<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
STONE STREET BANCORP, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
STONE STREET BANCORP, INC.
232 South Main Street
MOCKSVILLE, NORTH CAROLINA 27028
(336) 751-5936
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 21, 1998
NOTICE IS HEREBY GIVEN that the annual meeting (the "Meeting") of the
Stockholders of Stone Street Bancorp, Inc. (the "Company") will be held on April
21, 1998 at 5:00 p.m., Eastern Time, at Davie County Public Library, 371 North
Main Street, Mocksville, NC 27028
The Meeting is for the purpose of considering and voting upon the following
matters:
1. To elect three persons who will serve as directors of the Company
until the 2001 Annual Meeting of Stockholders or until their
successors are duly elected and qualify;
2. To ratify the selection of Weir Smith Jones Miller & Elliott, CPA PA
as the independent auditor for the Bank for the fiscal year ending
December 31, 1998;
3. To transact such other business as may properly come before the
Meeting or any adjournments thereof. The Board of Directors is not
aware of any other business to be considered at the Meeting.
The Board of Directors has established March 2, 1998 as the record date for
the determination of stockholders entitled to notice of and to vote at the
Meeting and at any adjournments thereof. In the event there are not sufficient
shares present in person or by proxy to constitute a quorum at the time of the
Meeting, the Meeting may be adjourned in order to permit further solicitation of
proxies by the Company.
By Order of the Board of Directors
/s/ Sandra M. Hadley
Sandra M. Hadley
Secretary
Mocksville, North Carolina
March 27, 1998
A FORM OF PROXY IS ENCLOSED TO ENABLE YOU TO VOTE YOUR SHARES AT THE MEETING.
YOU ARE URGED, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, TO COMPLETE, SIGN,
DATE AND RETURN THE PROXY PROMPTLY. A RETURN ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE>
STONE STREET BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1998
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
General
This Proxy Statement is being furnished to stockholders of Stone Street
Bancorp, Inc. (the "Company") in connection with the solicitation by the board
of directors of the Company (the "Board of Directors") of proxies to be used at
an annual meeting of stockholders (the "Meeting") to be held on April 21, 1998
at 5:00 p.m., Eastern Time, at Davie County Public Library, 371 South Main
Street, Mocksville, North Carolina 27028, and at any adjournments thereof. This
Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on March 27, 1998. The Company's office is located at 232 South
Main Street, Mocksville, North Carolina 27028, and its telephone number is (336)
751-5936.
Other than the matters listed on the attached Notice of 1998 Annual Meeting
of Stockholders, the Board of Directors knows of no matters that will be
presented for consideration at the Meeting. Execution of a proxy, however,
confers on the designated proxyholders discretionary authority to vote the
shares represented thereby in accordance with their best judgment on such other
business, if any, that may properly come before the Meeting or any adjournments
thereof.
REVOCABILITY OF PROXY
A proxy may be revoked at any time prior to its exercise by the filing of a
written notice of revocation with the Secretary of the Company, by delivering
to the company a duly executed proxy bearing a later date, or by attending the
meeting and voting in person. However, if you are a stockholder whose shares
are not registered in your own name, you will need appropriate documentation
from your recordholder to vote personally at the meeting.
SOLICITATION
The Company will pay the cost of preparing and mailing this Proxy Statement
and other proxy solicitation expenses, if any. Proxies may be solicited
personally or by telephone by directors, officers, and regular employees of the
Company and its wholly-owned savings bank subsidiary, Mocksville Savings Bank,
Inc. SSB (the "Bank"), without additional compensation therefor. The Company
has requested persons, firms, and corporations holding shares in their names, or
in the name of their nominees, which are beneficially owned by others, to send
proxy material to, and obtain proxies from, such beneficial owners and will
reimburse such holders, upon request, for their reasonable out-of-pocket
expenses in doing so.
