provided in Section 10
hereof, no Incentive Stock Option may be exercised unless the Optionee shall
have been in the employ of the Company at all times during the period beginning
with the date of grant of any such Incentive Stock Option and ending on the date
three (3) months prior to the date of exercise of any such Incentive Stock
Option. The Committee may impose additional conditions upon the right of an
Optionee to exercise any Incentive
B-5
Stock Option granted hereunder which are not inconsistent with the terms of the
Plan or the requirements for qualification as an Incentive Stock Option. Except
as otherwise provided by the terms of the Plan or by action of the Committee at
the time of the grant of the Options, the Options will be first exercisable at
the rate of 20% on the one year anniversary of the date of grant and 20%
annually thereafter during such periods of service as an Employee, Director or
Director Emeritus.
(e) CASHLESS EXERCISE. Subject to vesting requirements, if applicable,
an Optionee who has held an Incentive Stock Option for at least six months may
engage in the "cashless exercise" of the Option. Upon a cashless exercise, an
Optionee gives the Company written notice of the exercise of the Option together
with an order to a registered broker-dealer or equivalent third party, to sell
part or all of the Optioned Stock and to deliver enough of the proceeds to the
Company to pay the Option exercise price and any applicable withholding taxes.
If the Optionee does not sell the Optioned Stock through a registered
broker-dealer or equivalent third party, the Optionee can give the Company
written notice of the exercise of the Option and the third party purchaser of
the Optioned Stock shall pay the Option exercise price plus any applicable
withholding taxes to the Company. Such Option shall not be deemed exercised
until the Company has received full payment for the exercise price of such
Option.
(f) TRANSFERABILITY. An Incentive Stock Option granted pursuant to the
Plan shall be exercised during an Optionee's lifetime only by the Optionee to
whom it was granted and shall not be assignable or transferable otherwise than
by will or by the laws of descent and distribution.
9. TERMS AND CONDITIONS OF NON-INCENTIVE STOCK OPTIONS. Each Non-Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each Non-Incentive
Stock Option granted pursuant to the Plan shall comply with and be subject to
the following terms and conditions.
(a) OPTIONS GRANTED TO DIRECTORS. Subject to the limitations of Section
6(c), Non-Incentive Stock Options to purchase the number of shares of Common
Stock shown below will be granted to each Director who is not an Employee as of
the Effective Date, at an exercise price equal to the Fair Market Value of the
Common Stock on such date of grant.
OPTIONEE NUMBER OF SHARES
---------- ----------------
Ralph T. Teague 1,224
J. Craig Riddle 1,224
Charlotte E. Baldwin 1,043
Steven E. Carson 1,043
Paul W. Arison 898
C. Barry Vaughn 681
Charles G. Ramsey 609
B-6
The Options will be first exercisable at the rate of 20% on the one year
anniversary of the Effective Date and 20% annually thereafter during such
periods of service as a Director or Director Emeritus. Upon the death or
Disability of the Director or Director Emeritus, such Option shall be deemed
immediately 100% exercisable. Such Options shall continue to be exercisable for
a period of ten years following the date of grant without regard to the
continued services of such Director as a Director or Director Emeritus. In the
event of the Optionee's death, such Options may be exercised by the personal
representative of his estate or person or persons to whom his rights under such
Option shall have passed by will or by the laws of descent and distribution.
Options may be granted to newly appointed or elected non-employee Directors
within the sole discretion of the Committee. The exercise price per Share of
such Options granted shall be equal to the Fair Market Value of the Common Stock
at the time such Options are granted. All outstanding Awards shall become
immediately exercisable in the event of a Change in Control of the Bank or the
Company. Unless otherwise inapplicable, or inconsistent with the provisions of
this paragraph, the Options to be granted to Directors hereunder shall be
subject to all other provisions of this Plan.
(b) OPTION PRICE. The exercise price per Share of Common Stock for each
Non-Incentive Stock Option granted pursuant to the Plan shall be at such price
as the Committee may determine in its sole discretion, but in no event less than
the Fair Market Value of such Common Stock on the date of grant as determined by
the Committee in good faith.
(c) PAYMENT. Full payment for each Share of Common Stock purchased upon
the exercise of any Non-Incentive Stock Option granted under the Plan shall be
made at the time of exercise of each such Non-Incentive Stock Option and shall
be paid in cash (in United States Dollars), Common Stock or a combination of
cash and Common Stock. Common Stock utilized in full or partial payment of the
exercise price must have been owned by the party exercising such Option for not
less than six months prior to the date of exercise of such Option, and such
Common Stock shall be valued at the Fair Market Value at the date of exercise.
The Company shall accept full or partial payment in Common Stock only to the
extent permitted by applicable law. No Shares of Common Stock shall be issued
until full payment has been received by the Company and no Optionee shall have
any of the rights of a stockholder of the Company until the Shares of Common
Stock are issued to the Optionee.
(d) TERM. The term of exercisability of each Non-Incentive Stock Option
granted pursuant to the Plan shall be not more than ten (10) years from the date
each such Non-Incentive Stock Option is granted.
(e) EXERCISE GENERALLY. The Committee may impose additional conditions
upon the right of any Participant to exercise any Non-Incentive Stock Option
granted hereunder which is not inconsistent with the terms of the Plan. Except
as otherwise provided by the terms of the Plan or by action of the Committee at
the time of the grant of the Options, the Options will be first exercisable at
the rate of 20% on the one year anniversary of the date of grant and 20%
annually thereafter during such periods of service as an Employee, Director or
Director Emeritus.
