Document:

Exhibit 10.1

 

SOUTHERN HERITAGE BANK

2000 NON-EMPLOYEE DIRECTORS

STOCK OPTION PLAN

 

SECTION 1.  PURPOSE; DEFINITIONS

 

The purpose of
the Southern Heritage Bank 2000 Non-Employee Director Stock Option Plan (“Plan”)
is to advance the long-term success of Southern Heritage Bank and its
shareholders by attracting and retaining highly qualified non-employee
directors. The Plan will provide non-employee directors with the ability to
increase their proprietary interest of the Company’s shareholders by the grant
to such directors of Non-Qualified Stock Options of the Company.

 

For purposes
of the Plan, the following terms shall be defined as set forth below:

 

A.            “Board”
means the Board of Directors of the Company.

 

B.            “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and any
successor thereto.

 

C.            “Committee”
means the Stock Option Committee of the Board, as from time to time
constituted, or any successor committee of the Board with similar functions,
which shall consist of three members, each of whom shall be a Disinterested
Person.

 

D.            “Common
Stock” shall mean the common stock of the Company ($1.00 par value), subject to
adjustments pursuant to Section 3.2) below.

 

E.             “Company”
means Southern Heritage Bank, a corporation organized under the laws of the
State of Tennessee, or any successor corporation.

 

F.             “Disability”
means permanent and total disability of an Eligible Director within the meaning
of Section 22(e)(3) of the Code.

 

G.            “Disinterested
Person” shall have the meanings set forth in Rule 16b-3(c)(2)(i) as promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, or any successor definition adopted by the Commission.

 

H.            “Eligible
Directors” means duly elected directors of the Company who are not employees of
the Company or any Subsidiary thereof

 

I.              “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

J.             “Fair
Market Value” shall mean, as of any date, (i) if the Common Stock is listed or
admitted to unlisted trading privileges on any national securities exchange or
is not so listed or admitted but transactions in the Common Stock are reported
by the NASDAQ National Market System, the closing sale price of the Common
Stock on such exchange or by the NASDAQ National Market System as of such
date (or, if no such shares were traded on such date,  as of the next
preceding day on which there was such a  

 

trade); (ii)
if the Common Stock is not so listed or admitted to unlisted trading privileges
or reported on the NASDAQ National Market System, and bid and ask prices
therefore in the over-the-counter market are reported by the NASDAQ system or
the National Quotation Bureau, Inc., (or any comparable reporting service), the
mean of the closing bid and ask prices of the Common Stock as of such date, as
so reported: or (iii) if no quotations are available by any reporting services,
the fair market value of such Common Stock as determined by the Board, in each
case, on the business day immediately preceding the date on which the determination
is made,

 

K.            “Non-Qualified
Stock Option” means any Stock Option that does not comply with the provisions
of Section 422 of the Code.

 

L.             “Plan”
means this Southern Heritage Bank 2000 Non-Employee Director Stock Option Plan,
as hereinafter amended from time to time.

 

M.           “Retirement”
means the termination of service of an Eligible Director as a director of the
Company pursuant to and in accordance with the Board’s tenure policy or
otherwise retirement policy, or if approved by the Board for purposes of this
Plan, early retirement or other practice or policy then covering an Eligible
Director.

 

N.            “Stock”
means the Common Stock of the Company.

 

0.             “Stock
Option” or “Option” means any Non-Qualified Stock Option to purchase shares of
Common Stock granted pursuant to Section 5 below

 

P.             “Subsidiary”
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if each of the corporations (other than
the last corporation in the unbroken chain) owns stock possessing 50% or more
at the total combined voting power of all classes of stock in one of the other
corporations in the chain.

 

In addition,
the terms “Change in Control” and “Potential Change in Control” shall have
meanings set forth, respectively, in Sections 6.1, 6.2, and 6.3 below and the
term “Cause” shall have the meaning set forth in Section 5.2.10 below.

 

SECTION 2.  ADMINISTRATION

 

2.1           The Plan shall be administered by the Committee. The
functions of the Committee specified in the Plan may be exercised by the
Committee, and may be exercised by the Board, if and to the extent that no
Committee exists which otherwise has the authority to so administer the Plan.
The Committee shall have full authority to grant Stock Options, pursuant to the
terms of the Plan, to Eligible Directors under the terms and conditions of
Section 5 of this Plan.

