NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the regular annual meeting of shareholders of South
Branch Valley Bancorp, Inc. will be held on May 5, 1998 at 7:00 p.m. at the
Moorefield Middle School, Route 55 East, Moorefield, West Virginia, 26836, for
the purpose of considering and voting upon the following matters:
1. To elect directors;
2. To approve the adoption of the Officer Stock Option Plan;
3. To ratify the selection of Arnett & Foster as the Company's
independent certified public accountants for the fiscal year
ending December 31, 1998; and
4. To transact such other business as may properly come before the
meeting. The Board of Directors at present knows of no other
business to come before the annual meeting.
Only those shareholders of record at the close of business on
March 20, 1998 shall be entitled to notice and to vote at the
meeting.
By order of the Board of Directors
/s/ Oscar M. Bean
----------------------------------------
Oscar M. Bean
Chairman of the Board
Approximate mailing date of this Proxy: April 17, 1998
WE URGE YOU TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. THIS WILL NOT LIMIT YOUR
RIGHT TO VOTE IN PERSON IF YOU WISH TO DO SO AT THE MEETING. THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN ACCORDANCE WITH THE PROCEDURE SET
FORTH IN THE PROXY MATERIALS UNDER THE HEADING "REVOCATION OF PROXY OR
SUBSTITUTION."
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 5, 1998
GENERAL INFORMATION.
This proxy statement is furnished by the Board of Directors of South Branch
Valley Bancorp, Inc. (the "Company") for the Annual Meeting of Shareholders to
be held at the Moorefield Middle School, Route 259 East, Moorefield, West
Virginia 26836 at 7:00 p.m. on May 5, 1998 and any adjournment thereof. Holders
of shares of stock of the Company of record at the close of business on March
20, 1998 are entitled to notice of and to vote at the Annual Meeting of
Shareholders and at any adjournment of the meeting. The holders of a majority of
the shares entitled to vote at the meeting must be present in person or
represented by proxy in order to constitute a quorum for all matters to come
before the meeting.
In the election of directors, shareholders cast one (1) vote for each
nominee for each share held. However, every shareholder has the right of
cumulative voting, in person or by proxy, in the election of directors.
Cumulative voting gives each shareholder the right to aggregate all votes which
he or she is entitled to cast in the election of directors and to cast all such
votes for one candidate or distribute them among as many candidates and in such
a manner as the shareholder desires. For 1998 the number of directors to be
elected is six (6) and therefore each shareholder has the right to cast six (6)
votes in the election of directors for each share of stock held on the record
date. If you wish to exercise, by proxy, your right to cumulative voting in the
election of directors, you must provide a proxy showing how your votes are to be
distributed among one or more candidates. Unless contrary instructions are given
by a shareholder who signs and returns a proxy, all votes for the election of
directors represented by such proxy will be divided equally among the six (6)
nominees set forth in this proxy statement. However, if cumulative voting is
invoked by any shareholder, the vote represented by the proxies delivered
pursuant to this solicitation, which do not contain contrary instructions, may
be cumulated at the discretion of the Board of Directors of South Branch Valley
Bancorp, Inc. in order to elect to the Board of Directors the maximum nominees
named in this proxy statement.
On the record date, there were 412,827 shares of common stock outstanding
which are held by approximately 634 shareholders. A majority of the outstanding
shares of South Branch Valley Bancorp, Inc. will constitute a quorum at the
meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence of a quorum for the transactions of business. The
election of each director nominated requires the favorable vote of a plurality
of all votes cast by the holders of common stock at a meeting at which a quorum
is present. Only shares that are voted in favor of a particular nominee will be
counted toward such nominee's achievement of a plurality. Abstentions and broker
non-votes will not be counted toward such nominee's achievement of a plurality
and thus have no effect. A broker non-vote generally occurs when a broker who
holds shares in a street name for a customer does not have the authority to vote
on certain matters because its customer has not provided any voting instructions
on the matter.
RECENT DEVELOPMENTS.
- -------------------
On March 24, 1998, the Capital State Bank, Inc., Charleston, West Virginia
("Capital State") held a Special Meeting of shareholders to consider and vote
upon the Agreement and Plan of Merger dated August 6, 1997 as amended December
16, 1997 (the "Agreement") by and among Capital State, South Branch Valley
Bancorp, Inc. ("South Branch") and Capital Interim Bank, Inc., a wholly owned
subsidiary of South Branch ("Capital Interim Bank") organized solely to
facilitate the acquisition of Capital State. Pursuant to the Agreement, Capital
State was merged with and into Capital Interim Bank with Capital Interim Bank
surviving the merger (the "Merger"). The shareholders of Capital State approved
the Merger on March 24, 1998.
On March 25, 1998, South Branch held a Special Meeting of its shareholders
at which South Branch shareholders were asked to consider a vote upon two
proposals in connection with the Merger. The first proposal was to amend the
Articles of Incorporation of South Branch to increase the number of authorized
shares of common stock, par value $2.50 per share from 600,000 shares to
2,000,000 shares. The second proposal was to approve the issuance of up to One
Hundred Eighty-four-Thousand Five (184,005) shares of
1
South Branch Valley stock as consideration for the Merger. The shareholders of
South Branch approved both proposals on March 25, 1998.
No other matters came before either meeting or any adjournment thereof.
Effective at the close of business on March 31, 1998, Capital State Bank
merged with and into Capital Interim Bank and became a wholly owned subsidiary
of South Branch in accordance with the terms and conditions of the Agreement.
Pursuant to the Agreement, South Branch also agreed to take such action as
was necessary to cause three members of the Board of Directors of Capital State
to become members of the board of directors of South Branch. Pursuant to the
Agreement, Capital State was entitled to one director in each class of South
Branch's staggered board. Accordingly, effective at the close of business on
March 31, 1998, South Branch agreed to appoint Frank A. Baer, III, Georgette
Rashid George and Charles S. Piccirillo, Esq. to the Board of Directors of South
Branch. These individuals will serve until the 1998 Annual Meeting. These three
individuals have been nominated to continue to serve on South Branch's Board for
the terms indicated herein.
Mary Ann Ours, whose term would have expired in 1998, passed away in March
1998 after an extended illness. She was appointed to the Board in October 1994
to fill the unexpired term of her husband, A. Clyde Ours, Jr., after his death
and was subsequently elected to a three year term in 1995. Her tireless
contributions to the growth and success of the Company will be missed.
PROXY SOLICITATION.
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The accompanying proxy is solicited by the Board of Directors of the
Company. In that connection, this proxy statement is being mailed to the
shareholders on or before April 17, 1998. In addition to this solicitation by
mail, it is possible that employees of the Company may solicit proxies in person
or by telephone. Brokers, fiduciaries, custodians and other nominees have been
requested to forward solicitation materials to the beneficial owners of the
common stock of the Company held of record in their names and will, upon
request, be reimbursed for their reasonable expenses in so doing. All costs of
the solicitation of proxies will be borne by the Company.
REVOCATION OF PROXY OR SUBSTITUTION.
- -----------------------------------
Any person signing and mailing the enclosed proxy may, nevertheless, revoke
the proxy at any time before the actual voting thereof (i) by giving written
notice to the President of South Branch Valley Bancorp, Inc., (ii) by submitting
a subsequently dated proxy, or (iii) by appearing at the 1998 annual meeting and
voting in person. On the accompanying proxy, a shareholder may substitute the
name of another person in lieu of those persons presently named as proxies. Such
substituted persons may be asked to present adequate identification to the
Secretary prior to voting.
SHAREHOLDER OWNERSHIP.
- ----------------------
As of April 2, 1998, so far as is known to the Company, the following
person owned beneficially 5% or more of the outstanding common stock of the
Company. Beneficial ownership has been restated to give effect to the issuance
of approximately 183,438 shares of South Branch stock in connection with the
Merger and is based on approximately 596,265 shares issued and outstanding as of
April 2, 1998.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
- ----------------------- ----------------- -----------
John W. Crites 51,205 (1) 8.6%
46 Point Drive
Petersburg, WV 26847
(1) 23,905 shares are owned by Allegheny Wood Products, Inc., of which Mr.
Crites is majority owner and president.
2
Proposal No. 1: ELECTION OF DIRECTORS.
Nominees. There is one nominee for election as director to hold office
--------
until the year 1999 and until his successor has been duly elected and qualified.
There is one nominee for election as director to hold office until the year 2000
and until her successor has been duly elected and qualified. There are four (4)
nominees for election as directors of the Company to hold office until the year
2001 and until their successors have been duly elected and qualified.