VOTING SECURITIES AND VOTE REQUIRED FOR APPROVAL
Regardless of the number of shares of the Company's common stock (the
"Common Stock") owned, it is important that stockholders be represented by proxy
or be present in person at the Meeting. Stockholders are requested to vote by
completing the enclosed form of proxy and returning it signed and dated in the
enclosed postage-paid envelope. Any stockholder may vote for, against, or
withhold authority to vote with respect to any matter to come before the
Meeting. If the enclosed proxy is properly completed, signed, dated, and
returned, and not revoked, it will be voted in accordance with the instructions
therein. If no instructions are given, the proxy will be voted for the nominees
for election to the Board of Directors named in this Proxy Statement and for
the other matters described in this Proxy Statement calling for a vote of the
stockholders. If instructions are given with respect to some but not all
proposals, such instructions as are given will be followed, but the proxy will
be voted for the proposals on which no instructions are given.
2
<PAGE>
The close of business on March 2, 1998, has been fixed by the Board of
Directors as the record date ("Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Meeting and any
adjournments thereof. The total number of shares of Common Stock outstanding on
the Record Date was 1,898,052. Each share of Common Stock entitles its owner to
one vote on each matter calling for a vote of stockholders at the Meeting.
The presence, in person or by proxy, of the holders of at least the
majority of the total number of shares of Common Stock entitled to vote at the
Meeting is necessary to constitute a quorum at the Meeting. Since many of our
stockholders cannot attend the Meeting, it is necessary that a large number be
represented by proxy. Accordingly, the Board of Directors has designated
proxies to represent those stockholders who cannot be present in person and who
desire to be so represented. In the event there are not sufficient stockholders
present, in person or by proxy, to constitute a quorum or to approve any
proposal at the time of the Meeting, the Meeting may be adjourned in order to
permit the further solicitation of proxies.
In the election of directors, a nominee need only receive a plurality of
the votes cast in the election of directors in order to be elected. As a
result, those persons nominated who receive the largest number of votes in each
class will be elected as directors. Accordingly, shares not voted for any
reason respecting any one or more nominees, including abstentions, will not be
counted as votes against such nominees. No shareholder has the right to
cumulatively vote his or her shares in the election of directors.
The proposal to ratify the appointment of the Company's independent auditor
for the fiscal year ending December 31, 1998, will be approved if the votes cast
in favor of the proposal exceed the votes cast opposing the proposal. Shares
not voted for any reason respecting the appointment of Weir Smith Jones Miller &
Elliott, CPA PA will not be counted as a vote against such appointment.
Abstentions will be counted for purposes of determining whether a quorum is
present at the Meeting. Broker non-votes will not be counted either for
determining the existence of a quorum or for tabulating votes cast on any
proposal.
Proxies solicited hereby will be returned to the Board of Directors, and
will be tabulated by one or more inspectors of election designated by the Board
of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires that any person who acquires the beneficial ownership of more than five
percent of the Common Stock of the Company notify the Securities and Exchange
Commission (the "SEC") and the Company. Following is certain information, as
of the Record Date, regarding all persons or groups, as defined in the Exchange
Act, who are known to the Company to own beneficially more than five percent of
the Company's Common Stock.
3
<PAGE>
<TABLE>
<CAPTION>
Amount Percentage
Nature of of
Name and Address Beneficial Ownership/1/ Class/2/
- - ---------------- ----------------------- ----------
<S> <C> <C>
Robert B. Hall 174,085/3/ 8.83%
Chairman of Board of Directors of the Bank and Company
Post Office Box 812
Mocksville, NC 27028
J. Roy Harris 173,338/3/ 8.79%
Board of Directors of the Bank and Company
673 Salisbury Street
Mocksville, NC 27028
George W. Martin 171,584/3/ 8.71%
Director of the Bank and Company
10 Court Square
Mocksville, NC 27028
</TABLE>
- - ----------------------------
1 Unless otherwise noted, all shares are owned directly or indirectly by the
named individuals by their spouses and minor children, or by other entities
controlled by the named individuals.
2 Based upon a total of 1,898,052 shares of Common Stock outstanding at the
Record Date and the shares outstanding if each director exercised his
options to purchase shares of Common Stock (to the extent vested).