 

2.2           The Committee shall be appointed by the Directors and shall
serve for a term of four (4) years or until their successors are duly elected
and qualified.

 

2

 

2.3           The Committee shall have the authority to adopt, alter and
repel such rules, guidelines and practices governing the Plan as it shall, from
time to time, deem advisable; to interpret the terms and provisions of the Plan
and any Stock Options issued under the Plan (and any agreements relating
thereto); and to otherwise supervise the administration of the Plan.

 

2.4           All decisions made by the Committee pursuant to the
provisions of the Plan shall be made in the Committee’s sole discretion and
shall be final and binding on all persons, including the Company and Plan
participants.

 

SECTION 3.  STOCK SUBJECT TO PLAN

 

3.1           The maximum number of shares of Common Stock reserved and
available for issuance under the Plan shall be 12,100 shares of the Company’s
Common Stock, subject to adjustment upon changes in capitalization of the
Company as provided in Section 3.3 below. Such shares may consist in whole or
in part, of authorized and unissued shares of the Company.

 

3.2           If any shares of Stock that have been optioned cease to be
subject to a Stock Option prior to the payment of any dividend, if applicable,
with respect to such Stock, then such shares shall again be available for
distribution in connection with future awards under the Plan.

 

3.3           In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, split-up, split-off, spin-off, liquidation or other change in
corporate structure affecting the Common Stock of the Plan, then appropriate
substitutions or adjustments shall be made in maximum aggregate number of
shares subject to an amount of shares reserved for issuance under the Plan,
provided that the number of shares subject to any award shall always be a whole
number.

 

SECTION 4.  STOCK OPTIONS

 

4.1           All Eligible Directors shall be eligible to participate in
the Plan and to receive Non-Qualified Stock Options (as described in Section 5)
under the Plan.

 

SECTION 5.  STOCK OPTIONS

 

5.1           After the Plan becomes effective, the Committee shall grant
to Eligible Directors an option to purchase shares of Common Stock of the
Company as determined by the Committee. The Committee shall provide each
Eligible Director with a Stock Option Agreement between the Company and each
Eligible Director to carry out the terms of the Stock Options granted to each
Eligible Director hereunder.

 

5.2           Stock Options granted under the Plan shall be subject to the
following terms and conditions:

 

5.2.1        Option Price. The option price per share of
Common Stock purchasable under a Stock Option shall be 100% of the Fair Market
Value of the Common Stock at the time such Option is granted.

 

3

 

5.2.2        Option Term. No Stock Option shall be
exercisable more than ten years after the date the Option is granted.

 

5.2.3        Vesting. Stock Options granted under the Plan shall vest in full
immediately with the Eligible Director on the date of the grant of the Stock
Options provided the Eligible Director has continued to serve on the Board
until that date.

 

5.2.4        Exercisability. No Stock Option shall be
exercisable prior to six months and one day after the date of the granting of
the Option, except as provided in Sections 5.2.7, 5.2.8, and 5.2.9 and Section
6.

 

5.2.5        Method of Exercise. Stock Options, to the extent
they are vested, may be exercised in whole or in part at any time during the
option period, by giving written notice of exercise to the Company specifying
the number of shares to be purchased.

 

Such notice
shall be accompanied by payment in full of the purchase price, either by check,
note or such other instrument as the Committee may accept. As determined by the
Committee, in its sole discretion, at or after grant, payment in full or in part
may also be made in the form of Common Stock already owned by the Eligible
Director based on the Fair Market Value of the Common Stock on the date the
Option is exercised.

 

No shares of
Common Stock shall be issued until full payment therefore has been made. Ad
Eligible Director shall have the rights to dividends or other rights of a
stockholder with respect to shares subject to the Option when the Eligible
Director has given written notice of exercise, has paid in full for such
shares, and, if requested, has given the representation described in Section
8.1.

 

5.2.6        Non-Transferability of Options. No Stock Option shall be
transferable by an Eligible Director otherwise than by Will or by the laws of
descent and distribution, and all Stock Options shall be exercisable, during
the Eligible Director’s lifetime, only by the Eligible Director.