The Articles of Incorporation of the Company provide that nominations for
election to the Board of Directors may be made by the Board of Directors or by
any shareholder entitled to vote for the election of directors. Nominations,
other than those made by or on behalf of the existing management of the Company,
must be made in writing and delivered or mailed to the President of the Company
not less than thirty (30) days prior to any meeting of shareholders called for
the election of directors; provided, however, that if less than thirty (30) days
notice of the meeting is given to shareholders, such nomination shall be mailed
or delivered to the President of the Company not later than the fifth (5th) day
following the day on which the notice of meeting was mailed. Such notification
shall contain the following information to the extent known by the shareholder:
(i) the name and address of each nominee, (ii) the principal occupation of each
nominee, (iii) the name and address of the notifying shareholder, and (iv) the
number of shares of the Company's stock owned by the notifying shareholder.
Nominations not made in accordance with these requirements, may, in the
discretion of the chairman of the meeting, be disregarded, and upon his
instruction, the votes cast for each such nominee shall be disregarded.
If the enclosed proxy is properly executed and received in time for the
meeting, it is the intention of the person named in the proxy to vote for the
shares represented thereby for the persons nominated for election as directors
unless authority to vote has been withheld or otherwise directed by the
shareholder. All of the nominees have indicated a willingness to serve, but in
case any of the nominees are not candidates at the meeting or are disqualified
as a candidate for any reason, it is the intention of the persons named in the
enclosed proxy to vote in favor of the remainder of the nominees and to vote for
substitute nominees at their discretion.
Oscar M. Bean and Phoebe F. Heishman were each elected to the Board at the
1995 Annual Meeting and are currently serving as directors of the Company. H.
Charles Maddy, III was elected to the Board at the 1994 Annual Meeting is
currently serving as a director and as president of the Company. Mr. Maddy would
have stood for reelection in 1997, however, on September 19, 1997, the Board of
Directors voted to appoint Mr. Maddy to fill the vacancy created by the
resignation of Renick C. Williams whose term would have expired in 1998. All
nominees are also directors of the Company's subsidiary, South Branch Valley
National Bank, except Messrs. Baer and Piccirillo and Ms. George. Pursuant to
the Agreement, three directors of Capital State Bank, Frank A. Baer, III,
Georgette Rashid George and Charles S. Piccirillo were appointed on March 31,
1998 to serve until the 1998 Annual Meeting. These nominees are also currently
directors of the Company's subsidiary, Capital State Bank, Inc.
The following is information about the nominees as of April 2, 1998.
Beneficial ownership has been restated to give effect of the issuance of
approximately 183,438 shares of South Branch stock in connection with the Merger
and is based on approximately 596,528 shares issued and outstanding as of April
2, 1998.
TO SERVE FOR A ONE YEAR TERM UNTIL 1999:
Frank A. Baer, III, 37, is President of Commercial Insurance Service, an
------------------
insurance brokerage. He is also Vice President of M & B Properties, a real
estate company. He has served as a director of Capital State Bank since 1995. He
has served as director of the Company since March 1998. Mr. Baer is the
beneficial owner of 1,085 shares of the Company's common stock.
3
TO SERVE FOR A TWO YEAR TERM UNTIL 2000:
Georgette Rashid George, 37, is manager of E&G, Inc. dba Ramada Inn,
--------------------------
manager of Hospitality Ventures, dba Hampton Inn, and manager of Ridgeline,
Inc., a real estate development company. She has served as a director of Capital
State Bank since 1996. She has served as director of the Company since March
1998. Ms. George is the beneficial owner of 1,188 shares of the Company's common
stock.
TO SERVE FOR A THREE YEAR TERM UNTIL 2001:
Oscar M. Bean, 48, is the managing partner of Bean & Bean, Attorneys at
-------------
Law. He has been a director of the Company since 1987 and South Branch Valley
National Bank since 1978. He has served as Chairman of the Board since 1995. Mr.
Bean currently serves on the Executive, Planning & Budget, Asset/Liability
Management & Investments and Compliance & Audit committees. Mr. Bean is the
beneficial owner of 9,274 shares of the Company's common stock.
Phoebe F. Heishman, 56, is the publisher and editor of the Moorefield
-------------------
Examiner and President of R.E.Fisher Co., Inc. She has been a director of the
Company since 1987 and South Branch Valley National Bank since 1973. She has
served as Secretary of the Company since 1995. Mrs. Heishman currently serves on
the Trust Committee and is a rotating member of the Executive Committee. Mrs.
Heishman is the beneficial owner of 11,690 shares of the Company's common stock.
H. Charles Maddy, III, 35 , has served as the President and Chief Executive
---------------------
Officer of South Branch Valley National Bank since 1994. He has been a director
of both the Company and South Branch Valley National Bank since 1993. In 1994 he
was elected to a three year term and in 1997 was appointed to fill the vacancy
created by the resignation of Renick C. Williams. Mr. Maddy currently serves on
the Executive, Planning & Budget, Asset/Liability Management & Investments and
Compliance & Audit committees. Mr. Maddy also serves on the Board of Directors
of Capital State Bank. Mr. Maddy is the beneficial owner of 1,046 shares of the
Company's common stock.
Charles S. Piccirillo, 43, is a partner in the law firm of Shaffer &
-----------------------
Shaffer. He is also a partner in Lawoff Associates, a real estate partnership,
and is President of Anggus Enterprises, Inc., which owns commercial rental
property. He has served as a director of Capital State Bank since 1996. Mr.
Piccirillo was appointed acting Chairman of Capital State in February 1997 and
was elected Chairman the Board of Capital State in June 1997. He has served as
director of the Company since March 1998. Mr. Piccirillo is the beneficial owner
of 1,138 shares of the Company's common stock.
BOARD OF DIRECTORS CONTINUING TO SERVE UNEXPIRED TERMS.
In addition to the individual nominees listed above, the current Board of
Directors of the Company comprises the nine individuals listed below. Directors
of the Company are divided into three classes and serve a staggered three (3)
year term. All current directors of the Company are also directors of the South
Branch Valley National Bank or Capital State Bank, the only subsidiaries of
South Branch Valley Bancorp, Inc. Directors of South Branch or Capital State
serve for a one (1) year term. The table below sets forth information concerning
each director as of April 2, 1998. The current number of directors of the
Company is fifteen (15).
Date
Current Term
as Director
of Company Positions & Principal Occupation or
Name and Age Expires Employment Last Five Years
- ---------------- --------------- -----------------------------------------------
Donald W. Biller (66) 1999 Director and Vice Chairman of the Board since 1987; Director of
South Branch since 1975; President of D.W. Biller, Inc.; Director
of WV Farm Credit ACA; Farmer.
4
James M. Cookman (44) 2000 Director of Company and South Branch since 1994; President
of Cookman Insurance Center, Inc.; President of Cookman
Realty Group, Inc., Secretary/Treasurer of Apex Developers,
Inc.; Owner of WQWV-FM radio station; Member of West
Virginia Lottery Commission; Director of Capital State Bank.
John W. Crites (58) 1999 Director of Company and South Branch since 1989; President
of Allegheny Wood Products, Inc.; Partner, Allegheny
Dimension, LLC; Principal Stockholder, KJV Aviation.
Thomas J. Hawse, III (53) 2000 Director of Company and South Branch since 1988; President
of Hawse Food Market, Inc.
Gary L. Hinkle (49) 2000 Director of Company and South Branch since 1993; President
of Hinkle Trucking, Inc., Dettinburn Transport, Inc., and
Mt. Storm Fuel Corporation.
Jeffrey E. Hott (47) 1999 Director of Company and South Branch since 1990; Vice
President of Hott's Ag Services, E.E. Hott, Inc., and
Franklin Oil Co.
Harold K. Michael (54) 2000 Director of Company and South Branch since 1994; Owner/
Agent of H.K. Michael & Son Insurance; Member of the West
Virginia House of Delegates; Director of Capital State Bank.
Russell F. Ratliff, Jr. (48)1999 Director of Company and South Branch since 1994; Treasurer
of the Company, 1987 to present; Vice President and Cashier
of the Bank, 1993 to present; CEO and Cashier of the Bank,
1988 to 1993.
Harry C. Welton (68) 1999 Director of Company since 1987; Director of South Branch
since 1986; Retired farmer.
EXECUTIVE OFFICERS.
The following table identifies the executive officers of the Company, all of
whom were appointed in October 1997 to serve until the next annual meeting. Mr.
Jennings is an executive officer of the Company's subsidiary, South Branch
Valley National Bank, and Ms. Byrnside is an executive officer of the Company's
subsidiary, Capital State Bank. Mr. Bean and Mrs. Heishman, who are also
directors of the Company, do not receive additional compensation for their
service as executive officers of the Company and thus are not listed in the
Executive Compensation Table shown on page 8.
Name, Year Appointed, Age Office, Experience
- ------------------------- -------------------------
Oscar M. Bean, 1995 (48) Chairman of the Board of the Company, February 1995 to
present; Chairman of the Board of South Branch, February
1995 to present; Secretary of the Company 1987 to February
1995.