(f) CASHLESS EXERCISE. Subject to vesting requirements, if applicable,
an Optionee who has held a Non-Incentive Stock Option for at least six months
may engage in the "cashless exercise" of the Option. Upon a cashless exercise,
an Optionee gives the Company written notice of the exercise of the Option
together with an order to a registered broker-dealer or equivalent third party,
to sell part or all of the Optioned Stock and to deliver enough of the proceeds
to the Company to pay the Option exercise price and any applicable withholding
taxes. If the Optionee does not sell the Optioned Stock through a
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registered broker-dealer or equivalent third party, the Optionee can give the
Company written notice of the exercise of the Option and the third party
purchaser of the Optioned Stock shall pay the Option exercise price plus any
applicable withholding taxes to the Company. Such Option shall not be deemed
exercised until the Company has received full payment for the exercise price of
such Option.
(g) TRANSFERABILITY. Any Non-Incentive Stock Option granted pursuant to
the Plan shall be exercised during an Optionee's lifetime only by the Optionee
to whom it was granted and shall not be assignable or transferable otherwise
than by will or by the laws of descent and distribution.
10. EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH ON INCENTIVE
STOCK OPTIONS.
(a) TERMINATION OF EMPLOYMENT. In the event that any Optionee's
employment with the Company shall terminate for any reason, other than
Disability or death, all of any such Optionee's Incentive Stock Options, and all
of any such Optionee's rights to purchase or receive Shares of Common Stock
pursuant thereto, shall automatically terminate on (A) the earlier of (i) or
(ii): (i) the respective expiration dates of any such Incentive Stock Options,
or (ii) the expiration of not more than three (3) months after the date of such
termination of employment; or (B) at such later date as is determined by the
Committee at the time of the grant of such Award based upon the Optionee's
continuing status as a Director or Director Emeritus of the Bank or the Company,
but only if, and to the extent that, the Optionee was entitled to exercise any
such Incentive Stock Options at the date of such termination of employment, and
further that such Award shall thereafter be deemed a Non-Incentive Stock Option.
In the event that a Subsidiary ceases to be a Subsidiary of the Company, the
employment of all of its employees who are not immediately thereafter employees
of the Company shall be deemed to terminate upon the date such Subsidiary so
ceases to be a Subsidiary of the Company.
(b) DISABILITY. In the event that any Optionee's employment with the
Company shall terminate as the result of the Disability of such Optionee, such
Optionee may exercise any Incentive Stock Options granted to the Optionee
pursuant to the Plan at any time prior to the earlier of (i) the respective
expiration dates of any such Incentive Stock Options or (ii) the date which is
one (1) year after the date of such termination of employment, but only if, and
to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of such termination of employment.
(c) DEATH. In the event of the death of an Optionee, any Incentive Stock
Options granted to such Optionee may be exercised by the person or persons to
whom the Optionee's rights under any such Incentive Stock Options pass by will
or by the laws of descent and distribution (including the Optionee's estate
during the period of administration) at any time prior to the earlier of (i) the
respective expiration dates of any such Incentive Stock Options or (ii) the date
which is two (2) years after the date of death of such Optionee but only if, and
to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of death. For purposes of this Section 10(c), any
Incentive Stock Option held by an Optionee shall be considered exercisable at
the date of his death if the only unsatisfied condition precedent to the
exercisability of such Incentive Stock Option at the date of death is the
passage of a specified period of time. At the discretion of the Committee, upon
exercise of such Options the Optionee may receive Shares or cash or a
combination thereof. If cash shall be paid in lieu of Shares, such cash shall be
equal to the difference between the Fair Market Value of such Shares and the
exercise price of such Options on the exercise date.
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(d) INCENTIVE STOCK OPTIONS DEEMED EXERCISABLE. For purposes of Sections
10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any Optionee
shall be considered exercisable at the date of termination of employment if any
such Incentive Stock Option would have been exercisable at such date of
termination of employment without regard to the Disability or death of the
Participant.
(e) TERMINATION OF INCENTIVE STOCK OPTIONS. Except as may be specified
by the Committee at the time of grant of an Option, to the extent that any
Incentive Stock Option granted under the Plan to any Optionee whose employment
with the Company terminates shall not have been exercised within the applicable
period set forth in this Section 10, any such Incentive Stock Option, and all
rights to purchase or receive Shares of Common Stock pursuant thereto, as the
case may be, shall terminate on the last day of the applicable period.
11. EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH ON
NON-INCENTIVE STOCK OPTIONS. The terms and conditions of Non-Incentive Stock
Options relating to the effect of the termination of an Optionee's employment or
service, Disability of an Optionee or his death shall be such terms and
conditions as the Committee shall, in its sole discretion, determine at the time
of termination of service, unless specifically provided for by the terms of the
Agreement at the time of grant of the award, and provided further that any such
terms and conditions may not be inconsistent with applicable regulations of the
Office of Thrift Supervision or other appropriate banking regulatory agency.
12. WITHHOLDING TAX. The Company shall have the right to deduct from all
amounts paid in cash with respect to the cashless exercise of Options any taxes
required by law to be withheld with respect to such cash payments. Where a
Participant or other person is entitled to receive Shares pursuant to the
exercise of an Option, the Company shall have the right to require the
Participant or such other person to pay the Company the amount of any taxes
which the Company is required to withhold with respect to such Shares, or, in
lieu thereof, to retain, or to sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
13. RECAPITALIZATION, MERGER, CONSOLIDATION, CHANGE IN CONTROL AND OTHER
TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the stockholders of
the Company, within the sole discretion of the Committee, the aggregate number
of Shares of Common Stock for which Options may be granted hereunder, the number
of Shares of Common Stock covered by each outstanding Option, and the exercise
price per Share of Common Stock of each such Option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding Shares of Common Stock resulting from a subdivision or
consolidation of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares, or
otherwise) or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such Shares of Common Stock
effected without the receipt or payment of consideration by the Company (other
than Shares held by dissenting stockholders).