 

5.2.7        Termination by Death. If an Eligible Director’s
service on the Board terminates by reason of death, any Stock Option held by
such Eligible Director may thereafter by exercised, to the extent such option
was vested and exercisable at the time of death or on such accelerated basis as
the Committee may determine at or after grant (or as may be determined in
accordance with procedures established by the Committee), by the legal
representative of the estate or by the legatee of the Eligible Director under
the Will of the Eligible Director, for a period of one year from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is shorter.

 

5.2.8        Termination by Reason of Disability. If an Eligible Director’s
service on the Board terminates by reason of Disability, any Stock Option held
by such Eligible Director may thereafter be exercised by the Eligible Director,
to the extent it was vested and exercisable at the time of termination or on
such accelerated basis as the Committee may determine at or after grant (or as
may be determined in accordance with procedures established by the Committee),
for a period of one year from the date of such termination of service on the
Board or until the expiration of the stated term of such Stock Option,
whichever period is shorter;

 

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provided, however,
that, if the Eligible Director dies within such one year period, any
unexercised Stock Option held by such Eligible Director shall thereafter be
exercisable to the extent to which it was exercisable at the time of death for
a period of twelve months from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is shorter.

 

5.2.9        Termination by Reason of Retirement. If an Eligible Director’s
service on the Board terminates by reason of retirement, any Stock Option held
by such Eligible Director may thereafter be exercised by the Eligible Director,
to the extent it was vested and exercisable at the time of such Retirement or
on such accelerated basis as the Committee may determine at or after grant (or
as may be determined in accordance with procedures established by the
Committee), for a period of three years from the date of such termination of
service on the Board or the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that, if the Eligible
Director dies within such three year period, any unexercised Stock Option held
by such Eligible Director shall thereafter be exercisable, to the extent to
which it was vested and exercisable at the time of death, for a period of one
year from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.

 

5.2.10      Other Termination. If an Eligible Director’s
service on the Board terminates for any reason other than death, Disability or
Retirement, the Stock Option shall thereupon terminate, except that such Stock
Option may be exercised, to the extent otherwise then vested in exercisable,
for the lesser of three months or the balance of such Stock Option’s term if
the Eligible Director’s service on the Board is involuntarily terminated by the
Company or the shareholders of the Company without Cause. For purposes of this
Plan, “Cause” means (a) a felony conviction of an Eligible Director or the
failure of an Eligible Director to contest prosecution for a felony, or an
Eligible Director’s willful misconduct or dishonesty, any of which is directly
or materially harmful to the business or reputation of the Company or any
Subsidiary, or (b) the commission of a material violation of any laws and\or
regulations applicable to the Company or any Subsidiary.

 

SECTION 6.  CHANGE IN CONTROL PROVISIONS

 

6.1           Impact of Event.  In the event of:

 

(i)                                     a
“Change in Control” as defined in Section 6.2 or

 

(ii)                                  a
“Potential Change in Control” as defined in Section 6.3, but only if and to the
extent so determined by the Committee or the Board at or after grant (subject
to any right of approval expressly reserved by the Committee or the Board at
the time of such determination), then any Stock Option awarded under the Plan
not previously exercisable and vested shall become fully exercisable and
vested.

 

5

 

6.2           Definition of “Change in Control.” For purposes of Section 6.1,
a “Change in Control” means the happening of any of the following:

 

(i)                                     any
person or entity, including a “group” as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, other than the Company or a wholly-owned
subsidiary thereof or any employee benefit plan of the Company or any of its
Subsidiaries, becomes the beneficial owner of the Company’s securities having
20% or more of the combined voting power of the then outstanding securities of
the Company that may be cast for the election of’ directors of the Company
(other than as a result of an issuance of securities initiated by the Company
in the ordinary course of business); or

 

(ii)                                  as
a result of, or in connection with, any cash tender or exchange offer, merger
or other business combination, sale of assets or contested election, or any
combination of the foregoing transaction less than a majority of the combined
voting power of the then outstanding securities of the Company or any successor
corporation or entity entitled to vote generally in the election of the
directors of the Company or such other corporation or entity after such
transactions are held in the aggregate by the holders of the Company’s
securities entitled to vote generally in the election of directors of the
Company immediately prior to such transaction; or

 

(iii)                               during
any period of two consecutive years, individuals who at the beginning of any
such period constitute the Board cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
Company’s stockholders, of each director of the Company first elected during
such period was approved by a vote of at least two-third of the directors of
the Company then still in office who were directors of the Company at the
beginning of such period.