3 Messrs. Hall, Harris and Martin serve as trustees of the ESOP which holds
146,004 shares of the Company's Common Stock of which 115,182 are
unallocated and 30,822 are allocated at December 31, 1997. The trustees of
such plan share certain voting and investment power of such shares. The
number above includes 6,843 shares subject to options which have vested or
are exercisable within 60 days under the Stone Street Bancorp, Inc. Stock
Option Plan. Includes also 2,738 shares of restricted stock under the
Mocksville Savings Bank, Inc. SSB Management Recognition Plan on May 9,
1997.
Set forth below is certain information as of the Record Date regarding the
beneficial ownership of the Common Stock by each of the members of the Board of
Directors (including nominees for re-election at the Meeting), each of the
members of the Board of Directors of the Bank, each of the named executive
officers of the Company and the Bank, and the directors and executive officers
of the Company and the Bank as a group.
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF
Name and Address BENEFICIAL OWNERSHIP CLASS
- - ---------------- -------------------- -----------
<S> <C> <C>
Robert B. Hall 174,085/3,4/ 8.83%
Chairman of Board of Directors of the Bank and Company
Post Office Box 816
Mocksville, NC 27028
William F. Junker 27,881/4/ 1.41%
Vice Chairman of Board of Directors of the Bank and Company
Post Office Box 342
Mocksville, NC 27028
Donald G. Bowles 15,581/4/ .79%
Director of the Bank and Company
Post Office Box 645
Mocksville, NC 27028
J. Roy Harris 173,338/3,4/ 8.79%
Director of the Bank and Company
673 Salisbury Road
Mocksville, NC 27028
Claude R. Horn, Jr. 27,881/4/ 1.41%
Director of the Bank and Company
190 North Main Street
Mocksville, NC 27028
George W. Martin 171,584/3,4/ 8.71%
Director of the Bank and Company
10 Court Square
Mocksville, NC 27028
Lois C. Shore 10,781/4/ .55%
Director of the Bank and Company
190 West Church Street
Mocksville, NC 27028
Ronald H. Vogler 24,681/4/ 1.25%
Director of Bank and Company
150 Stratford Road
Suite 150
Winston Salem, NC 27104
Terry L. Bralley 275 .01%
Director of Bank and Company
Post Office Box 621
Mocksville, NC 27028
J. Charles Dunn 53,378/5/ 2.71%
Director of Bank and Company and
President of Bank and Company
P O Box 531
Mocksville, NC 27028
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF
Name and Address BENEFICIAL OWNERSHIP/1/ CLASS/2/
- - ---------------- ----------------------- ----------
<S> <C> <C>
Allen W. Carter 24,587/6/ 1.25%
Senior Vice President of the
Bank and Company
287 Rollingwood Drive
Mocksville, NC 27028
Marjorie D. Foster 17,619/7/ .89%
Vice President and Controller
of the Bank and Company
500 Daniel Road
Mocksville, NC 27028
Directors and all executive officers
as a group 412,614/8/ 21.80%
</TABLE>
1. Unless otherwise noted, all shares are owned directly or indirectly by the
named individuals, their spouses and minor children, or other entities
controlled by the named individuals.
2. Based upon a total of 1,898,052 shares of Common Stock outstanding at the
Record Date and the shares that would be outstanding if the director or
officer exercised his or her options to purchase shares of common stock of
the Corporation (to the extent vested).
3. Messrs. Hall, Harris and Martin serve as trustees of the ESOP which holds
146,004 shares of the Company's Common Stock. The trustees of such plan
share certain voting and investment power of such shares.
4. Includes 2,738 shares of restricted stock awarded under the Mocksville
Savings Bank, Inc. SSB Management Recognition Plan and 6,843 shares subject
to options which have vested or are exercisable within sixty days under the
Stone Street Bancorp, Inc. Stock Option Plan.
5. Includes 9,125 shares underlying options that have vested or are
exercisable within 60 days under the Stone Street Bancorp, Inc. Stock
Option Plan. Includes 18,249 shares of restricted stock awarded under the
Mocksville Savings Bank, Inc. SSB Management Recognition Plan on May 9,
1997. The number stated also includes 7,604 shares allocated under the
Mocksville Savings Bank, Inc. SSB Employee Stock Ownership Plan.