(b) CHANGE IN CONTROL. All outstanding Awards shall become immediately
exercisable in the event of a Change in Control of the Company or the Bank. In
the event of such a Change in Control, the Committee and the Board of Directors
will take one or more of the following actions to be effective as of the date of
such Change in Control:
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(i) provide that such Options shall be assumed, or equivalent
options shall be substituted, ("Substitute Options") by the acquiring or
succeeding corporation (or an affiliate thereof), provided that: (A) any such
Substitute Options exchanged for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, and (B) the shares of stock issuable
upon the exercise of such Substitute Options shall constitute securities
registered in accordance with the Securities Act of 1933, as amended, ("1933
Act") or such securities shall be exempt from such registration in accordance
with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered
Securities"), or in the alternative, if the securities issuable upon the
exercise of such Substitute Options shall not constitute Registered Securities,
then the Optionee will receive upon the exercise of the Substitute Options a
cash payment for each Option surrendered equal to the difference between (1) the
Fair Market Value of the consideration to be received for each share of Common
Stock in the Change in Control transaction times the number of shares of Common
Stock subject to such surrendered Options, and (2) the aggregate exercise price
of all such surrendered Options, or
(ii) in the event of a transaction under the terms of which the
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment (the "Merger Price") for each share of Common Stock
exchanged in the Change in Control transaction, to make or to provide for a cash
payment to the Optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such Options held by each
Optionee (to the extent then exercisable at prices not in excess of the Merger
Price) and (B) the aggregate exercise price of all such surrendered Options in
exchange for such surrendered Options.
(c) EXTRAORDINARY CORPORATE ACTION. Notwithstanding any provisions of
the Plan to the contrary, subject to any required action by the stockholders of
the Company, in the event of any Change in Control, recapitalization, merger,
consolidation, exchange of Shares, spin-off, reorganization, tender offer,
partial or complete liquidation or other extraordinary corporate action or
event, the Committee, in its sole discretion, shall have the power, prior or
subsequent to such action or event to:
(i) appropriately adjust the number of Shares of Common Stock
subject to each Option, the Option exercise price per Share of Common Stock, and
the consideration to be given or received by the Company upon the exercise of
any outstanding Option;
(ii) cancel any or all previously granted Options, provided that
appropriate consideration is paid to the Optionee in connection therewith;
and/or
(iii) make such other adjustments in connection with the Plan as the
Committee, in its sole discretion, deems necessary, desirable, appropriate or
advisable; PROVIDED, however, that no action shall be taken by the Committee
which would cause Incentive Stock Options granted pursuant to the Plan to fail
to meet the requirements of Section 422 of the Code without the consent of the
Optionee.
(d) ACCELERATION. The Committee shall at all times have the power to
accelerate the exercise date of Options previously granted under the Plan;
provided that such action is not contrary to regulations of the OTS or other
appropriate banking regulatory agency then in effect.
(e) NON-RECURRING DIVIDENDS. Notwithstanding anything herein to the
contrary, upon the payment of a special or non-recurring dividend that has the
effect of a return of capital distribution to the stockholders, the Company
shall, within the discretion of the Committee, either:
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(i) adjust the Option exercise price per share in a proportionate
and equitable manner to reflect the payment of such capital distribution,
or
(ii) make an equivalent payment to each Participant holding an
outstanding Option as of the dividend record date of such dividend. Such
payment shall be made at substantially the same time, in substantially the
same form and in substantially the same amount per Optioned Stock as the
dividend or other distribution paid with respect to outstanding Shares;
provided, however, that if any dividend or distribution on outstanding
Shares is paid in property other than cash, the Company, in the Committee's
discretion, may make such payment in a cash amount per Optioned Stock equal
in fair market value to the fair market value of the non-cash dividend or
distribution; or
(iii) take the action described in Section 13(e)(i) with respect
to certain outstanding Options and the action described in Section
13(e)(ii) with respect to the remaining outstanding Options.
Except as expressly provided in Sections 13(a) and 13(b), no
Optionee shall have any rights by reason of the occurrence of any of the events
described in this Section 13.
14. TIME OF GRANTING OPTIONS. The date of grant of an Option under the Plan
------------------------
shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the grant of an Option shall be
given to each individual to whom an Option is so granted within a reasonable
time after the date of such grant in a form determined by the Committee.
15. EFFECTIVE DATE. The Plan shall become effective upon the date of
---------------
approval of the Plan by the stockholders of the Company, subject to approval or
non-objection by the Office of Thrift Supervision, if applicable. The Committee
may make a determination related to Awards prior to the Effective Date with such
Awards to be effective upon the date of stockholder approval of the Plan.
16. APPROVAL BY STOCKHOLDERS. The Plan shall be approved by a majority vote
------------------------
of stockholders of the Company within twelve (12) months before or after the
date the Plan is approved by the Board.
17. MODIFICATION OF OPTIONS. At any time and from time to time, the Board
-----------------------
may authorize the Committee to direct the execution of an instrument providing
for the modification of any outstanding Option, provided no such modification,
extension or renewal shall confer on the holder of said Option any right or
benefit which could not be conferred on the Optionee by the grant of a new
Option at such time, or shall not materially decrease the Optionee's benefits
under the Option without the consent of the holder of the Option, except as
otherwise permitted under Section 18 hereof.
18. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
(a) ACTION BY THE BOARD. The Board may alter, suspend or discontinue the
Plan, except that no action of the Board may increase (other than as provided in
Section 13 hereof) the maximum number of Shares permitted to be optioned under
the Plan, materially increase the benefits accruing to Participants under the
Plan or materially modify the requirements for eligibility for participation in
the Plan unless such action of the Board shall be subject to approval or
ratification by the stockholders of the Company.
