EXHIBIT B
SOUTHERN COMMUNITY BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
AND TRUST AGREEMENT
ARTICLE I
DEFINITIONS
The following words and phrases when used in this Agreement with
an initial capital letter shall have the meanings set forth below,
unless the context clearly indicates otherwise. Wherever appropriate,
the masculine pronoun shall include the feminine pronoun and the
singular shall include the plural:
1.01 "Agreement" means the Southern Community Bancshares, Inc.
Management Recognition Plan and Trust Agreement.
1.02 "Association" means First Federal Savings & Loan
Association of Cullman, a federally chartered savings and loan
association.
1.03 "Award" means a right granted to a Director or an Employee
under this Plan to receive Plan Shares.
1.04 "Beneficiary" means the person or persons designated by a
Recipient to receive any benefits payable under this Plan in the event
of such Recipient's death. Such person or persons shall be designated
in writing on forms provided for this purpose by the Committee and may
be changed from time to time by similar written notice to the
Committee. In the absence of a written designation, the Beneficiary
shall be the Recipient's estate.
1.05 "Board" means the Board of Directors of the Holding
Company.
1.06 "Committee" means the Management Recognition Plan
Committee appointed by the Board pursuant to Article IV hereof.
1.07 "Common Shares" means common shares of the Holding Company.
1.08 "Conversion" means the conversion of the Association from
mutual to stock form.
1.09 "Director" means any person who is a member of the Board
of Directors of the Holding Company, the Association or a Subsidiary.
1.10 "Employee" means any person who is employed by the Holding
Company, the Association or a Subsidy.
1.11 "Holding Company" means Southern Community Bancshares,
Inc., a Delaware corporation incorporated for the purpose of holding
all of the common shares of the Association issued in connection with
the Conversion.
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1.12 "Person" means an individual, corporation, partnership,
trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of
entity not specifically listed herein.
1.13 "Plan" means the Management Recognition Plan established
by this Agreement.
1.14 "Plan Shares" means the Common Shares held pursuant to the
Trust and which are awarded or issuable to a Recipient pursuant to the
Plan.
1.15 "Plan Share Reserve" means the Common Shares held by the
Trustee pursuant to Sections 5.02 and 5.03 of this Agreement.
1.16 "Recipient" means any Director or Employee who receives an
Award under the Plan.
1.17 "Subsidiaries" means subsidiaries of the Holding Company
or the Association which, with the consent of the Board, agree to
participate in the Plan.
1.18 "Trust" means the trust established by this Agreement.
1.19 "Trustee(s)" means the person(s) or entity 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 II
ESTABLISHMENT OF THE PLAN AND TRUST
2.01 The Holding Company hereby establishes a Management
Recognition Plan and Trust upon the terms and subject to the
conditions set forth in this Agreement. The Trustee hereby accepts
the 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 of this Agreement.
ARTICLE III
PURPOSE OF THE PLAN
3.01 The purpose of the Plan is to reward and retain the
Directors and Employees of the Holding Company, the Association and
the Subsidiaries who are in key positions of responsibility by
providing such Directors and Employees with an equity interest in the
Holding Company as reasonable compensation for their contributions to
the Holding Company, the Association and the Subsidiaries.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of not less than
three members of the Board who are not employees of the Holding
Company or the Association. The Committee shall have all of the
powers set forth in this Plan. The interpretation and construction by
the Committee of any provisions of this Agreement or of any Award
granted hereunder shall be final, conclusive and binding. The
Committee shall act by the vote, or the written consent, of a majority
of its members. The Committee shall report actions and decisions with
respect to the Plan to the Board upon request by the Board.
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4.02 Role of the Board. The members of the Committee and the
Trustee(s) 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 Trustee(s). The Board, in its absolute
discretion, 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 or take any other action reserved to the Board
under this Agreement; provided, however, that the Board may not revoke
any Award already granted under this Agreement. All decisions,
determinations and interpretations of the Board shall be final,
conclusive and binding upon all parties having an interest in the
Plan.