Phoebe F. Heishman, 1995 (56) Secretary of the Company, February 1995 to present.
H. Charles Maddy, III, 1988 (35) President of the Company since 1994; Chief Financial Officer
of the Company, 1988 to 1994; President and Chief Executive
Officer of South Branch, April 1993 to present; Executive
Vice President of the Bank, 1992 to 1993; Vice President and
Controller, 1988 to 1992.
Russell F. Ratliff, Jr., 1986 (48) Treasurer of the Company, 1987 to present; Vice President
and Cashier of South Branch, April 1993 to present; CEO and
Cashier of the Bank, 1988 to 1993.
5
Scott C. Jennings, 1994 (36) Vice President of Loan Administration for South Branch April
1997 to present; Vice President of Loan Review and
Compliance, 1994 to April 1997; Loan Review and Compliance
Officer 1991 to 1994.
Emma L. Byrnside (48) President of Capital State Bank, 1997 to present; Executive
Vice President 1995-1997, Vice President, Bank One, West
Virginia, Boone, NA, 1975 to 1995.
OWNERSHIP OF STOCK BY DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth the amount of common stock beneficially
owned by each director and by all executive officers and directors of the
Company and its subsidiaries, South Branch Valley National Bank and Capital
State Bank, as a group of seventeen (17) persons as of April 2, 1998. Beneficial
ownership has been restated to give effect of the issuance of approximately
183,438 shares of South Branch stock in connection with the Merger and is based
on approximately 596,265 shares issued and outstanding.
Name of Qualifying Other Shares
Beneficial Shares Beneficially Owned Percent of
Owner Owned Direct Indirect Class**
- -------------------- ----------------- -----------------------------------
Frank A. Baer, III 1,000 11 74 (12) .0%
Oscar M. Bean 1,000 6,536 1,738 (4) 1.4%
Donald W. Biller 1,000 506 5,120 (9) .9%
James M. Cookman 1,000 -- 2,161 (7) .4%
John W. Crites 1,000 26,300 23,905 (2) 8.4%
Georgette R. George ***341 0 847 (10) .2%
Thomas J. Hawse, III 1,000 2,100 --- .5%
Phoebe F. Heishman 1,000 9,150 1,540 (5) 1.7%
Gary L. Hinkle 1,000 1 3,400 (8) 2.5%
Jeffrey E. Hott 1,000 3,530 18,105 (3) 3.6%
H. Charles Maddy, III * 202 844 (6) .2%
Harold K. Michael 1,000 38 --- .0%
Charles S. Piccirillo ***253 0 885 (11) .2%
Russell F. Ratliff, Jr * 950 883 (6) .3%
Harry C. Welton, Jr. 1,000 840 9,465 (1) 1.7%
61,635 68,967 21.9%
====== ====== =====
All directors and
executive officers as
a group (17 persons) 62,878 69,422 22.2%
====== ====== =====
* Director/employee not required to own 1,000 shares to qualify for
directorship.
** Does not include qualifying shares.
*** Director does not own the required number of qualifying shares at this time
but has until the expiration of his or her term to accumulate the qualifying
shares.
(1) All shares indirectly held are owned by the spouse.
(2) All shares indirectly held by Mr. Crites are owned by Allegheny Wood
Products, Inc. of which Mr. Crites is the President and majority shareholder.
(3) 150 shares are owned by Mr. Hott's minor children; 10,855 shares are owned
by E.E. Hott, Inc. and 7,100 shares are owned by Franklin Oil Co. (Mr. Hott is
vice president of both companies).
(4) 55 shares are owned by Mr. Bean's spouse; 493 shares are owned by Mr. Bean's
minor children; 1,190 shares are owned by Mr. Bean's mother for whom he has
power of attorney.
6
(5) 220 shares are owned by Ms. Heishman's spouse; 1,320 shares are owned by
minor children.
(6) Fully vested shares held on behalf of named individual in the Company's
ESOP.
(7) 710 shares are owned by Mr. Cookman's minor children; 500 shares are owned
by Cookman Insurance Center, Inc. in which Mr. Cookman has a majority interest,
and 1,368 shares are owned by the Cookman Insurance Center, Inc. Retirement
Plan.
(8) 3,400 shares are owned by Hinkle Trucking, Inc. of which Mr. Hinkle is the
President.
(9) All shares indirectly held by Mr. Biller are owned by D.W. Biller, Inc. of
which Mr. Biller is the President.
(10) 341 shares are owned by the spouse and 506 shares are held by the spouse's
retirement plan.
(11) 506 shares are held in trust by Shaffer & Shaffer and 379 shares are held
by the Shaffer & Shaffer retirement plan.
(12) 74 shares are owned by minor children.
DIRECTORS' QUALIFICATIONS, FEES, COMMITTEES, MEETINGS AND ATTENDANCE.
- --------------------------------------------------------------------
Each director of the Company is required to own a minimum of 1,000 shares
of the Company's common stock. Ownership is defined as shares held in the
individual's own name, jointly with spouse, or by a company where the individual
has controlling interest. Directors who are also employees of the Company's
subsidiary banks are exempt from this requirement. In addition, each director
must sign an oath and pledge confidentiality on all matters that he might learn
in his role as a director. The Company requires that all directors retire at the
end of the term during which the director attains the age of 70.
Directors of the Company do not receive a fee for their services. During
the 1997 calendar year, there were twelve (12) meetings of the Board of
Directors of the Company. The Company has no standing committees. Nominations
for election to office are made by the Board as a whole.
Directors of South Branch Valley National Bank receive a fee for their
services of $400 per month except for the Chairman of the Board who receives
$900 per month. They also receive $100 for each meeting they attend. As
employees of the bank, Mr. Maddy and Mr. Ratliff do not receive the $100 fee for
each meeting attended. Prior to 1994, South Branch Valley National Bank paid
major medical health insurance premiums for all members of its Board of
Directors. In 1994, the Board elected to discontinue these payments on a forward
going basis and individuals elected to the Board after that date will not
receive these payments. For those still receiving payments, such payments will
be eliminated upon retirement. The following members of the board continue to
receive these payments in the amounts indicated. Oscar M. Bean - $5,670, Donald
W. Biller - $5,646, John W. Crites - $5,642, Phoebe F. Heishman - $5,751, Gary
L. Hinkle - $5,649, Jeffrey E. Hott - $5,746, and Harry C. Welton, Jr. - $5,649
for a total payment of $39,753.
Pursuant to a deferred compensation plan adopted in 1994, directors may
elect to defer their fee income. Periodically, the fees will be converted to
units representing shares of the Company's stock which the Company is required
to deliver when the director reaches retirement age. Directors have no voting
rights with respect to the units of Company stock purchased. The following
directors currently have the right to receive the indicated number of shares
pursuant to this arrangement. Oscar M. Bean - 278 shares, Donald W. Biller - 549
shares, James M. Cookman - 584 shares, John W. Crites - 638 shares, Thomas J.
Hawse, III - 659 shares, Gary L. Hinkle - 664 shares, and Harold K. Michael -
562 shares.
During the 1997 calendar year, there were twelve (12) meetings of the Board
of Directors of South Branch Valley National Bank. The Board of Directors of
South Branch Valley National Bank has a standing Executive Committee, a standing
Planning & Budget Committee, a standing Compliance & Audit Committee, a standing
Trust Committee, and a standing Asset/Liability Management Committee. The Board
does not have a nominating committee as nominations are made by the Board as a
whole.
7
The Executive Committee is comprised of eight directors, four of whom are
regular members including the Chairman of the Board and the President & Chief
Executive Officer and the Vice President of Operations. The fourth member is
rotated alphabetically each year and for the current year is John W. Crites. The
other four members rotate each month according to their membership on other
committees which are meeting the same day. The Committee monitors the Bank's
problem loans, sets loan limits for the Bank's officers and for the Officer Loan
Committee. It sits as an approval body for loans above the limits set for the
Officer Loan Committee, and is responsible for the Bank's loan policy. The
committee has the authority to establish officers' salaries and reviews
management's recommendations as to employee pay grade scales and other matters
relating to compensation and personnel. The committee may transact any business
that the entire Board can transact.
The Compliance & Audit Committee has the primary responsibility of
administering the Bank's compliance monitoring system and of reviewing all audit
issues relating to the Bank, both external and internal. The committee met three
times in 1997 to review reports submitted by the compliance officer and internal
auditor, noting any exceptions, and sees that education and training sessions
are scheduled for any area where deficiencies are noted. The committee looks at
each employee's area of responsibility to ascertain that there are no conflicts
of interest. Current members of this committee are Oscar M. Bean, H. Charles
Maddy, III, Russell F. Ratliff, Jr., Donald W. Biller, Harold K. Michael and
Harry C. Welton.