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(b) CHANGE IN APPLICABLE LAW. Notwithstanding any other provision
contained in the Plan, in the event of a change in any federal or state law,
rule, regulation or policy which would make the exercise of all or part of any
previously granted Option unlawful or subject the Company to any penalty, the
Committee may restrict any such exercise without the consent of the Optionee or
other holder thereof in order to comply with any such law, rule or regulation or
to avoid any such penalty.
19. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATIONS ON OPTION EXERCISE;
----------------------------------------------------------------------
CANCELLATION OF OPTION RIGHTS.
- -----------------------------
(a) Shares shall not be issued with respect to any Option granted under
the Plan unless the issuance and delivery of such Shares shall comply with all
relevant provisions of applicable law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities laws and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) The inability of the Company to obtain any necessary authorizations,
approvals or letters of non-objection from any regulatory body or authority
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares issuable hereunder shall relieve the Company of any liability with
respect to the non-issuance or sale of such Shares.
(c) As a condition to the exercise of an Option, the Company may require
the person exercising the Option to make such representations and warranties as
may be necessary to assure the availability of an exemption from the
registration requirements of federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the
termination of employment or service of an Optionee by the Company or its
Subsidiaries for "cause" as defined at 12 C.F.R. 563.39(b)(1) as determined by
the Board of Directors, all Options held by such Participant shall cease to be
exercisable as of the date of such termination of employment or service.
(e) Upon the exercise of an Option by an Optionee (or the Optionee's
personal representative), the Committee, in its sole and absolute discretion,
may make a cash payment to the Optionee, in whole or in part, in lieu of the
delivery of shares of Common Stock. Such cash payment to be paid in lieu of
delivery of Common Stock shall be equal to the difference between the Fair
Market Value of the Common Stock on the date of the Option exercise and the
exercise price per share of the Option. Such cash payment shall be in exchange
for the cancellation of such Option. Such cash payment shall not be made in the
event that such transaction would result in liability to the Optionee or the
Company under Section 16(b) of the Securities Exchange Act of 1934, as amended,
and regulations promulgated thereunder.
(f) In the event that the Bank shall be deemed critically
undercapitalized (as defined at 12 CFR 565.4), is subject to enforcement action
by the Office of Thrift Supervision, or receives a capital directive under 12
CFR 565.7, then all Options awarded to executive officers or directors of the
Company or its Subsidiaries must exercise such options or forfeit such Options.
20. RESERVATION OF SHARES. During the term of the Plan, the Company will
----------------------
reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
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21. UNSECURED OBLIGATION. No Participant under the Plan shall have any
---------------------
interest in any fund or special asset of the Company by reason of the Plan or
the grant of any Option under the Plan. No trust fund shall be created in
connection with the Plan or any grant of any Option hereunder and there shall be
no required funding of amounts which may become payable to any Participant.
22. NO EMPLOYMENT RIGHTS. No Director, Employee or other person shall have
--------------------
a right to be selected as a Participant under the Plan. Neither the Plan nor any
action taken by the Committee in administration of the Plan shall be construed
as giving any person any rights of employment or retention as an Employee,
Director, Director Emeritus or in any other capacity with the Company, the Bank
or other Subsidiaries.
23. GOVERNING LAW. The Plan shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Kentucky, except to the extent
that the Maryland General Corporation Law or federal law shall be deemed to
apply.
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APPENDIX C
COMMUNITY FIRST BANK
2004 RESTRICTED STOCK PLAN
AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Community First Bank ("Bank") hereby establishes the Restricted Stock
Plan (the "Plan") and Trust (the "Trust") upon the terms and conditions
hereinafter stated in this Restricted Stock Plan and Trust Agreement (the
"Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and to retain personnel of
experience and ability in key positions of responsibility with the Bank and its
subsidiaries, by providing such personnel of the Bank and its subsidiaries with
an increased equity interest in the Community First Bancorp, Inc. ("Company"),
the parent corporation of the Bank, as compensation for their prior and
anticipated future professional contributions and service to the Bank and its
subsidiaries.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meaning as set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
"Bank" means Community First Bank, a federal stock savings bank.
"Beneficiary" means the person or persons designated by the Participant to
receive any benefits payable under the Plan in the event of such Participant's
death. Such person or persons shall be designated in writing by the Participant
and addressed to the Bank or the Committee on forms provided for this purpose by
the Committee and delivered to the Bank and may be changed from time to time by
similar written notice to the Committee. A Participant's last will and testament
or any codicil thereto shall not constitute written designation of a
Beneficiary. In the absence of such written designation, the Beneficiary shall
be the Participant's surviving spouse, if any, or if none, the Participant's
estate.
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"Board" means the Board of Directors of the Bank, or any successor
corporation thereto.
"Cause" means the personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profits, intentional failure to
perform stated duties, willful violation of a material provision of any law,
rule or regulation (other than traffic violations and similar offense), or a
material violation of a final cease-and-desist order or any other action which
results in a substantial financial loss to the Company or its Subsidiaries.
"Change in Control" shall mean: (i) the sale of all, or a material portion,
of the assets of the Company or the Bank; (ii) the merger or recapitalization of
the Company or the Bank whereby the Company or the Bank is not the surviving
entity; (iii) a change in control of the Company or the Bank, as otherwise
defined or determined by the Office of Thrift Supervision ("OTS") or regulations
promulgated by it; or (iv) the acquisition, directly or indirectly, of the
beneficial ownership (within the meaning of that term as it is used in Section
13(d) of the 1934 Act and the rules and regulations promulgated thereunder) of
twenty-five percent (25%) or more of the outstanding voting securities of the
Company by any person, trust, entity or group. This limitation shall not apply
to the purchase of shares of up to 25% of any class of securities of the Company
by a tax-qualified employee stock benefit plan which is exempt from the approval
requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or
as may hereafter be amended. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
"Committee" means the Board of Directors of the Company or the Restricted
Stock Plan Committee appointed by the Board of Directors of the Company pursuant
to Article IV hereof.