6. Includes 5,475 shares underlying options that have vested or are
exercisable within 60 days under the Stone Street Bancorp, Inc. Stock
Option Plan. Includes 10,949 of restricted stock awarded under the
Mocksville Savings Bank, Inc. SSB Management Recognition Plan on May 9,
1997. The number stated also includes 5,460 shares allocated under the
Mocksville Savings Bank, Inc. SSB Employee Stock Ownership Plan.
7. Includes 3,650 shares underlying options that have vested or are
exercisable within 60 days under the Stone Street Bancorp, Inc. Stock
Option Plan. Includes 7,300 of restricted stock awarded under the
Mocksville Savings Bank, Inc. SSB Management Recognition Plan on May 9,
1997. The number stated also includes 3,985 shares allocated under the
Mocksville Savings Bank, Inc. SSB Employee Stock Ownership Plan.
8. The 146,004 shares held by the ESOP for which the trustees, Messers. Hall,
Harris and Martin, share voting and investment power have been included
only once in the total number of shares owned beneficially by the directors
and executive officers as a group. Includes 72,994 shares underlying
options that have vested or are exercisable within 60 days under the Stock
Option Plan.
6
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT OF 1934
Section 16 (a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of the Common
Stock, to file reports of ownership and changes in ownership with the SEC.
Executive officers, directors and greater than ten percent beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during the fiscal year ended December 31,
1997, all of its executive officers and directors and greater than ten percent
beneficial owners complied with all applicable Section 16(a) filing
requirements.
7
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Articles of Incorporation of the Bank provide that the number of
directors of the Bank shall not be less than nine, with the exact number to be
fixed or changed from time to time by the Board of Directors. The Board of
Directors has currently fixed the size of the Board at nine members.
So long as the total number of directors is nine or more, the directors
will be divided into three classes, as nearly equal in number as possible. Each
director in a class is to be elected for a term of three years or until his or
her earlier death, resignation, retirement, removal or disqualification or until
his or her successors shall be elected and shall qualify.
The Board of Directors has nominated the three persons named below for
election as directors to serve for the term specified or until their earlier
death, resignation, retirement, removal or disqualification or until their
successors shall be elected and shall quality.
The persons named in the accompanying form of proxy intend to vote any
shares of Common Stock represented by valid proxies received by them to elect
the three nominees listed below as directors for the terms specified, unless
authority to vote is withheld or such proxies are revoked. Each of the nominees
for election is currently a member of the Board of Directors. In the event that
any of the nominees should become unavailable to accept nomination or election,
it is intended that the proxyholders will vote to elect in his stead such other
person as the present Board of Directors may recommend. The present Board of
Directors has no reason to believe that any of the nominees named herein will be
unable to serve if elected to office.
In order to be elected as a director, a nominee need only receive a
plurality of the votes cast. As a result, the three nominees who receive the
largest number of votes will be elected as directors. Accordingly, shares not
voted for any reason respecting any one or more nominees will not be counted as
votes against such nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE FOLLOWING NOMINEES
---
FOR ELECTION AS DIRECTORS.
The following table sets forth as to each nominee for the term ending as of
the 2001 Annual Meeting of Stockholders, his or her name, age, principal
occupation during the last five years and the year he or she was first elected
as a director.
<TABLE>
<CAPTION>
DIRECTOR
OF THE
AGE ON PRINCIPAL OCCUPATION DURING COMPANY
Name DECEMBER 31, 1997 LAST FIVE YEARS SINCE
- - ---- ----------------- --------------------------- -------
<S> <C> <C> <C>
J. Charles Dunn 59 President and CEO of the 1975
Company and the Bank
J. Roy Harris 71 President of Davie Auto 1979
Parts Co., Inc., Rowan Auto
Parts, Inc. and Colonial
Estates, Inc.