The Asset/Liability Management Committee coordinates the Bank's overall
acquisition and allocation of funds along with managing the Bank's interest rate
exposure and determining general balance sheet strategy. This committee is also
involved with the investment policy, asset/liability management, liquidity
management, capital management and related issues. Current members of this
committee are Oscar M. Bean, Harry C. Welton, H. Charles Maddy, III, Thomas J.
Hawse, III, James M. Cookman and Russell F. Ratliff, Jr. This committee meets at
least quarterly.
The Planning & Budget Committee currently consists of Oscar M. Bean, John
W. Crites, Thomas J. Hawse, III, Gary L. Hinkle, H. Charles Maddy, III and
Russell F. Ratliff, Jr. This committee recommends planning and budgeting policy
to the Board, monitors the planning and budgeting activities of the Bank's
officers, and is responsible for planning future direction of the Bank. The
Bank's strategic plan, mission statement and policy statement are all
responsibilities of this committee.
The Trust Committee reviews all issues relating to the Bank's trust
department, including audit issues. The Committee is currently comprised of the
following members: Donald W. Biller, Jeffrey E. Hott and Phoebe F. Heishman.
EXECUTIVE COMPENSATION.
- -----------------------
Cash Compensation. Executive officers of the Company are not compensated for
- ------------------
services rendered to the Company. Executive officers of its subsidiary, South
Branch Valley National Bank, are compensated for services rendered to the Bank.
The table below sets forth the cash compensation of the Company's Chief
Executive Officer and any executive officer of South Branch Valley Bancorp, Inc.
or its subsidiaries earning $100,000 or more for the years ended December 31,
1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and
Principal All Other
Position Year Salary Bonus Compensation
H. Charles Maddy, III 1997 $89,313 $32,808 $20,521 (1)
President & Chief
Executive Officer 1996 $73,500 $26,667 $19,113 (1)
1995 $70,000 $25,110 $19,432 (1)
8
(1) Amount includes payments made on behalf of the executive to the ESOP and
401(k) Profit Sharing Plan, amounts taxable to the executive for personal use of
the Company vehicle, and fees received by the executive as a member of the
Company's subsidiary bank's Board of Directors.
SOUTH BRANCH VALLEY BANCORP, INC. PLANS.
- ----------------------------------------
The Company has a defined contribution profit-sharing and thrift plan with
401(k) provisions covering substantially all employees. Any employee who is at
least 21 years of age and is employed in a position requiring at least 1,000
hours of service per year is eligible to participate. Vesting in discretionary
contributions occurs at the rate of 0% for the first two years of eligibility
and 20% per year thereafter. Under the provisions of the plan, the Company will
make a matching contribution on behalf of each participant of 25% of the
participant's salary reduction contributions of up to 4% of such participant's
compensation. These matching contributions shall be fully vested at all times.
The Company may also make optional contributions at the discretion of the
Company's Board of Directors. Total Company contributions to the plan for the
year ended December 31, 1997, totaled $53,417. The trustees of the plan are also
members of the Company's Board of Directors.
The Company has an Employee Stock Ownership Plan (ESOP) covering
substantially all employees. Any employee who is at least 21 years of age and is
credited with at least 1,000 hours of service during the plan year is eligible
to participate. Vesting occurs at the rate of 0% for the first year of credited
service and 20% for each year thereafter. Under the provisions of the plan,
employee participants in the ESOP are not permitted to contribute to the plan,
rather the cost of the ESOP is borne by the Company through annual contributions
in amounts determined by the Company's Board of Directors. Contributions to the
plan for the year ended December 31, 1997, totaled $41,047. The trustees of the
ESOP are also members of the Company's Board of Directors.
In 1990, the Company adopted an incentive compensation program for its key
employees. Bonuses are awarded to key employees based on a prescribed formula
using the Company's return on assets as a base. For the year ended December 31,
1997, $149,155 was paid under the provisions of the incentive compensation
program. The amounts awarded to the Chief Executive Officer are shown in the
bonus column of the Compensation Table.
CHANGE OF CONTROL AGREEMENT.
- ---------------------------
Effective January 26, 1996, the Company entered into an agreement with H.
Charles Maddy, III, its Chief Executive Officer, to encourage him to continue
his employment with the Company in the event that the Company might be acquired
by another entity (the "Agreement"). The Board of Directors determined that such
an arrangement was appropriate, especially in view of the recent entry of large
regional bank holding companies into West Virginia. The agreements were not
undertaken in the belief that a change of control of the Company was imminent.
Generally, the Agreement provides severance compensation to Mr. Maddy if
his employment should end under certain specified conditions after a change of
control. Compensation is paid upon any involuntary termination following a
change of control unless Mr. Maddy is terminated for cause. In addition,
compensation will be paid after a change of control if Mr. Maddy voluntarily
terminates employment because of (i) a decrease in the total amount of Mr.
Maddy's base salary below the level in effect on the date of consummation of the
change of control, without Mr. Maddy's consent; (ii) a material reduction in the
importance of Mr. Maddy's job responsibilities without his consent, (iii)
geographical relation of Mr. Maddy without his consent to an office more than
twenty (20) miles from his location at the time of a change of control; (iv)
failure by the Company to obtain assumption of the contract by its successor,
(v) failure of the Company to give notice of termination as required in the
Agreement, or (vi) any removal of Mr. Maddy from, or failure to reelect Mr.
Maddy to, any position with the Company or Bank that he held immediately prior
to the change in control without his prior written consent (except for good
cause, death, disability or retirement).
Under the Agreement, a "change of control" is deemed to occur in the event
of (i) a change of ownership of the Company which must be reported to the
Securities and Exchange Commission as a change of control, including but not
limited to the acquisition by any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities and Exchange Act of 1934 (the "Exchange Act")
of direct or indirect "beneficial ownership" (as defined by Rule 13d-3 under the
Exchange Act) of twenty-five percent (25%) or more of the combined voting power
of the Company's then outstanding securities, or (ii) the failure during any
period of three (3) consecutive years of individuals who at the beginning of
such period constitute the Board for any reason to constitute at least a
majority thereof, unless the election
9
of each director who was not a director at the beginning of such period has been
approved in advance by directors representing at least two-thirds (2/3) of the
directors at the beginning of the period, or (iii) the consummation of a
"Business Combination" as defined in the Company's Articles of Incorporation.
Under the Agreement, severance benefits include: (a) cash payment equal to
Mr. Maddy's monthly base salary in effect on either (i) the date of termination;
or (ii) the date immediately preceding the change of control, whichever is
higher, multiplied by the number of full months between the date of termination
and the date that is twenty-four (24) months after the date of consummation of
the change of control; (b) payment of cash incentive award, if any, under the
Company's bonus plan; continuing participation in employee benefit plans and
programs such as retirement, disability and medical insurance for a period of
twenty-four (24) months following the date of termination.
Mr. Maddy also has the right to terminate his employment without reason by
giving written notice of termination within six (6) months of consummation of
any change of control. In such event, Mr. Maddy will be entitled to receive a
lump sum equal to 75% of his salary, as defined in the Agreement.
The Agreement does not effect the right of the Company to terminate Mr.
Maddy, or change the salary or benefits of Mr. Maddy, with or without good
cause, prior to any change of control; provided, however, any termination or
change which takes place after discussions have commenced which result in a
change of control will be presumed to be a violation of the agreement and will
entitle the officer to the benefits under the agreement, absent clear and
convincing evidence to the contrary.
TRANSACTIONS WITH DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS.
- ------------------------------------------------------------------
Directors and executive officers of South Branch Valley Bancorp, Inc. and
its subsidiaries, members of their immediate families, and business
organizations and individuals associated with them have been customers of, and
have had normal banking transactions with, South Branch Valley National Bank and
Capital State Bank. All such transactions were made in the ordinary course of
business, were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.
STOCK TRANSFERS.
- ----------------
Shares of the Company's common stock are occasionally bought and sold by
private individuals, firms or corporations. In many instances, the Company does
not have knowledge of the purchase price or the terms of the purchase. No
definitive records of bids and ask or sale prices are available. The Company has
engaged Ferris, Baker, Watts Incorporated as its market maker for its common
stock. Persons interested in buying or selling the Company's common stock should
contact David J. Miller at (304)697-2119 or (800)505-2030. The company may also
be reached at the following address:
David J. Miller, CPA
Ferris, Baker Watts, Inc.
704 4th Avenue
Huntington, WV 25701
PROPOSAL NO. 2: PROPOSAL TO APPROVE OFFICER STOCK OPTION PLAN
Summary of the officer Stock Option Plan
- ----------------------------------------
At a meeting held on March 25, 1998, the South Branch Board of Directors
unanimously approved the adoption of an Officer Stock Option Plan (the "Officer
Plan") and directed that the Officer Plan be submitted to shareholders for
approval. The Officer Plan provides for the granting of options (individually
referred to as "Stock Option") for up to 120,000 shares of South Branch Common
Stock. The Officer Plan will become effective upon approval of the shareholders
of South Branch at this Annual Meeting. The South Branch Board believes that it
is in the best interest of South Branch and its shareholders to attract and
retain qualified and motivated management and that the Officer Plan will help
South Branch achieve this goal. The Officer Plan is not intended to qualify as a
stock option plan under Section
10
422 of the Internal Revenue Code of 1986, as amended, (the "Code" generally).