 

6.3           Definition of Potential Change in Control. For purposes of Section 6.1, a
“Potential Change in Control” means the happening of any one of the following:

 

(i)                                     The
approval by stockholders of an agreement by the Company, the consummation of
which would result in a Change in Control of the Company as defined in Section
6.2; and

 

(ii)                                  The
acquisition of beneficial ownership, directly or indirectly, by an entity,
person or group [other than the Company or a subsidiary or any Company employee
benefit plan (including any trustee of such plan acting as such trustee)] of
securities of the Company representing 5% or more of the combined voting power
of the Company’s outstanding securities and the adoption by the Board of a
resolution to the effect that a Potential Change in Control of the Company has
occurred for purposes of this Plan.

 

6

 

SECTION 7.  AMENDMENTS AND TERMINATION

 

7.1           The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of the Eligible Director under any Stock Option theretofore granted,
without the Eligible Director’s consent or which, without approval of the
Company’s stockholders, would:

 

7.1.1        except as expressly provided in this Plan, increase the
total number of shares reserved for the purpose of the Plan;

 

7.1.2        change the method for valuation of the Stock;

 

7.1.3        change the class of Eligible Directors eligible to
participate in the Plan; or

 

7.1.4        extend the maximum option period under Section 5.2.2 of the
Plan.

 

7.2           The Committee may amend the terms of the Stock Option
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder’s consent. The Committee may also substitute new Stock Options for
previously granted Stock Option (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices.

 

7.3           Subject to the above provisions, the Board shall have broad
authority to amend the Plan to take into account changes in applicable
securities and tax laws and accounting rules, as well as other developments.
Not withstanding the foregoing, no amendment to the Plan may be made more than
once every six months, other than to comport with changes of the Code, the
Employee Retirement Income Security Act, or the rules or regulations
promulgated thereunder.

 

SECTION 8.  GENERAL PROVISIONS

 

8.1           The Committee may require each Eligible Director purchasing
shares pursuant to a Stock Option under the Plan to represent to and agree with
the Company in writing that the Eligible Director is acquiring the shares
without a view to distribution thereof.

 

All
certificates or shares of Stock delivered under the Plan shall be subject to
such stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.

 

8.2           Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.

 

7

 

8.3           The adoption of the Plan shall not confer upon any Eligible
Director serving on the Board of the Company any right to continued service as
a director with the Company nor shall it interfere in any way with the right of
the Company or the shareholders of the Company to remove or otherwise terminate
his or her service as a director of the Company.

 

8.4           No later than the date as of which an amount first becomes
includable in the gross income of an Eligible Director for Federal income tax
purposes with respect to any award under the Plan, an Eligible Director shall
pay to the Company, or make arrangement satisfactory to the Committee regarding
the payment of any Federal, state, or local taxes of any kind required by law
to be withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations may be settled with Stock, including Stock
that is part of the award that gives rise to the withholding requirement. The
satisfaction of withholding obligations with Stock at the election of a grantee
who is subject to Section 16 of the Exchange Act shall be made either (i)
during the 10 business day window period described in Rule 16b-3(e)(3) (or any
successor provision) thereunder, if the exercise is also made during such a
period, or (ii) at least six months prior to the date as of which the income
attributable to the exercise of the related award is recognized under the Code,
and shall be irrevocable to the extent required under such Rule 16b-3(e)(3) (or
any successor provision). The obligations of the Company under the Plan shall
be conditional on such payment or arrangements and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to an Eligible Director.

 

8.5           The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Tennessee.

 

8.6           It is intended that the Plan shall comply in all respects
with Rule 16b-3 (as amended from time to time and including any successor rule
or regulation) of the Securities and Exchange Commission, and in the event that
any provision of the Plan is determined by the Committee, upon advice of
counsel, not to comply with Rule 16b-3, the Committee shall be authorized to
nullify and void any such provision.