Claude R. Horn, Jr. 64 President of Horn Oil Co. 1979
</TABLE>
8
<PAGE>
BOARD OF DIRECTORS OF THE BANK
The Bank currently has a nine-member board of directors which is composed
of the same persons who are now directors of the Company.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors met twelve times in the fiscal year ended
December 31, 1997. The Bank's board of directors has regular meetings once each
month, and held twelve regular and special meetings in the fiscal year ended
December 31, 1997. The Company's Board of Directors has also established one
standing committee--an Audit Committee. No director attended fewer than 75% of
the total number of Company or Bank board meetings, and committee meetings of
the Company's Board of Directors on which he served, during the year ended
December 31, 1997.
The Company's Audit Committee is composed of directors Bowles, Horn and
Bralley. This committee is responsible for retaining internal and independent
auditors, overseeing the adequacy of internal control, insuring compliance with
the Company's policies and procedures and with generally accepted accounting
principles. During the fiscal year ended December 31, 1997, the Audit Committee
met one time.
In addition, the full Board of Directors acts as a nominating committee
each year prior to the annual meeting of stockholders to nominate persons for
election to the Board of Directors. The Company's Bylaws provide that, in order
to be eligible for consideration at the annual meeting of stockholders, all
nominations of directors, other than those made by the Company's Board of
Directors, must be made in writing and must be delivered to the Secretary of the
Company not less than 30 days nor more than 50 days prior to the meeting at
which such nominations will be made; provided, however, if less than 21 days
notice of the meeting is given to stockholders, such nominations must be
delivered to the Secretary of the Company not later than the close of business
on the seventh day following the day on which the notice of meeting was mailed.
The Bank's board of directors has appointed five standing committees to
which certain responsibilities have been delegated-- the Loan Committee, the
Audit Committee, the Personnel Committee, the Executive Committee and the
Branching Committee. The Board of Directors and the Bank's board of directors
appoint other committees of its members to perform certain more limited
functions from time to time and have appointed committees to administer the
various employee and director benefit plans which have been established by the
Company and the Bank.
Director Compensation
Board Fees. Members of the Board of Directors receive no fees or
compensation for serving on the Board of Directors of the Company. However, all
members of the Company's Board of Directors are also directors of the Bank.
During fiscal year 1997, each member of the Bank's board of directors received
directors' fees of $1,000 per month, and an additional fee of $75 for each
special meeting attended.
Retirement Payment Agreements With Directors. The Bank has entered into a
retirement Payment Agreement with all of its directors. Under the agreement, the
Bank agrees to pay each director $1,000 per month for a period of 10 years upon
the director's attainment of age 65. If a director dies while serving as a
director of the Bank but before receiving all of his or her benefits under the
agreement, payments will be made to his or her designated beneficiary. If a
director becomes disabled while serving as a director, but prior to his normal
retirement date, the Bank will pay the benefits due under the agreement, either
in installments over the ten year period or in a lump sum payment. If a
director terminates his or her service to the Bank for reasons other than death
or disability, he or she shall be entitled at the normal retirement date to
receive only the vested portion of the benefits due under the agreement.
Vesting occurs according to a schedule contained in the agreement. If any
director's termination of service shall occur after a change in control of the
Bank, the director shall be 100% vested in the retirement benefits. As a
condition of the agreement, each director has agreed not to engage in activities
in competition with the Bank and to provide consulting services to the Bank
during the period that the retirement benefits are payable. The Bank has
purchased life insurance on the lives of its directors to fund its obligation
under this agreement. Total expense related to the agreements was approximately
$123,000 in the fiscal year ended December 31, 1997.
Stock Option Plan. See "Management Compensation--Stock Option Plan" for a
discussion of the stock options granted to members of the Board of Directors
under the Stone Street Bancorp, Inc.. Stock Option Plan (the "Stock Option
Plan").
9
<PAGE>
MANAGEMENT RECOGNITION PLAN. See "Management Compensation--Management
Recognition Plan" for a discussion of the restricted stock awards made to
members of the Board of Directors under the Mocksville Savings Bank, Inc. SSB
Management Recognition Plan (the "Management Recognition Plan " or "MRP").
EXECUTIVE OFFICERS. The following table sets forth certain information
with respect to the persons who are executive officers of either the Company or
the Bank or both.