"Common Stock" means shares of the common stock of the Company, or any
successor corporation or parent thereto.
"Company" means Community First Bancorp, Inc., and any successor
corporation thereto.
"Conversion" means the effective date of the stock charter of the Bank and
simultaneous acquisition of all of the outstanding stock of the Bank by the
Company.
"Director" means a member of the Board of the Bank.
"Director Emeritus" means a person serving as a director emeritus, advisory
director, consulting director, or other similar position as may be appointed by
the Board of Directors of the Company or the Bank from time to time.
"Disability" means any physical or mental impairment which renders the
Participant incapable of continuing in the employment or service of the Bank or
any Subsidiary in his current capacity as determined by the Committee.
"Effective Date" shall mean the date of stockholder approval of the Plan by
the Company's stockholders.
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"Eligible Participant" means an Employee, Director or director of a
Subsidiary who may receive a Plan Share Award under the Plan.
"Employee" means any person who is employed by the Bank or a Subsidiary.
"Participant" means an Employee or Director who receives a Plan Share Award
under the Plan.
"Plan Shares" means shares of Common Stock held in the Trust which are
awarded or issuable to a Participant pursuant to the Plan.
"Plan Share Award" or "Award" means a right granted to a Participant under
this Plan to earn or to receive Plan Shares.
"Plan Share Reserve" means the shares of Common Stock held by the Trust
pursuant to Sections 5.03 and 5.04.
"Subsidiary" means those subsidiaries of the Bank which, with the consent
of the Board, agree to participate in this Plan.
"Trustee" or "Trustee Committee" means that person(s) or entity nominated
by the Committee and approved by the Board pursuant to Sections 4.01 and 4.02 to
hold legal title to the Plan assets for the purposes set forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE OF THE COMMITTEE. The Plan shall be administered and interpreted
by the Board of Directors of the Bank or a Committee appointed by said Board,
which shall consist of not less than two non-employee members of the Board,
which shall have all of the powers allocated to it in this and other sections of
the Plan. All persons designated as members of the Committee shall be
"Non-Employee Directors" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended ("1934 Act"). The interpretation and
construction by the Committee of any provisions of the Plan or of any Plan Share
Award granted hereunder shall be final and binding. The Committee shall act by
vote or written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to
the Plan to the Board at appropriate times, but in no event less than one time
per calendar year. The Committee shall recommend to the Board one or more
persons or entity to act as Trustee in accordance with the provision of this
Plan and Trust and the terms of Article VIII hereof.
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4.02 ROLE OF THE BOARD. The members of the Committee and the Trustee shall
be appointed or approved by, and will serve at the pleasure of the Board. The
Board may in its discretion from time to time remove members from, or add
members to, the Committee, and may remove, replace or add Trustees. The Board
shall have all of the powers allocated to it in this and other sections of the
Plan, may take any action under or with respect to the Plan which the Committee
is authorized to take, and may reverse or override any action taken or decision
made by the Committee under or with respect to the Plan, provided, however, that
the Board may not revoke any Plan Share Award already made except as provided in
Section 7.01(b) herein.
4.03 LIMITATION ON LIABILITY. No member of the Board, the Committee or the
Trustee shall be liable for any determination made in good faith with respect to
the Plan or any Plan Share Awards granted. If a member of the Board, Committee
or any Trustee is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by any reason of anything done or not done by
him in such capacity under or with respect to the Plan, the Company and the Bank
shall indemnify such member against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the Company, the Bank and its Subsidiaries and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Notwithstanding anything herein to the contrary, in no
event shall the Bank take any actions with respect to this Section 4.03 which is
not in compliance with the limitations or requirements set forth at 12 C.F.R.
545.121, as may be amended from time to time.
ARTICLE V
---------
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board of Directors of the Bank
shall determine the amounts (or the method of computing the amounts) to be
contributed by the Bank to the Trust established under this Plan. Such
contribution amounts shall be paid to the Trustee at the time of contribution.
No contributions to the Trust by Participants shall be permitted except with
respect to amounts necessary to meet tax withholding obligations.
5.02 INITIAL INVESTMENT. Any funds held by the Trust prior to investment in
the Common Stock shall be invested by the Trustee in such interest-bearing
account or accounts at the Bank as the Trustee shall determine to be
appropriate.
5.03 INVESTMENT OF TRUST ASSETS. Following approval of the Plan by
stockholders of the Company and receipt of any other necessary regulatory
approvals, the Trust shall purchase Common Stock of the Company in an amount
equal to up to 100% of the Trust's cash assets, after providing for any required
withholding as needed for tax purposes, provided, however, that the Trust shall
not purchase more than 8,331 shares of Common Stock. The Trustee may purchase
shares of Common Stock in the open market or, in the alternative, may purchase
authorized but unissued shares of the Common Stock or treasury shares from the
Company in an amount sufficient to fund the Plan Share Reserve.
5.04 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON PLAN SHARE
RESERVES. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.05,
or the decision of the Committee to return
C-4
Plan Shares to the Company, the Plan Share Reserve shall be reduced by the
number of Shares subject to the Awards so allocated or returned. Any Shares
subject to an Award which are not earned because of forfeiture by the
Participant pursuant to Section 7.01 shall be added to the Plan Share Reserve.
ARTICLE VI
----------
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Eligible Participants may receive Plan Share Awards
within the sole discretion of the Committee. Directors who are not otherwise
Employees shall receive Plan Share Awards pursuant to Section 6.05.