4.03 Limitation on Liability. No member of the Board or the
Committee, nor any Trustee, shall be liable for any determination made
in good faith with respect to the Plan or any Plan Shares or Awards
granted under the Plan. If a member of the Board or of the 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 reason of
anything done or not done by such member in such capacity under or
with respect to this Plan, the Holding Company shall indemnify such
member against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by
such member in connection with such action, suit or proceeding if such
member acted in good faith and in a manner such member reasonably
believed to be in or not opposed to the best interests of the Holding
Company, the Association and the Subsidiaries and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
member's conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board shall
determine the amounts (or the method of computing the amounts) to be
contributed by the Holding Company to the Trust. Such amounts shall
be paid to the Trustee at the time of contribution. No contributions
to the Trust by Directors or Employees shall be permitted.
5.02 Investment of Trust Assets. Except as otherwise permitted
by Section 8.02 of this Agreement, the Trustee shall invest all of the
Trust's assets, after providing for any required withholding as needed
for tax purposes, exclusively in Common Shares; provided, however,
that the Trust shall not purchase a number of Common Shares equal to
more than 3% of the number of Common Shares issued in connection with
the Conversion, except that if the Association's tangible capital
exceeds 10%, the Trust may purchase a number of Common Shares equal to
up to 4% of the Common Shares issued in connection with the
Conversion. After such investment, the Common Shares shall be held by
the Trustee in the Plan Share Reserve until such Common Shares are
subject to one or more Awards. Any funds held by the Trust before
purchasing Common Shares shall be invested by the Trustee in such
interest-bearing account or accounts at the Association as the Trustee
shall determine to be appropriate.
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5.03 Effect of Allocations, Returns and Forfeitures Upon Plan
Share Reserves. Upon the allocation of Awards under Section 6.02 of
this Agreement, or the decision of the Committee to return Plan Shares
to the Holding Company, the Plan Share Reserve shall be reduced by the
number of Plan Shares so allocated or returned. Any Plan Shares
subject to an Award which is subject to forfeiture by the Recipient
pursuant to Section 7.01 of this Agreement shall be retained in the
Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Directors and Employees are eligible to
receive Awards within the sole discretion of the Committee, subject to
review and approval or rejection by the Board.
6.02 Allocations. The Committee will determine which of the
Directors and Employees will be granted Awards and the number of Plan
Shares covered by each Award; provided, however, that: (a) the
aggregate number of Plan Shares covered by Awards to any Employee
shall not exceed 25% of the total number of Plan Shares, (b) no more
than 5% of the Shares shall be awarded to any Director who is not an
Employee, and (c) no more than 30% of the Plan Shares shall be awarded
in the aggregate to Directors who are not Employees. In the event
Plan Shares are forfeited for any reason or additional Plan Shares are
purchased by the Trustee, the Committee may, from time to time,
determine which of the Employees will be granted additional Awards to
be awarded from forfeited or additional Plan Shares.
In selecting the Directors and Employees to whom Awards will be
granted and the number of shares covered by such awards, the Committee
shall consider the position, duties and responsibilities of the
eligible Directors and Employees, the value of their services to the
Holding Company, the Association and the Subsidiaries and any other
factors the Committee may deem relevant. All allocations by the
Committee shall be subject to review and approval or rejection by the
Board.
6.03 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.02 of this Agreement that
an Award is to be made, the Committee shall notify the recipient 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 determines that
an Award is to be made or a later date designated by the Committee
shall be considered the date of grant of the Awards. The Committee
shall maintain records as to all grants of Awards under the Plan.
6.04 Allocations Not Required. None of the Directors or
Employees, either individually or as a group, shall have any right or
entitlement to receive an Award under the Plan. The Committee may,
with the approval of the Board, and shall, if so directed by the
Board, return all Common Shares and other assets in the Plan Share
Reserve to the Holding Company at any time and thereafter cease
issuing Awards.
6.05 Shareholder Approval. This Agreement shall be submitted
to the shareholders of the Holding Company at an annual or special
meeting to be held no sooner than six months after the effective date
of the Conversion. Notwithstanding anything to the contrary in this
Agreement, no Awards shall be granted hereunder until the shareholders
of the Holding Company approve this Agreement.