 

SECTION 9.  EFFECTIVE DATE OF PLAN

 

9.1           The Plan shall be effective as of June 1, 2000, upon the
approval of the Share Exchange between the Bank and the Company by the holders
of the Bank’s Common Stock at the 2000 annual meeting of the shareholders.

 

SECTION 10.  TERM OF PLAN

 

10.1         No Stock Option shall be granted pursuant to the Plan on or
after the tenth anniversary of the date of stockholder approval, but awards
granted prior to such tenth anniversary may extend beyond that date.

 

8

 

SECTION 11.  CONTINGENT ACTION BY FEDERAL REGULATOR.

 

11.1         In the event the Company’s capital falls below the minimum
requirements as established by the Company’s state or primary federal
regulatory agency, the primary federal regulatory agency shall have the right
to:

 

11.1.1      direct the Company to require plan participants to exercise
their stock rights granted hereunder, or

 

11.1.2      direct the Company to require plan participants to forfeit
their stock rights granted hereunder.

 

The Southern
Heritage Bank 2000 Non-Employee Directors Stock Option Plan was adopted by
action taken by the Board of Directors of Southern Heritage Bank on March 16,
2000.

 

	
   

  	
  Southern Heritage Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ J. Lee Stewart

  	
   

  
	
   

  	
   

  	
  President

  	
   

  

 

9Exhibit 10.2

 

SOUTHERN HERITAGE BANK

2000
STOCK OPTION PLAN FOR EMPLOYEES

 

1.             Purpose. The purposes of the Southern Heritage
Bank 2000 Stock Option Plan (“Plan”) is to advance the growth and prosperity of
Southern Heritage Bank (“Company”) and its subsidiaries by providing key
employees with an additional incentive to contribute to the best interests of
the Company. Without prejudice to other compensation programs approved from
time to time by the Board of Directors (“Board”) and\or shareholders of the
Company, such additional incentive is to be given key employees by means of
stock options provided for under the Plan. In the discretion of the Committee
hereinafter provided for and the Board, such options may be “Incentive Stock
Options” within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (“Code”), or “non-statutory” stock options.

 

2.             Administration of the Plan.

 

2.1           The Plan shall be administered
by the Board unless and until such time as the Board delegates administration
to a committee pursuant to subparagraph 2.3 (“Committee”). The Board shall
administer the Plan only if a majority of’ the entire Board, and a majority of
the directors acting with respect to each matter pertaining to the
administration of the Plan, is comprised of Disinterested Persons. For the
purposes of this paragraph 2, “Disinterested Persons” shall mean a person who
has not at any time within one year prior to the date in question been eligible
for participation in the Plan or any other plan of the Company or any of its
subsidiaries entitling the participants therein to acquire stock or stock
options of the Company or any of its subsidiaries.

 

2.2           The Board [or Committee if the
Board delegates authority under Section 2.3] shall have the power, subject to, and
within, the limits of the express provisions of the Plan:

 

(i)          To determine from time to time which of the
eligible persons shall be granted options under the Plan, the term of each
granted option, the time or times during the term of each option within all or
portions of each option may be exercised, whether the options granted shall be
incentive Stock Options or non-statutory options, and the number of shares for
which each option shall be granted.

 

(ii)         To construe and interpret the Plan and
options granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power,
shall generally determine all questions of policy and expediency that may arise
and may correct any defect, omission or inconsistency in the Plan or in any
option agreement in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.

 

(iii)        To prescribe the terms and provisions of each
option granted (which need not be identical).

 

(iv)        To amend the Plan as provided herein.

 

 

(v)         Generally, to exercise such powers and to
perform such acts as are deemed necessary or expedient to promote the beat
interests of the Company.

 

2.3           The Board, by resolution, may
delegate administration of the Plan [including, without limitation, The Board’s
powers under subparagraph 2.2] to a Committee comprised of three (3) members,
all of whom shall be Disinterested Persons. Members of the Committee shall be
appointed by the Board to serve far a term of four (4) years or until their
successors are duly elected and qualified. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers therefore possessed by the Board, subject, however, to
such constraints, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board at any time may remove
members from or add members to the Committee or may abolish the Committee and
re-vest in the Board the administration of the Plan. Vacancies on the
Committee, however caused, shall be filled by the Board.