6.02 ALLOCATIONS. The Committee will determine which of the Eligible
Participants will be granted Plan Share Awards and the number of Shares covered
by each Award, provided, however, that in no event shall any Awards be made
which will violate the Charter or Bylaws of the Bank or its Subsidiaries or any
applicable federal or state law or regulation. In the event Shares are forfeited
for any reason or additional Shares are purchased by the Trustee, the Committee
may, from time to time, determine which of the Eligible Participants will be
granted Plan Share Awards to be awarded from forfeited Shares. In selecting
those Eligible Participants to whom Plan Share Awards will be granted and the
number of shares covered by such Awards, the Committee shall consider the prior
and anticipated future position, duties and responsibilities of such
individuals, the value of their prior and anticipated future services to the
Bank and its Subsidiaries, and any other factors the Committee may deem
relevant. All actions by the Committee shall be deemed final, except to the
extent that such actions are revoked by the Board. Notwithstanding anything
herein to the contrary, in no event shall any Participant receive Plan Share
Awards in excess of 25% of the aggregate Plan Shares authorized under the Plan.
6.03 FORM OF ALLOCATION. As promptly as practicable after a determination
is made pursuant to Section 6.02 or Section 6.05 that a Plan Share Award is to
be made, the Committee shall notify the Participant in writing of the grant of
the Award, the number of Plan Shares covered by the Award, and the terms upon
which the Plan Shares subject to the award may be earned. The date on which the
Committee makes its award determination or the date the Committee so notifies
the Participant shall be considered the date of grant of the Plan Share Awards
as determined by the Committee. The Committee shall maintain records as to all
grants of Plan Share Awards under the Plan.
6.04 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary at
Sections 6.01, 6.02 or 6.05, no Eligible Participants shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards being at the
sole discretion of the Committee and the Board, nor shall the Eligible
Participants as a group have such a right. The Committee may, with the approval
of the Board (or, if so directed by the Board) return all Common Stock in the
Plan Share Reserve to the Company at any time, and cease issuing Plan Share
Awards.
6.05 AWARDS TO DIRECTORS. Notwithstanding anything herein to the contrary,
as of the Effective Date, a Plan Share Award shall be awarded to each Director
of the Bank that is not otherwise an Employee as indicated below:
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NON-EMPLOYEE NUMBER OF
DIRECTOR PLAN SHARES
------------ -----------
Ralph T. Teague 416
J. Craig Riddle 416
Charlotte E. Baldwin 354
Steven E. Carson 354
Paul W. Arison 305
C. Barry Vaughn 231
Charles G. Ramsey 206
Such Plan Share Award shall be immediately 100% earned and non-forfeitable
in the event of the death or Disability of such Director or Director Emeritus.
Such Plan Share Award shall be immediately 100% earned and non-forfeitable upon
a Change in Control of the Company or the Bank. Subsequent to the Effective
Date, Plan Share Awards may be awarded to newly elected or appointed Directors
of the Bank by the Committee, provided that total Plan Share Awards granted to
non-employee Directors of the Bank shall not exceed 30% of the total Plan Share
Reserve in the aggregate under the Plan or 5% of the total Plan Share Reserve to
any individual non-employee Director.
ARTICLE VII
-----------
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNINGS PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Unless the Committee shall specifically state to the
contrary at the time a Plan Share Award is granted, Plan Shares subject to an
Award shall be earned and non-forfeitable by a Participant at the rate of
one-fifth of such Award following one year after the granting of such Award, and
an additional one-fifth following each of the next four successive years;
provided that such Participant remains an Employee, Director, or Director
Emeritus during such period. Notwithstanding anything herein to the contrary, in
no event shall a Plan Share Award granted hereunder be earned and
non-forfeitable by a Participant more rapidly than at the rate of one-fifth of
such Award as of the one year anniversary of the date of grant and an additional
one-fifth following each of the next four successive years.
(b) REVOCATION FOR MISCONDUCT. Notwithstanding anything herein to the
contrary, the Board shall, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been delivered thereunder to the
Participant, whether or not yet earned, in the case of a Participant who is
discharged from the employ or service of the Bank or a Subsidiary for Cause, or
who is discovered after termination of employment or service to have engaged in
conduct that would have justified termination for Cause. A determination of
Cause shall be made by the Board within its sole discretion.
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(C) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR DISABILITY. Notwithstanding
the general rule contained in Section 7.01(a) above, all Plan Shares subject to
a Plan Share Award held by a Participant whose employment or service with the
Company or a Subsidiary terminates due to death or Disability, shall be deemed
earned and nonforfeitable as of the Participant's last date of employment or
service with the Bank or a Subsidiary and shall be distributed as soon as
practicable thereafter.
(D) EXCEPTION FOR TERMINATION AFTER A CHANGE IN CONTROL. Notwithstanding
the general rule contained in Section 7.01 above, all Plan Shares subject to a
Plan Share Award held by a Participant shall be deemed to be immediately 100%
earned and non-forfeitable in the event of a Change in Control of the Company or
the Bank and shall be distributed as soon as practicable thereafter.
7.02 ACCRUAL AND PAYMENT OF DIVIDENDS. A holder of a Plan Share Award,
whether or not earned, shall also be entitled to receive an amount equal to any
cash dividends declared and paid with respect to shares of Common Stock
represented by such Plan Share Award between the date the relevant Plan Share
Award was granted to such Participant and the date the Plan Shares are
distributed. Such cash dividend amounts shall be held in arrears under the Trust
and distributed upon the earning of the applicable Plan Share Award. Such
payment shall also include an appropriate amount of earnings, if any, of the
Trust assets with respect to any cash dividends so distributed.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as provided in
Subsections (d) and (e) below, Plan Shares shall be distributed to the
Participant or his Beneficiary, as the case may be, as soon as practicable after
they have been earned. No fractional shares shall be distributed.