West Virginia Code ss. 31-1-84 requires shareholder approval of the Officer
Plan. The Officer Plan is not subject to the Employee Retirement Income Security
Act of 1974 ("ERISA").
THIS SECTION CONTAINS A SUMMARY OF KEY TERMS OF THE OFFICER PLAN. THE
COMPLETE OFFICER PLAN IS ATTACHED HERETO AS EXHIBIT A. THE SUMMARY DESCRIPTION
OF THE OFFICER PLAN DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE COMPLETE DOCUMENT ATTACHED HERETO AS EXHIBIT A.
Purpose of the Officer Plan
- ---------------------------
The Officer Plan permits officers of the Board of South Branch and its
subsidiaries to acquire and hold Common Stock ("Common Stock") of the Company
and share in the growth of the value of the Company, thereby reinforcing a
mutuality of interest with shareholders. In the opinion of the Board of
Directors, the long-term success of South Branch is dependent upon the ability
of South Branch to attract and retain outstanding individuals and to motivate
their best efforts on behalf of South Branch's interest. The Board of Directors
believes that the Officer Plan will be effective in providing its officers with
a proprietary interest in the business and consequently a greater incentive to
promote the long-term interests of South Branch.
Common Stock Available
- -----------------------
The total number of shares of Common Stock that may be issued under the
Officer Plan shall not exceed in the aggregate one hundred twenty thousand
(120,000) shares, which shares may be in whole or in part, as the Board shall
from time to time determine, authorized but unissued shares of Common Stock.
Eligibility for Participation
- -----------------------------
Only officers of South Branch and its subsidiaries may participate in the
Officer Plan.
Option Agreement
- -----------------
Each Stock Option granted under the Officer Plan will be evidenced by an
Option Agreement between the Company and the officer. These agreements will
contain the terms on which the option can be exercised.
Option Price
- -------------
The option price for purchasing a share of Common Stock will be the fair
market value of the Common Stock on the date the option is granted.
"Fair Market Value" means the value of Common Stock (i) if listed on an
established Common Stock exchange, based on its price on such exchange at the
close of business on the date in question; (ii) if traded on a reasonably active
basis but not listed on an established Common Stock exchange, based on its price
as reflected on the NASDAQ Interdealer Quotation System of the National
Association of Securities Dealers, Inc. at the close of business on the date in
question; or (iii) if the Common Stock is not traded on any United States
securities exchange but is traded on any formal over-the-counter quotation
system in general use in the United States, the value per share shall be the
mean of the closing prices reported on the last five (5) business days on which
the Common Stock is traded prior to the date of grant.
South Branch is not traded on a securities exchange. Accordingly, at this
time, the market value of South Branch stock will be based on the mean of the
closing prices reported on the last five (5) business days on which Common Stock
traded prior to the date of grant. As of March 31, 1998, the fair market value
of South Branch Common Stock as defined above was $43.98.
The option price can be paid by cash, certified check, or by surrender of
previously acquired shares of Common Stock with a fair market value on the date
surrendered equal to the exercise price.
11
Option Expiration
- -----------------
Each Stock Option will automatically expire after ten (10) years, unless a
shorter expiration term is granted by the Board. No Stock Option may be
exercised by any person after expiration.
Option Termination
- ------------------
In the event of termination of employment by either the participating
officer or the Company, other than a termination by reason of retirement,
permanent disability, or death, an officer may exercise the stock option within
six months after termination (or such other time as the Committee may authorize)
with respect to the number of shares which were vested at the date of
termination.
In the event of retirement, a participating officer will become one hundred
percent (100%) vested in any Stock Option he or she has been granted under the
Officer Plan. Such Officer may exercise the Stock Option anytime within one year
of retirement.
In the event of permanent disability, to the extent that the Officer would
have been entitled to exercise the Stock Option immediately prior to the
disability, such option may be exercised with respect to the number of shares
that were vested during the period the Stock Option could have been exercised if
the director had not been disabled.
In the event of death, to the extent the Officer would have been entitled
to exercise the Stock Option immediately prior to his or her death, such Stock
Option may be exercised during the period the option would have been exercisable
if the deceased director had not died, by the person or persons to whom his or
her rights shall have passed by will or by laws of descent and distribution.
Administration
- --------------
The Officer Plan is administered by a Committee of the Board appointed by
the Board, however, the Board reserves the right to administer the Plan in its
discretion. The Committee has discretion, subject to the express provisions of
the plan to: (i) to determine the officers to whom options may be granted; (ii)
to determine the time or times when options may be granted; (iii) to determine
the purchase price of the Common Stock covered by each option; (iv) to determine
the number of shares to be subject to each option; (v) to determine when an
option may be exercised and whether in whole or in installments as the result of
a vesting schedule triggered by the passage of time or the attainment of
performance goals set by the Committee and approved by the Board; (vi) to
prescribe, amend, or rescind rules and regulations relating to the Plan; (vii)
to determine any other terms and provisions and any related amendments of the
individual Non Qualified Stock Option Agreements, which need not be identical
for each Participating Officer, including such terms and provisions and
amendment as shall be required in the judgment of the Committee to conform to
any change in any law or regulation applicable thereto, and with particular
regard to any changes in or effect of the Code and the regulations thereunder;
and (viii) to make all other determinations deemed necessary or advisable for
the administration of the Plan.
Officer Plan Effective Date
- ---------------------------
The Officer Plan is effective on the date of its approval by the
shareholders of South Branch.
Officer Plan Expiration
- -----------------------
The Officer Plan will automatically terminate at the tenth anniversary of
the date of shareholder approval of the Officer Plan. The term of Stock Options
granted before such tenth anniversary may continue beyond that date.
Amendment and Termination of the Officer Plan
- ---------------------------------------------
The Board of Directors may at any time amend or terminate the Officer Plan.
Among other things, the Board may (a) increase the maximum number of shares to
which options may be granted, subject to approval by the shareholders; (b)
increase the period during which options may be granted or options may be
exercised; or (c) provide for the administration of the Plan in a manner which
may avoid, without the consent of the officer to whom any option
12
shall theretofore shall have been granted, adversely affecting the rights of
such officer under such grant. Amendments may not alter the outstanding options
without the consent of the optionee.
Registration of Common Stock
- ----------------------------
South Branch will register the shares issued under the Officer Plan under
applicable federal and state securities law, unless an exemption is available.
Initial Option Grants
- ---------------------
The Committee will award options to officers of the Company. The options
will be nonassignable and nontransferable. All options are subject to all terms
of the Officer Plan, including but not limited to, those related to employment
status, change in corporate structure, restrictions on exercise, and a vesting
schedule for options granted.
Federal Income Tax Consequences
- -------------------------------
The Officer Plan permits South Branch to grant non-statutory Stock options
(options that do not meet the Stock option requirements under Section 422 of the
Code). Options granted under the Officer Plan, which are non-statutory, may be
taxed to the participant depending on the provisions of such options when
granted, exercised, disposed of or when any restrictions placed thereon lapse.
South Branch will be treated as having paid compensation to the participant and
generally may deduct the same at the time at which and in the same amount in
which the participant is considered to have realized compensation, except as may
be limited under Section 280G of the Code relating to golden parachute payments
exceeding $1 million.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH IN THIS SECTION IS INCLUDED FOR
GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
LISTING OF ALL POTENTIAL TAX CONSEQUENCES. THE DISCUSSION DOES NOT ADDRESS THE
TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY, OR FOREIGN
JURISDICTION. THE DISCUSSION IS BASED UPON THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, TREASURY REGULATIONS THEREUNDER, AND ADMINISTRATIVE RULINGS AND COURT
DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND
ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. PLAN
PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM, INCLUDING THE EFFECT OF FOREIGN, STATE, AND LOCAL TAXES.
Resale of Common Stock by Officer Plan Participants
- ---------------------------------------------------
Participants who exercise options and receive South Branch Common Stock
under the Officer Plan may resell the Common Stock received without restriction
if they are not affiliates of South Branch. Those participants who are
affiliates will be subject to the resale provisions of Rule 144 under the
Securities Act of 1933, as amended.
Change in Control Provisions
- ----------------------------
If there is a change of control of South Branch (as defined in the Officer
Plan), all options granted shall become immediately vested and exercisable
regardless of the number of years that have passed since the date of grant.