 

2.4           The interpretation and
construction by the Board of any provisions of the Plan or of any option
granted under it shall be final, and the interpretation of construction by any
Committee appointed pursuant to subparagraph 2.3 or any such provisions or
option shall also, unless otherwise determined by the Board, be final. No
member of such Committee or the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any option granted under it.

 

3.             Eligible Employees. The Board or the Committee
shall determine from time to time those officers and key employees of the
Company and its subsidiaries to whom options shall be granted and, pursuant to
the provisions of the Plan, the amount thereof and the terms and conditions,
including requirements as to continued employment by participant, upon which
such options are granted and are exercisable. Directors of the Company who are
not also employees of the Company or its subsidiaries shall not be eligible to
participate in the Plan.

 

4.             The Stock The stock subject to the options shall
be shares of the Company’s authorized and unissued Common Stock, $1.00 par
value, or reacquired Common Stock held in the treasury. The total number of
shares of the Company’s Common Stock that may be transferred pursuant to the
exercise of stock options under the Plan shall not exceed in the aggregate
141,443 shares. Shares subject to options which terminate or expire prior to
exercise shall be available for further option hereunder.

 

Each option granted under
this Plan shall be subject to the requirement that if at any time the Board or
the Committee shall determine that the listing, registration or qualification
of the shares subject thereto upon any securities exchange or under any state
or Federal law, or the consent or approval of any governmental regulatory body
are necessary or desirable in connection with the issue or transfer of shares
subject thereto, no such option may be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board or
Committee. If required at any time by the Board or the Committee, an option may
not be exercised until the optionee has delivered an investment letter to the
Company containing the representations that all shares being purchased are
being acquired for investment and nor with a view to, or for resale in
Connection with, any distribution of such shares.

 

2

 

5.             Terms and Conditions of Options. All
stock options granted pursuant to the Plan shall be in such form as the Board
or the Committee shall from time to time determine, shall clearly indicate
whether such option is an Incentive Stock Option or a non-statutory stock
option, and shall be subject to the following terms and conditions:

 

5.1           Option Price. The
price per share far Common Stock under each option granted under the Plan shall
be determined by the Board or the Committee but, in the case of Incentive Stock
Options, shall in no event be less that 100% of the fair market value of the
Common Stock on the date of grant of such option. In the case of the grant of
an Incentive Stock Option to an individual who, at the time of the grant, owns
more than 10% of the total combined voting power of all classes of stock of the
Company, such price per share shall not be less than 110% of the fair market
value of the Common Stock on the date of grant of the option.

 

5.2           Option Period. The
period during which an option may be exercised shall be determined by the Board
or the Committee, provided, however, that in no event shall an Incentive Stock
Option be exercisable after the expiration of 10 years from the date such
option was granted; and provided further that in the case of the grant of an
Incentive Stock Option to an individual, who at the time of the grant, owns
more than 10% of the total combined voting power of all classes of stock of the
Company, in no event shall such option be exercisable more that five years from
the date of the grant. Options may be made exercisable in installments, and
such installments thereof may be exercised in part from time to time alter they
become exercisable. The maturity of any installment or installments may be
accelerated at the discretion of the Board or Committee.

 

5.2.1        In
the event that a participant shall cease to be employed by the Company or one of
its subsidiaries for any reason other than his death, all options held by him
pursuant to the Plan and not previously exercised at the date of such
termination shall terminate immediately and become void and of no effect;
provided, however, that the Board or the Committee shall have the right to
extend the exercise period not in excess of three months following the date of
termination of the participant’s employment, subject to the further
condition, however, that no Incentive Stock Option shall be exercisable after
the expiration of 10 years from the date is granted. Notwithstanding the
forgoing, if the termination is due to disability, or to retirement with the
consent of the Company, such disabled or retiring participant shall have the
right to exercise his options which have not previously been exercised at the
date of such termination of employment at any time within three months after
such termination, subject to the condition that no Incentive Stock Option shall
be exercisable after the expiration of 10 years from the date it is granted.
Whether termination of employment is due to disability or is to be considered
retirement with the consent of the Company shall be determined by the Board or
the Committee, which determination shall be final and conclusive.