<TABLE>
<CAPTION>
Age on Employed By
December 31, Positions and Occupations the Bank or the
Name 1997 During Last Five Years Company Since
- - ---- ------------ -------------------------------- ---------------
<S> <C> <C> <C>
J. Charles Dunn 59 President and Chief Executive 1968
Officer of the Company and the
Bank
Allen W. Carter 41 Senior Vice President of the 1984
Company and the Bank
Marjorie D. Foster 34 Vice President and Controller of 1986
the Company and the Bank
</TABLE>
Management Compensation
Summary Compensation Table. The executive officers of the Company are not
paid any cash compensation by the Company. However, the executive officers of
the Company are also executive officers of the Bank and receive cash
compensation from the Bank. The following table shows, for the fiscal years
ending December 31, 1997 and 1996, the cash compensation paid by the Bank, as
well as certain other compensation paid or accrued for those years, to (i) the
Chief Executive Officer of the Bank and (ii) all other executive officers of the
Bank whose cash compensation exceeded $100,000 in fiscal 1997, for services in
all capacities.
10
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation Awards
--------------------------------
Annual Compensation Securities Underlying
---------------------------------------- Restricted Options/Stock
Name and Other Annual Stock Appreciation Rights
Principal Position Year Salary Bonus Compensation/3/ Awards ("SARS") (in shares) All Other Compensation/1/
- - ------------------ ---- ------ ----- --------------- ---------- -------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Chief Executive Officer:
J. Charles Dunn 1997 $99,182 $93,531/2/ $20,327/4/ $374,099/5/ 45,626/45,626/6/ $158,575
1996 $95,800 0 0 0 0/0 $ 84,506
Senior Vice President:
Allen W. Carter 1997 $59,500 $56,093/7/ $12,195/4/ $224,475/8/ 27,376/27376/6/ $ 0
1996 $56,724 $ 0 $ 0 $ 0 0/0 $ 0
</TABLE>
- - ---------------------------------
1 Includes during 1997 and 1996, respectively, (a) directors' fees of $12,900
and $14,625, (b) $0 and $471 contributed to the Bank's 401(k) profit
sharing plan for Mr. Dunn, (c) $23,665 and $26,280 paid to Mr. Dunn under
the Bank's supplemental retirement plan, and (d) $122,010 and $43,130
contributed to the Bank's ESOP for Mr. Dunn. A total of 7,604 shares of
common Stock with a market value of $168,657 or $22.18 per share as of
December 31, 1997 were allocated to Mr. Dunn under the ESOP during fiscal
1997 and 1996.
2 The amount represents a stock award made to Mr. Dunn pursuant to the Bank's
Management Recognition Plan of 3,650 shares of Common Stock that vested
immediately upon grant. Such shares had an aggregate fair market value of
$93,531 on the date of grant. See footnote 5 below for more information on
the stock grant awards made to Mr. Dunn and "Management Recognition Plan"
for more information about the terms of the MRP.
3 Perquisites on other personal benefits, securities, or property for the
years ended December 31, 1997 and 1996, did not exceed the lesser of
$50,000 or 10% of total salary and bonus.
4 Represents cash dividends paid to the executive officer pursuant to the
Bank's Management Recognition Plan and Stock Option Plan.
5 This amount represents the fair market value on the date of grant of 14,599
unvested shares awarded to Mr. Dunn pursuant to the Bank's Management
Recognition Plan. On May 9, 1997 Mr. Dunn was awarded 18,249 shares of
Common Stock which had a market value of $25.625 per share on the date of
grant (May 9, 1997) and $22.18 per share as of December 31, 1997, or a
total value of $404,763 on December 31, 1997. These shares will vest 20% on
May 9, 1997 and 20% each year thereafter until all such shares are vested
on May 9, 2001. Twenty percent of the shares vested immediately (the values
of the vested shares $93,531) is included under the "Bonus" category
herein. Mr. Dunn has all rights of ownership with respect to such shares,
including the right to receive dividends.