Notwithstanding anything herein to the contrary, at the discretion of the
Committee, Plan Shares may be distributed prior to such Shares being 100%
earned, provided that such Plan Shares shall contain a restrictive legend
detailing the applicable limitations of such shares with respect to transfer and
forfeiture.
(b) FORM OF DISTRIBUTION. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be made in cash.
Notwithstanding anything within the Plan to the contrary, upon a Change in
Control whereby substantially all of the Common Stock of the Company shall be
acquired for cash, all Plan Shares associated with Plan Share Awards, together
with any shares representing stock dividends associated with such Plan Share
Awards, shall be, at the sole discretion of the Committee, distributed as of the
effective date of such Change in Control, or as soon as administratively
feasible thereafter, in the form of cash equal to the consideration received in
exchange for such Common Stock represented by such Plan Shares.
(c) WITHHOLDING. The Trustee may withhold from any payment or distribution
made under this Plan sufficient amounts of cash or shares of Common Stock
necessary to cover any applicable withholding and employment taxes, and if the
amount of such payment or distribution is not sufficient, the Trustee may
require the Participant or Beneficiary to pay to the Trustee the amount required
to be withheld in taxes as a condition of delivering the Plan Shares. The
Trustee shall pay over to the Bank or a Subsidiary which employs or employed
such Participant any such amount withheld from or paid by the Participant or
Beneficiary.
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(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS. Notwithstanding Subsection (a)
above, no Plan Shares may be distributed prior to the date which is five years
from the effective date of the Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common
Stock, unless such action is approved in advance by a majority vote of
disinterested directors of the Board of the Company. Any Plan Shares remaining
undistributed solely by reason of the operation of this Subsection (d) shall be
distributed to the Participant or his Beneficiary on the date which is five
years from the effective date of the Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be distributed, however,
unless and until all of the requirements of all applicable law and regulation
shall have been fully complied with, including the receipt of approval of the
Plan by the stockholders of the Company by such vote, if any, as may be required
by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. After a Plan Share Award has become earned and
non-forfeitable, the Participant shall be entitled to direct the Trustee as to
the voting of the Plan Shares which are associated with the Plan Share Award and
which have not yet been distributed pursuant to Section 7.03, subject to rules
and procedures adopted by the Committee for this purpose. All shares of Common
Stock held by the Trust as to which Participants are not entitled to direct, or
have not directed, the voting of such Shares, shall be voted by the Trustee as
directed by the Committee.
ARTICLE VIII
------------
TRUST
8.01 TRUST. The Trustee shall receive, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the Plan and Trust and the applicable directions, rules, regulations,
procedures and policies established by the Committee pursuant to the Plan.
8.02 MANAGEMENT OF TRUST. It is the intention of this Plan and Trust that
the Trustee shall have complete authority and discretion with respect to the
management, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust, except those attributable to cash dividends paid
with respect to Plan Shares not held in the Plan Share Reserve, in Common Stock
to the fullest extent practicable, except to the extent that the Trustee
determines that the holding of monies in cash or cash equivalents is necessary
to meet the obligations of the Trust. In performing their duties, the Trustees
shall have the power to do all things and execute such instruments as may be
deemed necessary or proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in the
Common Stock without regard to any law now or hereafter in force limiting
investments for Trustees or other fiduciaries. The investment authorized
herein may constitute the only investment of the Trust, and in making such
investment, the Trustee is authorized to purchase Common Stock from the
Company or from any other source, and such Common Stock so purchased may be
outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance with
(a) above in such deposit accounts, and certificates of deposit (including
those issued by the Bank), obligations of the United
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States government or its agencies or such other investments as shall be
considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time held
or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in the name
of a nominee, without the addition of words indicating that such security
is an asset of the Trust (but accurate records shall be maintained showing
that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be in the opinion
of the Trustee reasonable for the proper operation of the Plan and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights, duties
and obligations hereunder, and such other legal services or representation
as they may deem desirable.
(h) To hold funds and securities representing the amounts to be distributed
to a Participant or his Beneficiary as a consequence of a dispute as to the
disposition thereof, whether in a segregated account or held in common with
other assets.
(i) As may be directed by the Committee or the Board from time to time, the
Trustee shall pay to the Bank earnings of the Trust attributable to the
Plan Share Reserve.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of a court for the exercise of any power
herein contained, or to maintain bond.
8.03 RECORDS AND ACCOUNTS. The Trustee shall maintain accurate and detailed
records and accounts of all transactions of the Trust, which shall be available
at all reasonable times for inspection by any legally entitled person or entity
to the extent required by applicable law, or any other person determined by the
Committee.
8.04 EARNINGS. All earnings, gains and losses with respect to Trust assets
shall be allocated in accordance with a reasonable procedure adopted by the
Committee, to bookkeeping accounts for Participants or to the general account of
the Trust, depending on the nature and allocation of the assets generating such
earnings, gains and losses. In particular, any earnings on cash dividends
received with respect to shares of Common Stock shall be allocated to accounts
for Participants, except to the extent that such cash dividends are distributed
to Participants, if such shares are the subject of outstanding Plan Share
Awards, or, otherwise to the Plan Share Reserve.
8.05 EXPENSES. All costs and expenses incurred in the operation and
administration of this Plan, including those incurred by the Trustee, shall be
paid by the Bank.
8.06 INDEMNIFICATION. Subject to the requirements and limitations of
applicable laws and regulations, the Company and the Bank shall indemnify,
defend and hold the Trustee harmless against all
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claims, expenses and liabilities arising out of or related to the exercise of
the Trustee's powers and the discharge of their duties hereunder, unless the
same shall be due to their gross negligence or willful misconduct.