 

5.2.2        If the participant should die
while in the employ of the Company or a subsidiary of the Company or within a
period of three months after the termination of his employment by retirement
and shall not have full exercised options granted under the Plan, such options
may be exercised in whole or in part at any time within 12 months after the
participant’s death by the executors or administrators of the participant’s
estate or by any person or persons who shall have acquired the options directly
from the  participant  

3

 

by bequest or inheritance, subject to
the condition that no Incentive Stock Option shall be exercisable after the
expiration of 10 years from the date it is granted.

 

5.2.3        The exercise of an option
granted under the Plan shall not affect the optionee’s right or ability to
exercise any other option under the Plan or any other stock option plan of the
Company or its subsidiaries.

 

5.3           Limitations on Grants. If any
Incentive Stock Option be granted to any participant under the Plan, the
aggregate fair market value (as of the date
the option is granted) of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by the optionee during any
calendar year under this Plan and any other incentive stock option plan of the
Company or any subsidiary shall not exceed $100,000. The foregoing limitation
shall be modified from time to time to reflect any changes in Section 422(d) of
the Code setting forth such limitations.

 

5.4           Limitations on Disposition. To
obtain any tax benefits which may become associated with Incentive Stock
Options, the optionee must make no disposition of shares acquired pursuant to
the exercise of an Incentive Stock Option within two years from the granting of
such Incentive Stock Option or within one year from the date of the exercise of
Incentive Stock Option.

 

6.             Payment for Stock. Payment for shares subject to
options granted under the Plan shall be made by the optionee in the form of cash.
Payment in currency or by check, bank draft, cashier’s check or postal money
order shall be considered payment in cash.

 

7.             Non-Assignability. No option shall be
transferable otherwise than by Will or the laws of descent and distribution and
an option is exercisable during the lifetime of the optionee only by him or
her.

 

8.             Adjustment Upon Changes in Stock.  The number of shares of Common Stock
available for the granting of options under the Plan and the number of shares
and price per share of Common Stock subject to outstanding options and stock
appreciation rights granted pursuant to the Plan may be adjusted by the Board
or by the Committee in an equitable manner to reflect changes in the
capitalization of the Company, including, but not limited to, such changes as
result from exchange, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares and change in corporate
structure. If any adjustment under this paragraph would create a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares available
under the Plan and the number covered under any options granted pursuant to the
Plan shall be the next lower number of shares, rounding all fractions downward.
Any adjustment made by the Board or the Committee under this paragraph 8 shall
be conclusive and binding on all affected persons. No Incentive Stock Option
granted pursuant to the Plan shall be adjusted in a manner that causes such
Incentive Stock Option to fail to continue to quality as an Incentive Stock
Option within the meaning of Section 422 of the Code,

 

4

 

9.             Amendment. The Board from time to time may amend
this Plan, but except as provided above with respect to dilutions or other
adjustments or exchanges or consolidations, or with the approval of the Company’s
shareholders, may not (a) increase the aggregate number of shares available for
option hereunder, (b) change the price at which options may be granted, (c)
extend the maximum period during which an option may be exercised, or (d)
change the eligibility requirements for options hereunder. Rights and
obligations under any option granted before amendment of the Plan shall not be
altered or impaired by amendment of the Plan, except with the consent of the
person to whom the option was granted.

 

10.           Fair Market Value of Stock. Whenever
pursuant to the terms of the Plan the fair market value of the Company’s Common
Stock is required to be determined as of a particular date, such fair market
value shall equal the mean between the closing bid and asked price of the
Common Stock on the National Association of Securities Dealers Automated
Quotation System (“NASDAQ”), or if no bid quotation is available on NASDAQ, the
fair market value of such Common Stock as determined by the Board or Committee,
in each case, on the business day immediately preceding the date on which the
determination is made. Fair market value shall be determined in all cases
without regard to any restriction other than a restriction which, by its terms,
will never lapse.

 

11.           No Rights as Shareholder. A participant in the Plan
shall have no rights as a shareholder with respect to any shares covered by his
option until the date of the issuance of a stock certificate to him. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued.