11
<PAGE>
6 These options and stock appreciation rights (SARs) granted pursuant to the
Company's Stock Option Plan, entitle the executive officer to purchase, at
any time after vesting and before May 9, 2007, shares of the Common Stock
in exchange for an exercise price of $21.75 per share, which represents the
fair market value of the shares on the date of grant of $25.625 adjusted to
reflect the $4.00 special return of capital dividend paid to stockholders
during 1997. These shares began vesting at 20% on May 9, 1997 and will
continue to vest at 20% each year thereafter until all such options are
vested on May 9, 2001. Options become 100% vested upon death or
disability.
7 The amount represents a stock award made to Mr. Carter pursuant to the
Bank's Management Recognition Plan of 2,189 shares of common stock that
vested immediately upon grant. Such shares had an aggregate fair market
value of $56,093 on the date of grant. See footnote 8 below for more
information on the stock grant awards made to Mr. Carter and "Management
Recognition Plan" for more information about terms of the MRP.
8 This amount represents the fair market value on the date of grant of 8,760
unvested shares awarded to Mr. Carter pursuant to the Bank's Management
Recognition Plan. On May 9, 1997 Mr. Carter was awarded 10,949 shares of
Common Stock which had a market value of $25.625 per share on the date of
grant (May 9, 1997) and $22.18 per share as of December 31, 1997, or a
total value of $242,849 on December 31, 1997. These shares will vest at
20% on May 9, 1997 and 20% each year thereafter until all such shares are
vested on May 9, 2001. Twenty percent of the shares vested immediately
(the values of the vested shares $56,093) is included under the "Bonus"
category herein. Mr. Carter has all rights of ownership with respect to
such shares, including the right to receive dividends.
12
<PAGE>
Bonus Compensation. For many years, the Bank has paid bonuses to its
employees in amounts determined in the discretion of the Board of Directors.
The Bank anticipates that discretionary bonuses will continue to be paid to its
employees in the future.
Bank Supplemental Income Agreement. The Bank entered into a Supplemental
Income Agreement with Charles Dunn on March 1, 1994. The agreement provides
that the Bank will pay Mr. Dunn $20,000 per year for a continuous period of 15
years, commencing on the first day of the month following Mr. Dunn's 65th
birthday or if earlier, the first day of the month following Mr. Dunn's
retirement should he retire after reaching his 65th birthday. Such initial
annual income shall be increased 5% annually for each additional full year of
service to the Bank after the execution of the agreement, except there will be
no increase in benefits after age 65. If Mr. Dunn dies before receiving any or
all of the payments due under the agreement, the remaining payments will be made
to his designated beneficiary, or if none, to his estate. If Mr. Dunn becomes
disabled prior to his retirement form the Bank, the Bank will pay him the
benefits due under the agreement.
If Mr. Dunn terminates his employment before age 65, he will be entitled
to a portion of benefits due under the agreement according to a vesting
schedule. Mr. Dunn's benefits under the agreement will be fully vested after
December 31, 1998 or after a change in control of the Bank. As a condition of
the agreement, Mr. Dunn must be able to provide consulting services to the Bank
during the period the retirement payments are payable and must not engage in
activities in Davie County, North Carolina in competition with the Bank. The
Bank has purchased life insurance on the life of Mr. Dunn to fund its
obligations under the agreement.
Supplemental Retirement Plan. In 1990, the Bank established a supplemental
retirement plan for Mr. Dunn, under which he is paid an annual amount to be
invested in tax-exempt municipal bonds for his retirement. The amount of the
annual contribution is calculated by subtracting the current value of the
investment from a target amount, as adjusted for inflation, and dividing the
result by the number of years remaining in the 12-year term of the plan. This
amount is then increased to reimburse Mr. Dunn for the additional federal and
state income taxes that result from the payment.
401(k) Profit Sharing Plan. The Bank has established a contributory
savings plan for its employees, which meets the requirements of section 401(k)
of the Code. All employees who have completed one year of service may elect to
contribute a percentage of their compensation to the plan each year, subject to
certain maximums imposed by federal law. The Bank does not currently provide
any matching of employee contributions.
Participants are fully vested in amounts they contribute to the plan.
Participants are fully vested in amounts contributed to the plan on their behalf
by the Bank as employer matching contributions and as profit sharing
contributions after seven years of service as follows: one year, 0%; two years,
20%; three years, 40%; four years, 60%; five years, 80%; six years or more,
100%.