ARTICLE IX
----------
MISCELLANEOUS
9.01 ADJUSTMENTS FOR CAPITAL CHANGES. The aggregate number of Plan Shares
available for issuance pursuant to the Plan Share Awards and the number of
Shares to which any Plan Share Award relates shall be proportionately adjusted
for any increase or decrease in the total number of outstanding shares of Common
Stock issued subsequent to the effective date of the Plan resulting from any
split, subdivision or consolidation of the Common Stock or other capital
adjustment, change or exchange of the Common Stock, or other increase or
decrease in the number or kind of shares effected without receipt or payment of
consideration by the Company.
9.02 AMENDMENT AND TERMINATION OF THE PLAN. The Board may, by resolution,
at any time, amend or terminate the Plan. The power to amend or terminate the
Plan shall include the power to direct the Trustee to return to the Company all
or any part of the assets of the Trust, including shares of Common Stock held in
the Plan Share Reserve, as well as shares of Common Stock and other assets
subject to Plan Share Awards which have not yet been earned by the Participants
to whom they have been awarded. However, the termination of the Trust shall not
affect a Participant's right to earn Plan Share Awards and to the distribution
of Common Stock relating thereto, including earnings thereon, in accordance with
the terms of this Plan and the grant by the Committee or the Board.
Notwithstanding the foregoing, no action of the Board may increase (other than
as provided in Section 9.01 hereof) the maximum number of Plan Shares permitted
to be awarded under the Plan as specified at Section 5.03, materially increase
the benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility for participation in the Plan unless such action of
the Board shall be subject to ratification by the stockholders of the Company.
9.03 NONTRANSFERABLE. Plan Share Awards and rights to Plan Shares shall not
be transferable by a Participant, and during the lifetime of the Participant,
Plan Shares may only be earned by and paid to the Participant who was notified
in writing of the Award by the Committee pursuant to Section 6.03. No
Participant or Beneficiary shall have any right in or claim to any assets of the
Plan or Trust, nor shall the Company, the Bank or any Subsidiary be subject to
any claim for benefits hereunder.
9.04 NO EMPLOYMENT RIGHTS. Neither the Plan nor any grant of a Plan Share
Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Participant to continue in the
employ or service of the Company, the Bank or a Subsidiary thereof.
9.05 VOTING AND DIVIDEND RIGHTS. No Participant shall have any voting or
dividend rights of a stockholder with respect to any Plan Shares covered by a
Plan Share Award, except as expressly provided in Sections 7.02 and 7.04 above,
prior to the time said Plan Shares are actually distributed to such Participant.
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9.06 GOVERNING LAW. The Plan and Trust shall be governed by and construed
under the laws of the Commonwealth of Kentucky, except to the extent that the
Maryland General Corporation Law Federal Law shall be deemed applicable.
9.07 EFFECTIVE DATE. The Plan shall be effective as of the date of approval
of the Plan by stockholders of the Company, subject to the receipt of approval
or non-objection by the OTS or other applicable banking regulator, if
applicable.
9.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of
(i) termination by the Board, (ii) the distribution of all assets of the Trust,
or (iii) 21 years from the Effective Date. Termination of the Plan shall not
effect any Plan Share Awards previously granted, and such Plan Share Awards
shall remain valid and in effect until they have been earned and paid, or by
their terms expire or are forfeited.
9.09 TAX STATUS OF TRUST. It is intended that the Trust established hereby
shall be treated as a grantor trust of the Bank under the provisions of Section
671 et seq. of the Internal Revenue Code of 1986, as amended, as the same may be
amended from time to time.
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REVOCABLE PROXY
COMMUNITY FIRST BANCORP, INC.
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS WITH- FOR
MAY 20, 2004 FOR HOLD EXCEPT
The undersigned hereby appoints Michael D. Wortham, Ralph 1. The election as director |_| |_| |_|
Teague and Charlotte Baldwin and each of them, with full powers of the nominees listed
of substitution in each, to act as proxies for the undersigned, to (except as marked to the
vote all shares of common stock of Community First Bancorp, contrary below):
Inc. (the "Company") which the undersigned is entitled to vote at
the annual meeting of stockholders (the "Annual Meeting"), to be William M. Tandy
held at the main office of Community First Bank, 2420 North Steven E. Carson
Main Street, Madisonville, Kentucky on Thursday, May 20, 2004 J. Craig Riddle
at 8:00 a.m., and at any and all adjournments thereof, as follows:
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR
A LISTED NOMINEE(S), MARK "FOR EXCEPT" AND WRITE THE
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
__________________________________________________
FOR AGAINST ABSTAIN
2. Approval of the |_| |_| |_|
Community First
Bancorp, Inc. 2004
Stock Option Plan
3. Approval of the |_| |_| |_|
Community First
Bank 2004 Restricted
Stock Plan
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE
VOTED FOR THE LISTED NOMINEES AND FOR PROPOSALS
2 AND 3. 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 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 PERSON AS DIRECTOR WHERE THE
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT
SERVE AND MATTERS INCIDENT TO THE CONDUCT OF THE
ANNUAL MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
--------------------------------------------
Please be sure to sign and date | Date |
this proxy in the box below | |
- ----------------------------------------------------------------------------
| |
| |
| Stockholder sign above. Co-holder (if any) sign above. |
- ----------------------------------------------------------------------------
Should the above stockholder 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 above stockholder acknowledges receipt from the Company prior to the
execution of this proxy of notice of the Annual Meeting, a Proxy Statement
therefor and the 2003 Annual Report to Stockholders. Please sign exactly as your
name appears on this proxy card. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title. If shares are
held jointly, each holder should sign.