 

12.           Indemnification of Committee. In
addition to such other rights of indemnification as they many have as directors
or as members of the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including attorney’s
fees actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the plan or any option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member is liable for
negligence or misconduct in the performance of his duties; provided that within
60 days after institution of any such action, suit or proceeding, the Committee
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.

 

13.           Termination. This Plan shall terminate on March
31, 2010, unless sooner terminated by action of the Board. No option may be
granted hereunder after termination of the Plan, but such termination shall not
affect the validity of any option then outstanding.

 

14.           Shareholder Approval. The Plan shall be subject to
approval by the holders of a majority of the outstanding shares of Common Stock
of the Company present and voting at a meeting of shareholders, which approval
must occur within the period beginning  12  months  before  and  ending
 12  months  after
 the  date  the  Plan  is  adopted  by  the  Board,  provided,  however, that  

5

 

options may be granted
thereunder when all the conditions (other than shareholder approval) precedent
to the granting of options under the Plan have been completed by the Company.

 

15.           Change in Control Provisions.

 

15.1         Impact of Event.  In the event of:

 

1.             a “Change in Control” as defined in Section
15.2 or

 

2.             a “Potential Change in Control” as defined in
Section 15.3, but only if and to the extent so determined by the Committee or
the Board at or after grant (subject to any right of approval expressly
reserved by the Committee or the Board at the time of such determination), then
any Stock Option awarded under the Plan not previously exercisable and vested
shall become fully exercisable and vested.

 

15.2         Definition of “Change in Control”. For
purposes of Section 15.1, a “Change in Control” means the happening of any of
the following:

 

(i)            any person or entity, including a “group” as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, other than
the Company or a wholly-owned subsidiary thereof or any employee benefit plan
of the Company or any of its subsidiaries, becomes the beneficial owner of the
Company’s securities having 20% or more of the combined voting power of the
then outstanding securities of the Company that may be cast for the election of
directors of the Company (other than as a result of an issuance of securities
initiated by the Company in the ordinary course of business); or

 

(ii)           as a result of, or in connection with, any
cash tender or exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing transaction
less than a majority of the combined voting power of the then outstanding
securities of the Company or any successor corporation or entity entitled to
vote generally in the election of the directors of the Company or such other
corporation or entity after such transactions are held in the aggregate by the
holders of the Company’s securities entitled to vote generally in the election
of’ directors of the Company immediately prior to such transaction; or

 

(iii)          during any period of two consecutive years,
individuals who at the beginning of any such period constitute the Board cease
for any reason to constitute at least a majority thereof, unless the election,
or the nomination for election by the Company’s stockholders, of each director
of the Company first elected during such period was approved by a vote of at
least two-third of the directors of the Company then still in office who were
directors of the Company at the beginning of such period.

 

15.3         Definition of Potential Change in Control. For
purposes of Section 15.1, a “Potential Change in Control” means the happening of any one of the following:

 

6

 

(i)            The approval by stockholders of an agreement
by the Company, the consummation of which would result in a Change in Control
of the Company as defined in Section 15.2; and

 

(ii)           The acquisition of beneficial ownership,
directly or indirectly, by an entity, person or group [other than the Company
or a subsidiary or any Company employee benefit plan (including any trustee of
such plan acting as such trustee)] of securities of the Company representing 5%
or more of the combined voting power of the Company’s outstanding securities
and the adoption by the Board of a resolution to the effect that a Potential
Change in Control of the Company has occurred for purposes of this Plan.

 

15.4         Contingent Action by Federal
Regulator. In the event the Company’s capital falls below the minimum
requirements as
established by the Company’s state or primary federal regulatory agency, the
primary federal regulatory agency shall have the right to:

 

(i)            direct the Company to require plan
participants to exercise their stock rights granted hereunder, or

 

(ii)           direct the Company to require plan
participants to forfeit their stock rights granted hereunder.

 

The Southern Heritage Bank
2000 Stock Option Plan for Employees was adopted by action taken by the Board
of Directors of Southern Heritage Bank on March 16, 2000.

 

	
   

  	
  Southern
  Heritage Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  J. Lee Stewart

  	
   

  
	
   

  	
   

  	
  President

  	
   

  

 

7

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