Generally, a "Change of Control" occurs if (i) any individual, firm, corporation
or other entity (other than the Company or its employee benefit plans) is or has
become a beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding securities; (ii) the Company files a report or
proxy statement with the Securities and Exchange Commission disclosing that a
Change in Control of the Company has or may have occurred or will or may occur
in the future pursuant to any then-existing contract or transaction; (iii) the
Company is merged or consolidated with another corporation and, as a result
thereof, securities representing less than fifty percent (50%) of the combined
voting power of the surviving or resulting corporation's securities are owned in
the aggregate by holders of the Company's securities immediately prior to such
merger or consolidation; (iv) all or substantially all of the assets of the
Company are sold in a single transaction or a series of related transactions to
a single purchaser or a group of affiliated purchasers; or (v) during any period
of twenty-four (24) consecutive months, individuals who were Directors of the
Company at the beginning of such period
13
cease to constitute at least a majority of the Company's board unless the
election, or nomination for election by the Company's shareholders, of more than
one-half of any new Directors of the Company was approved by a vote of at least
two-thirds of the Directors of the Company then still in office who were
Directors of the Company at the beginning of such twenty-four (24) month period,
either actually or by prior operation of this clause (v). Under the Officer
Plan, Change in Control does not include any transaction described in the
definition of Change in Control in connection with which the Corporation
executes a letter of intent or similar agreement with another company within one
year from the effective date of the Plan.
Considerations For and Against the Proposal
- -------------------------------------------
In the opinion of the Board of Directors of South Branch, the long-term
success of South Branch is dependent upon its ability to attract and retain
outstanding individuals and to motivate their best efforts on behalf of South
Branch's interests. Consequently, the Board of Directors believes that both
South Branch and its shareholders benefit by providing officers of South Branch
the option to acquire shares of South Branch Common Stock.
Under the Officer Plan, shares may be purchased by participants at an
option price fixed on the date the options are awarded. Generally, the options
would later be exercised by the participant only if the market price at the time
of the exercise exceeds the option price. Thus the participant may acquire South
Branch Common Stock at a price below its market value. At the time of its
exercise, therefore, South Branch experiences slight dilution in its earnings
per share to the extent that the book value of South Branch Common Stock exceeds
the option price.
Vote Required
- --------------
An affirmative vote of the holders of a majority of the outstanding shares
of South Branch Common Stock is required to adopt the Officer Plan. Shares voted
"Abstain" and shares not voted will have the same effect as if the shares were
voted "against" approval of the plan.
SOUTH BRANCH'S BOARD OF DIRECTORS RECOMMEND, BY THE VOTE INDICATED ABOVE,
THAT THE SHAREHOLDERS VOTE FOR THE ADOPTION OF THE OFFICER STOCK OPTION PLAN
DISCUSSED ABOVE.
Proposal No. 3: INDEPENDENT PUBLIC ACCOUNTANT.
At the meeting, the shareholders of the Company will be asked to ratify the
selection of the firm of Arnett & Foster, PLLC, of 1000 Laidley Tower, 500 Lee
Street East, Charleston, West Virginia 25329, as the Company's independent
auditors for the year ending December 31, 1998. A member of the firm will be
available to respond to shareholder inquiries at the annual meeting.
OTHER MATTERS.
- --------------
The Board of Directors does not intend to bring other matters before the
meeting except items incident to the context of the meeting. However, on all
matters properly brought before the meeting by the Board or by others, the
persons named as proxies in the accompanying proxy, or their substitutes, will
vote in accordance with the recommendations of the Board of Directors.
SHAREHOLDER PROPOSALS.
- ---------------------
To be included in the Board of Directors' Proxy Statement for the 1999
Annual Meeting of Shareholders, a shareholder's proposal must be received by the
Company on or before December 31, 1998. The proposal should be directed to the
secretary of the Company at P.O. Box 680, Moorefield, West Virginia 26836.
ANNUAL REPORT.
- -------------
The annual report of the Company for the year ended December 31, 1997 is
being mailed concurrently with this Proxy Statement. The financial statements
and other information to be delivered with this Proxy Statement constitute the
annual disclosure statement as required by 12 C.F.R. 18.
14
FORM 10-KSB.
- -----------
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR 1997. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE
DIRECTED TO CAROL A. RIGGLEMAN, ASSISTANT SECRETARY, SOUTH BRANCH VALLEY
BANCORP, INC., P.O. BOX 680, MOOREFIELD, WEST VIRGINIA 26836.
By Order of the Board of Directors
Dated: April 10, 1998
15
EXHIBIT A
SOUTH BRANCH VALLEY BANCORP, INC.
1998 OFFICER STOCK OPTION PLAN
Witnesseth this 1998 OFFICER STOCK OPTION PLAN dated as of the _____ day
of __________, 1998, by SOUTH BRANCH VALLEY BANCORP, INC. ("Corporation"), a
West Virginia corporation:
1. PURPOSE OF PLAN. The purpose of this 1998 Officer Stock Option Plan
("Plan") is to further the success of the Corporation and its
subsidiaries by making stock of the Corporation available for purchase
by officers of the Corporation or its subsidiaries through stock
option grants. The Plan provides an additional incentive to such
officers to continue in the Corporation's service and give them a
greater interest as stockholders in the success of the Corporation.
2. REFERENCE, CONSTRUCTION, AND DEFINITIONS. Unless otherwise indicated,
all references made in this Plan shall be to articles, sections and
subsection of this Plan. This Plan shall be construed in accordance
with the laws of the state of West Virginia. The headings and
subheadings in this Plan have been inserted for convenience of
reference only and are to be ignored in construction of the provision
of this Plan. In the construction of this Plan, the masculine shall
include the feminine and singular the plural, wherever appropriate.
The following terms shall have the meanings set forth opposite such
terms:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday on which the Corporation's Common Stock
is available for purchase or sale.
(c) "Change of Control" means (a) a report is filed with the
Securities and Exchange Commission (the "SEC") on Schedule
13D or Schedule 14D-1 (or any successor schedule, form or
report), each as promulgated pursuant to the Exchange Act,
disclosing that any "person", as such term is used in
section 13(d) and Section 14(d)(2) of the Exchange Act,
other than the company or any company employee benefit plan,
is or has become a beneficial owner, directly or indirectly,
of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the
Company's then outstanding securities; (b) the Company files
a report or proxy statement with the SEC pursuant to the
Exchange Act disclosing in response to Item 1 of Form 8-K
thereunder or Item 6(e) of Schedule 14A thereunder that a
Change in Control of the Company has or may have occurred or
will or may occur in the future pursuant to any
then-existing contract or transaction; (c) the Company is
merged or consolidated with another corporation and, as a
result thereof, securities representing less than fifty
percent (50%) of the combined voting power of the surviving
or resulting corporation's securities (or of the securities
of a parent corporation in case of a merger in which the
surviving or resulting corporation becomes a wholly owned
subsidiary of the parent corporation) are owned in the
aggregate by holders of the Company's securities immediately
prior to such merger or consolidation; (d) all or
substantially all of the assets of the Company are sold in a
single transaction or a series of related transactions to a
single purchaser or a group of affiliated purchasers; or (e)
during any period of twenty-four (24) consecutive months,
individuals who were Directors of the Company at the
beginning of such period cease to constitute at least a
majority of the Company's board unless the election, or
nomination for election by the Company's shareholders, of
more than one-half of any new Directors of the Company was
approved by a vote of at least two-thirds of the Directors
of the Company then still in office who were Directors of
the Company at the beginning of such twenty-four (24) month
period, either actually or by prior operation of this clause
(e). A Change in Control shall not include any transaction
described in the definition of Change in Control in
connection with which the Corporation executes a letter of
intent or similar agreement with another company within one
year from the effective date of the Plan. The date of a
Change of Control shall be deemed to be the date of the
earlier of the date of (i) consummation of the transaction
involving the Change in Control, or (ii) the execution of a
definitive agreement by the Corporation involving a
transaction deemed to be a Change in Control; .
EXHIBIT A
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" means the Committee of the Board appointed by
the Board to administer the Plan as constituted from time to
time in accordance with Section 4(a); provided, however,
that if the Committee shall not be in existence, the term
"Committee" shall mean the Board.
(f) "Common Stock" means the common stock ($2.50 par value) of
the Corporation.
(g) "Corporation" means South Branch Valley Bancorp, Inc., a
West Virginia banking corporation.
(h) "Date of Grant" means the date on which an option is granted
under the Plan.
(i) "Effective Date" means the date on which the Plan is
approved and adopted by the shareholders of the Corporation.
(j) "Fair Market Value" means the value of Common Stock (i) if
listed on an established stock exchange, based on its price
on such exchange at the close of business on the date in
question; (ii) if traded on a reasonably active basis but
not listed on an established stock exchange, based on its
price as reflected on the NASDAQ Inter-dealer Quotation
System of the National Association of Securities Dealers,
Inc. at the close of business on the date in question; (iii)
if the Common Stock is not traded on any United States
securities exchange but is traded on any formal
over-the-counter quotation system in general use in the
United States, the value per share shall be the mean of the
closing prices reported on the last five (5) Business Days
on which the common stock traded prior to the date of grant.