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ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically
state a longer period of time over which Awards shall be earned and
non-forfeitable at the time an Award is granted, Plan Shares shall be
earned and non-forfeitable by a Recipient over a period of five years
at the rate of one-fifth per year commencing on the date which is one
year after the date of the grant of such Award. As Plan Shares become
earned and non-forfeitable, any cash dividend, returned capital and
earnings thereon shall also be earned and non-forfeitable.
(b) Revocation. Unless otherwise permitted by applicable law
and regulations, any Plan Shares and any cash dividends, returned
capital and earnings thereon that have not been earned and are not
non-forfeitable in accordance with Section 7.01(a) of this Agreement
shall be forfeited in the event that (i) a Recipient who is a Director
ceases to serve on the Board of Directors of both the Holding Company
and the Association or (ii) a Recipient who is not a Director of the
Holding Company or the Association ceases to be an Employee of the
Holding Company or the Association, except as otherwise provided in
subsection (c) of this Section 7.01.
(c) Exception for Terminations Due to Death or Disability.
All Plan Shares and cash dividends, returned capital and earnings
thereon subject to an Award held by a Recipient whose service as a
Director or Employee of the Holding Company, the Association or a
Subsidiary terminates due to (i) death or (ii) disability (as
determined by the Committee) shall be deemed fully earned and non-
forfeitable as of the later of the Recipients last day of service as a
Director or as an Employee and shall be distributed as soon as
practicable thereafter.
7.02 Distribution of Plan Shares.
(a) Timing of Distributions; General Rule. Except as
otherwise provided in this Agreement, Plan Shares shall be distributed
to the Recipient or his Beneficiary, as the case may be, as soon as
practicable after they have been earned, together with any cash
dividends, returned capital and earnings thereon with respect to Plan
Shares that have been earned.
(b) Form of Distribution. All distributions of Plan Shares,
together with any shares representing stock dividends, shall be
distributed in the form of Common Shares. No fractional shares shall
be distributed. Payments representing cash dividends, returned
capital and earnings thereon shall be made in cash.
(c) Withholding. The Trustee may withhold from any cash
payment made under this Plan sufficient amounts to cover any
applicable withholding and employment taxes and, if the amount of such
cash payment is not sufficient, the Trustee may require the Recipient
or Beneficiary to pay to the Trustee the amount required to be
withheld as a condition of delivering the Plan Shares. The Trustee
shall pay over to the Holding Company, the Association or the
Subsidiary which employs or employed such Recipient or which the
Recipient serves or served as a Director, any such amount withheld
from or paid by the Recipient or Beneficiary.
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(d) Regulatory Exceptions. Notwithstanding anything to the
contrary in this Agreement, no Plan Shares, upon becoming fully earned
and non-forfeitable, shall be distributed unless and until all of the
requirements of all applicable laws and regulations shall have been
met.
7.03 Voting of Plan Shares. All Common Shares held by the
Trustee in the Plan Share Reserve which have not yet been earned by a
Recipient pursuant to Section 7.01 of this Agreement shall be voted by
the Trustee. A Recipient shall be entitled to direct the voting of
Plan Shares which have been earned pursuant to Section 7.01 of this
Agreement but have not yet been distributed to him.
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 the Trust and the
applicable directions, rules, regulations, procedures and policies
established by the Committee pursuant to this Agreement.
8.02 Management of Trust. The Trustee shall have complete
authority and discretion with respect to the management, control and
investment of the Trust, and 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
Shares to the fullest extent practicable, and 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. The
Trustee 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 100% of all Trust assets in Common Shares
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 Shares from the Holding Company or from any other source. Such
Common Shares so purchased may be outstanding, newly issued or
treasury shares;
(b) To invest any Trust assets not otherwise invested in
accordance with Section 8.02(a) of this Agreement in such deposit
accounts and certificates of deposit (including those issued by the
Association), obligations of the United 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
reasonable, in the opinion of the Trustee, for the proper operation of
the Plan and the Trust;
(f) To employ brokers, agents, custodians, consultants and
accountants;
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(g) To hire counsel to render advice with respect to the
Trustee's rights, duties and obligations hereunder, and such other
legal services or representation as the Trustee may deem desirable;
and
(h) To hold funds and securities representing the amounts to
be distributed to a Recipient 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 of the Trust.