(k) "Non Qualified Stock Option" means an Option which is not of
the type described in Section 422(b) or 423(b) of the Code.
(l) "Option" means an option to purchase a share or shares of
the Corporation's par value Common Stock.
(m) "Option Agreement" means the written agreement to be entered
into by the Corporation and the Participant, as provided in
Section 6 hereof.
(n) "Participant" means any officer of the Corporation or its
subsidiaries designated by the Committee and approved by the
Board to receive a stock option grant pursuant to this Plan.
(o) "Plan" means this 1998 Officer Stock Option Plan.
(p) "Retirement" shall mean termination of employment by the
Participant (i) at the age of 65 or more, or (ii) after
twenty-five years of service with the Corporation.
(q) "Term" means the period during which a particular Option may
be exercised in accordance with Section 8(b) hereof.
(r) "Vest" or "Vesting" means the date, event, or act prior to
which an Option, in whole or in part, is not exercisable,
and as a consequence of which the Option, in whole or in
part, becomes exercisable for the first time.
3. STOCK SUBJECT TO PLAN. Subject to the provisions of Sections 6, 7, and
8, there shall be reserved for issuance or transfer upon the exercise
of Options to be granted from time to time under the Plan an aggregate
of one hundred twenty thousand (120,000) shares of Common Stock, which
shares may be in whole or in part, as the Board shall from time to
time determine, authorized and unissued shares of Common Stock, or
issued shares of Common Stock which shall have been reacquired by the
Corporation. If any Option granted under the Plan shall expire,
terminate, or be canceled for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be
available for the purpose of the Plan.
EXHIBIT A
4. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. Actions by
the Committee for purposes of this Plan shall be by not less
than a majority of its members. Any decision or
determination reduced to writing and signed by all Committee
members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held. The
Committee shall report all action taken by it to the Board.
(b) The Board may authorize the Committee to administer the
Plan. In the event the Board elects to administer the Plan,
the Board shall have the power and authority otherwise
delegated to the Committee in the Plan documents and all
acts performed by the Committee under the Plan shall be
performed by the Board.
(c) The Committee shall have authority in its discretion, but
subject to the express provisions of the Plan:
(1) to determine Participants to whom Option may be granted;
(2) to determine the time or times when Option may be
granted;
(3) to determine the purchase price of the Common Stock
covered by each Option grant;
(4) to determine the number of shares of Common Stock to be
subject to each Option;
(5) to determine when an Option can be exercised and whether
in whole or in installments as the result of a
Vesting schedule triggered by the passage of time or the
attainment of performance goals set by the Committee
and approved by the Board;
(6) to prescribe, amend, or rescind rules and regulations
relating to the Plan;
(7) to determine any other terms and provisions and any
related amendments to the individual Option Agreements,
which need not be identical for each Participant,
including such terms and provisions and amendments
as shall be required in the judgement of the Committee
to conform to any change in any law or regulation\
applicable thereto, and with particular regard to any
changes in or effect of the Code and the regulations
thereunder; and
(8) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
5. PARTICIPATION. Options may be granted to officers employed by the
Corporation or its subsidiaries. In determining the officers to whom
Options may be granted and the number of shares to be covered by each
grant, the Committee may take into account the nature of the services
rendered by the respective officers, their present and potential
contributions to the Corporation's success, and such other factors as
the Committee in its discretion shall deem relevant. Options may be
granted to officers who currently hold Corporate stock or who hold or
have held Options under this Plan.
6. OPTION GRANTS AND LIMITS.
(a) Nothing contained in this Plan or in any resolution adopted
or to be adopted by the Board shall constitute the granting
of any Option hereunder. The granting of an Option pursuant
to the Plan shall take place only when a written Option
Agreement shall have been duly executed and delivered by or
on behalf of the Corporation and the officer (or his duly
authorized attorney-in-fact) in whom such Option is to be
granted.
(b) During the Participant's lifetime, any Option granted under
this Plan shall be exercisable only by the Participant or
any guardian or legal representation of the Participant, and
the Option shall not be transferable except, in case of the
death of the death of the Participant, by will or the laws
of descent and distribution, nor shall the Option be subject
to attachment, execution, or other similar process. In the
event of (i) any attempt by the Participant to alienate,
assign, pledge, hypothecate, or otherwise
EXHIBIT A
dispose of the Option, except as provided in this Plan, or
(ii) the levy of any attachment, execution, or similar
process upon the rights or interests conferred by the
Option, the Corporation may terminate the Option by notice
to the Participant and upon such notice the Option shall
become null and void.
(c) Each Option Agreement shall include a Vesting schedule
describing the date, event, or act upon which an Option
shall Vest, in whole or in part, with respect to all or a
specified portion of the shares covered by such Option. This
condition shall not impose upon the Corporation any
obligation to retain the Participant in its employ for any
period.
(d) Options shall be limited to Non Qualified Stock Options.
7. OPTION PRICES. The Option price to be paid by the Participants to the
Corporation for each share purchased upon the exercise of the Option
shall be not less than the Fair Market Value of the share on the date
the Option is granted. In no event may an Option be granted under the
Plan if the Option price per share is less than the par value of a
share.
8. EXERCISE OF OPTIONS.
(a) A Participant may exercise any Option granted under this
Plan with respect to all or any part of the number of shares
then exercisable under the terms of this written Option
Agreement by giving the Committee written notice of intent
to exercise. The notice of exercise shall specify the number
of shares to be purchased under the Option and the date of
exercise.
(b) Each Option granted under the Plan shall be exercisable only
during a Term established by the Committee as set forth in
the applicable Option Agreement. In no event shall the Term
of the Option extend beyond ten (10) years from the date of
grant of the Option.
(c) Full payment of the option price for the shares purchased
shall be made by the Participant on or before the exercise
date specified in the notice of exercise. Payment of the
purchase price of any shares with respect to which the
Option is being exercised shall be (i) cash, (ii) certified
check to the order of the Corporation, or (iii) shares of
Common Stock of the Corporation valued at the Fair Market
Value on such Business Day as the Option or portion thereof
is exercised.
(d) The Corporation shall not be required to deliver
certificates for such shares until full payment of the
Option price has been made. On or as soon as is practicable
after the exercise date specified in the Participant's
notice and upon full payment of the Option price, the
Corporation shall cause to be delivered to the Participant a
certificate or certificates for the shares then being
purchased (out of previously unissued Common Stock or
reacquired Common Stock, as the Corporation may elect). The
exercise of the Option and the resulting obligation of the
Corporation to deliver Common Stock shall, however, be
subject to the condition that the listing, registration, or
qualification of the Option or the shares upon any
securities exchange or under any state or federal law, or
the consent, or approval of any governmental regulatory body
shall have been effected or obtained free of any conditions
not acceptable to the Committee.
(e) If the Participant fails to pay for any of the shares
specified in such notice or fails to accept delivery of the
shares, his right to purchase such shares may be terminated
by the Corporation. The date specified in the Participant's
notice as the date of exercise shall be deemed the date of
exercise of the Option, provided that payment in full for
the shares to be purchased upon such exercise shall have
been received by such date.
(f) The holder of an Option shall not have any of the rights of
a stockholder with respect to the shares subject to the
Option until such shares shall be issued or transferred to
him upon the exercise of his Option.
EXHIBIT A
(g) Notwithstanding the foregoing, any shares that may be
purchased as of the Effective Date, pursuant to the terms of
any Option granted prior to the Effective Date, shall
continue thereafter to be purchasable pursuant to the
exercise of such Option.
9. TERMINATION, DISABILITY, OR DEATH OF OPTION HOLDER. The ability to
exercise Options under this Plan shall be conditioned as follows:
(a) Exercise During and After Employment. Unless otherwise
provided in the terms of an Option, an Option may be
exercised by the Participant while he is an employee and has
maintained since the date of the grant of the Option
continuous status as an employee.
In the event of termination of the employment of a
Participant by either the Participant or the Corporation to
whom an Option has been granted under the Plan, other than a
termination by reason of retirement, permanent disability,
or death (all as more fully described below), the
Participant may (unless otherwise provided in his or her
Option Agreement) exercise his or her option at any time
within six months after such termination, or such other time
as the Committee may authorize, but in no event after ten
years from the date of the granting thereof, with respect
to, the number of shares covered by his or her Option which
were Vested at the date of termination of employment.