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 court for the
exercise of any power herein contained, or to give 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
Recipients or to the general account of the Trust, depending on the
nature and allocation of the assets generating such earnings, gains
and losses. Without limiting the generality of the foregoing, any
earnings on cash dividends or returned capital received with respect
to Common Shares shall be allocated (a) to accounts for Recipients, if
such shares are the subject of outstanding Awards, and shall become
deemed earned and be distributed as specified in Article VII of this
Agreement, or (b) or otherwise to the Plan Share Reserve if such Plan
Shares are not the subject of outstanding awards.
8.05 Expenses. All costs and expenses incurred in the operation
and administration of the Plan shall be paid by the Holding Company.
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of
Plan Shares available for issuance pursuant to the Awards and the
number of Plan Shares to which any Award relates shall be
proportionately adjusted for any increase or decrease in the total
number of outstanding Common Shares issued subsequent to the effective
date of the Plan if such increase or decrease resulted from any split,
subdivision or consolidation of shares or other capital adjustment, or
other increase or decrease in such shares effected without receipt or
payment or consideration by the Holding Company.
9.02 Amendment and Termination of 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 Holding Company or the Association all or any
part of the assets of the Trust, including Common Shares held in the
Plan Share Reserve, as well as Common Shares and other assets subject
to Awards which are not yet earned by the Directors or Employees to
whom they are allocated provided, however, that the termination of the
Trust shall not affect a Recipient's right to earn Awards and to the
distribution of Shares relating thereto, including earnings thereon,
in accordance with the terms of this Agreement and the grant by the
Committee or the Board.
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9.03 Nontransferable. Awards shall not be transferable by a
Recipient. During the lifetime of the Recipient, an Award may only be
earned by and paid to the Recipient who was notified in writing of the
Award by the Committee pursuant to Section 6.03 of this Agreement. No
Recipient or Beneficiary shall have any right in or claim to any
assets of the Plan or the Trust, nor shall the Holding Company, the
Association or any Subsidiary be subject to any claim for benefits
hereunder.
9.04 Directorship Rights. Neither this Agreement nor any grant
of an Award 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 Director to
continue to serve as a Director of the Association or a Subsidiary.
9.05 Employment Rights. Neither this Agreement nor any grant
of an Award 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 Employee to
continue in the employ of the Holding Company, the Association or a
Subsidiary.
9.06 Voting and Dividend Rights. No Recipient shall have any
voting or dividend rights or other rights of a shareholder in respect
of any Plan Shares covered by an Award, except as expressly provided
in Sections 7.01, 7.02 and 7.03 of this Agreement, prior to the time
such Plan Shares are actually distributed to such Recipient.
9.07 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, except to the
extent that federal laws shall be deemed applicable.
9.08 Effective Date. This Agreement shall be effective as of
the 19th day of January, 1998.
9.09 Term of Plan. The Plan shall remain in effect until the
earlier of (a) the termination of the Plan by the Board or (b) the
distribution of all assets from the Trust. The termination of the
Plan shall not affect any Awards previously granted and such Awards
shall remain valid and in effect until they have been earned and paid
or by their terms expire or are forfeited.
9.10 Tax Status of Trust. It is intended that the trust
established hereby be treated as a grantor trust of the Association
under the provisions of Section 671, et seq., of the Internal Revenue
Code of 1986, as amended (26 U.S.C. Sect. 671 et seq.)
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IN WITNESS WHEREOF, the following Trustees execute this
Agreement, accepting and binding themselves to undertake and perform
the obligations and duties of the Trustee hereunder and consenting to
the foregoing Agreement effective the 19th day of January, 1998.
By: ________________________ (Trustee)
By: ________________________ (Trustee)
By: _______________________ (Trustee)
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