(b) Exercise Upon Retirement. Unless otherwise provided in the
terms of an Option, if a Participant's continuous employment
shall terminate by reason of his retirement, at a retirement
date authorized by the Committee, from the Corporation or
its subsidiaries, a retired Participant shall be come one
hundred percent (100%) Vested in any Option he has been
granted under the Plan as of that date, and he may exercise
the otherwise exercisable Option anytime within one year of
his retirement date.
(c) Exercise Upon Permanent Disability. Unless otherwise
provided in the terms of an Option, if a Participant's
continuous employment shall terminate by reason of a
permanent disability (as determined by the Participant's
establishing to the Committee his disability as defined in
Code Section 22(e))(3) of the Code, as amended from time to
time), then such Option of the disabled Participant may be
exercised with respect to the number of shares covered by
the Participant's Option that were Vested immediately prior
to that disability. Such Option of the permanently disabled
Participant may be exercised during the period the Option
would have been exercisable if the permanently disabled
Participant had not been permanently disabled and had
remained in employment.
(d) Exercise Upon Death. Unless otherwise provided in the terms
of an Option, if a Participant's continuous employment shall
terminate by reason of his death, then to the extent that
the Participant would have been entitled to exercise the
Option immediately prior to his death. Such Option of the
deceased Participant may be exercised during the period the
Option would have been exercisable if the deceased
Participant had not died and had remained in employment, by
the person or persons (including his estate) to whom his
rights under such Option shall have passed by will or by
laws of descent and distribution.
10. ADJUSTMENTS.
(a) In the event that the outstanding shares of Common Stock are
hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other
securities of the Corporation or of another corporation, by
reason of a recapitalization, reclassification, stock
split-up, combination of shares or dividend or other
distribution payable in capital stock, appropriate
adjustment shall be made by the Committee in the number and
kind of shares for which Options may be granted under the
Plan. In addition, the Committee shall make appropriate
adjustment in the number and kind of shares as to which
outstanding Options, or portions thereof then unexercised,
shall be exercisable, to the end that the proportionate
interest of the holder of the Option shall, to the extent
practicable, be maintained as before the occurrence of such
event. Such adjustment in outstanding Options shall be
EXHIBIT A
made without change in the total price applicable to the
unexercised portion of the Option but with a corresponding
adjustment in the Option price per share.
(b) In the event of a Change in Control, any Option under the
Plan shall terminate as of a date to be fixed by the
Committee, provided that not less than ninety (90) days'
written notice of the date so fixed shall be given to each
Participant, and each such Participant shall have the right
during such period to exercise any of his or her Options as
to all or any part of the shares covered thereby including
shares as to which such Options would not otherwise be
exercisable by reason of any insufficient lapse of time.
(c) Adjustment and determinations under this Section 10 shall be
made by the Committee, whose decisions as to what
adjustments or determinations shall be made, and the extent
thereof, shall be final, binding, and conclusive.
11. CHANGE OF CONTROL. Notwithstanding any other Plan provisions or
grant term, in the event of a Change of Control, all Options
granted hereunder shall become Vested and exercisable regardless
of the number of years that have passed since the Date of Grant.
12. AMENDMENT AND TERMINATION. Unless the Plan shall theretofore have
been terminated as hereinafter provided, it shall terminate on,
and no Option shall be granted thereunder after the tenth (10th)
anniversary of the Effective Date. The Board may terminate the
Plan or make such modifications or amendments thereof as it shall
deem advisable, or to conform to any change in any law or
regulation applicable thereto, including (a) increasing the
maximum number of shares to which Options may be granted under
the Plan, subject to shareholder approval, (b) changing the class
of employees eligible to be granted or Options may be exercised,
or (d) providing for the administration of the Plan in a manner
which may avoid, without the consent of the Participant to whom
any Option shall theretofore have been granted, adversely
affecting the rights of such Participant under such grant.
13. RESTRICTIONS ON ISSUING SHARES. The transfer of a share of Common
Stock upon the exercise of each Option shall be subject to the
condition that if at any time the Corporation shall determine in
its discretion that the satisfaction of withholding tax or other
withholding liabilities, or that the listing, registration or
qualification of any shares otherwise deliverable upon any
securities exchange or under any state or federal law, or that
the consent or approval of such regulatory body, is necessary or
desirable as a condition, of, or in connection with, such
transfer of shares pursuant thereto, then in any such event, such
transfer shall not be effective unless such withholding, listing,
registration, qualification, consent, or approval shall have been
effected or obtained under conditions acceptable to the
Corporation.
14. USE OF PROCEEDS. The proceeds received from the sale of Common
Stock pursuant to the exercise of Options granted under the Plan
shall be added to the Corporation's general funds and used for
general corporate purposes.
15. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as members of the Board or as
members of the Committee, the members of the Committee shall be
indemnified by the Corporation against all costs and expenses
reasonable incurred by them in connection with any action, suit,
or proceeding to which they or any of them may be party by reason
of any action taken or failure to act under or in connection with
the Plan, or any Option and against all amounts paid by them in
settlement thereof (provided such settlement is approved by legal
counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such action, suit, or
proceeding, except a judgment based upon a finding of bad faith.
Upon the institution of any such action, suit, or proceeding, a
Committee member shall notify the Corporation in writing, giving
an opportunity, at its own expense, to handle and defend the same
before such Committee member undertakes to handle it on his own
behalf.
16. EFFECTIVENESS OF THE PLAN. The Plan shall become effective as of
the Effective Date. Options may be granted to Participants prior
to such date, but the ability to exercise all such Options from
such grant shall be conditioned upon such approval and advice.
EXHIBIT A
17. MISCELLANEOUS.
(a) Employment Not Affected. Neither the granting of an Option
nor its exercise shall be construed as granting to the
Participant any right with respect to continuance of his
employment with the Corporation or its subsidiaries. Except
as may otherwise be limited by a written agreement between
the Corporation or its subsidiaries and the Participant, the
right of the Corporation or its subsidiaries to terminate at
will the Participant's employment with it at any time
(whether by dismissal, discharge, retirement, or otherwise)
is specifically reserved by the Corporation or its
subsidiaries as the employer or on behalf of the employer
(whichever the case may be) and acknowledged by the
Participant.
(b) Notice. Any notice to the Corporation provided for in this
instrument shall be addressed to it in care of its President
at its principal office in West Virginia, and any notice to
the Participant shall be addressed to the Participant at the
current address shown on the payroll records of the
Corporation. Any notice shall be deemed to be duly given if
and when properly addressed and posed by registered or
certified mail, postage prepaid.
SOUTH BRANCH VALLEY BANCORP, INC.
By: ____________________________________
H. Charles Maddy, III
President
Attest: ___________________________
Title: ____________________________
PROXY FOR ANNUAL MEETING OF THE SHAREHOLDERS
OF SOUTH BRANCH VALLEY BANCORP, INC. ON
May 5, 1998
The undersigned hereby appoints Russell F. Ratliff, Jr., Treasurer, and Carol A.
Riggleman, Assistant Secretary, of South Branch Valley Bancorp, Inc., or either
of them with full power to act alone as attorneys and proxies to vote all the
shares of the common stock of South Branch Valley Bancorp, Inc. held or owned by
the undersigned at the Annual Meeting of Shareholders on May 5, 1998 and at any
adjournments thereof, as follows:
1. A) Election of Director to serve a one year term until the 1999 annual
meeting or until his successor is elected and qualified:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
EXCEPT AS MARKED TO THE CONTRARY BELOW TO VOTE FOR NOMINEE LISTED BELOW
Frank A. Baer, III
B) Election of Director to serve a two year term until the 2000 annual
meeting or until her successor is elected and qualified:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
EXCEPT AS MARKED TO THE CONTRARY BELOW TO VOTE FOR NOMINEE LISTED BELOW
Georgette Rashid George
C) Election of Directors to serve a three year term until the 2001 annual
meeting or until their successors are elected and qualified:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
EXCEPT AS MARKED TO THE CONTRARY BELOW TO VOTE FOR ALL NOMINEES LISTED
BELOW
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Oscar M. Bean, Phoebe F. Heishman, H. Charles Maddy, III,
Charles S. Piccirillo
2. Adoption of the Officer Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the selection of Arnett & Foster as the Company's
independent certified public accountants for the fiscal year ending
December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, upon any other business which may properly come before
the meeting or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4.
THIS PROXY CONFIRMS ON THE PROXY HOLDER THE POWER OF CUMULATIVE VOTING AND THE
POWER TO VOTE CUMULATIVELY FOR LESS THAN ALL OF THE NOMINEES LISTED IN ITEMS 1,
2, 3 AND 4. IF ANY OTHER BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY SHALL
BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS. THIS
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN ACCORDANCE WITH THE
PROCEDURE SET FORTH IN THE PROXY MATERIALS.
Dated , 1998
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Shareholder should sign exactly as
name appears on the label. Any
person signing in fiduciary capacity
should please enclose proof of his
appointment unless such proof has
already been furnished. All joint
owners must sign.