Benefits under the plan are payable in the event of the participant's
retirement, death, disability or termination of employment. Normal retirement
age under the plan is 65 years of age.
Other Benefits. The Bank provides its employees with group medical,
cancer, dental, life and disability insurance benefits. Employees are also
provided with vacation, holiday and sick leave.
Employee Agreements. The Bank has entered into an employment agreement
with J. Charles Dunn in order to establish his duties and compensation and
provide for his continued employment with the Bank. The agreement provides for
an initial term of employment of three years. Commencing on the first
anniversary date and continuing on each anniversary date thereafter, following a
performance evaluation of the employee, the agreement may be extended for an
additional year so that the remaining term shall be three years unless written
notice of non-renewal is given by the Board of Directors. The agreement also
provides that base salary shall be reviewed by the Board of Directors not less
often than annually. Under the terms of the agreement, Mr. Dunn's annual base
salary was $99,182 for 1997. In the event of a change in control (as defined
below), the employees base salary shall be increased by at least 6% annually.
In addition, the employment agreement provides for profitability and
discretionary bonuses and participation in all other pension, profit-sharing or
retirement plans maintained by the Bank or by the Company for employees of the
Bank, as well as fringe
13
<PAGE>
benefits normally associated with such employee's office The employment
agreement provides that it may be terminated by the Bank for cause, as defined
in the agreement, and that it may otherwise be terminated by the Bank (subject
to vested rights) or by the employee.
The employment agreement provides that the nature of Mr. Dunn's
compensation, duties or benefits cannot be diminished following a change in
control of the Bank or the Company. For purposes of the employment agreement, a
change in control generally will occur if (i) after the effective date of the
employment agreement, any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the Exchange Act) directly or indirectly, acquires beneficial
ownership of voting stock, or acquires irrevocable proxies or any combination of
voting stock and irrevocable proxies, representing 25% or more of any class of
voting securities of either the Company or the Bank, or acquires in any manner
control of the election or a majority of the directors of either the Company or
the Bank, (ii) either the Company or the Bank consolidates or merges with or
into another corporation, association or entity, or is otherwise reorganized,
where neither the Company nor the Bank is the surviving corporation in such
transaction, or (iii) all or substantially all of the assets of either the
Company or the Bank are sold or otherwise transferred to, or are acquired by,
any other entity or group.
Special Termination Agreements. In order to assure the continued
employment of Allen W. Carter and Marjorie D. Foster, the Bank entered into
special termination agreements with each of them to provide benefits in the
event of a change in control of the Bank or the Company. Such agreements are
intended to ensure that the Bank will be able to maintain a stable and competent
employee base. The continued success of the Bank depends, to a significant
degree, on the skill and competence of its employees.
Each special termination agreement provides for payment to the employee
only (i) in the event of a change in control of the Company or the Bank followed
by termination of the employee's employment within 24 months by the Bank for
other than "cause," as such term is defined in the agreement or (ii) in the
event the nature of the employee's compensation, duties or benefits are
diminished within 24 months following a change in control of the Bank or the
Company and the employee terminates his employment within twelve months
thereafter. In the event of such a termination of employment, the employee is
entitled to payment in an amount equal to two times his or her average annual
compensation for income tax purposes for the most recent five tax years prior
to the change in control, payable in a lump sum or in equal monthly payments.
Based on Mr. Carter's and Ms. Foster's annual compensation for income tax
purposes for the most recent five tax years, Mr. Carter and Ms. Foster would be
paid $135,448 and $101,550, respectively, under the agreements in the event of
their termination after a change in control. The initial term of each
agreement is for a period commencing March 29,1996, and ending three calendar
years later. For purposes of the special termination agreement, "change in
control" has the same meaning as contained in the employment agreement with Mr.
Dunn. See "--Employment Agreement".
Employee Stock Ownership Plan. The Bank has established an Employee Stock
Ownership Plan (the "ESOP") for its eligible employees. Employees with one year
of service with the Bank are eligible to participate. The ESOP borrowed funds
from the Company and used the funds to purchase 8% of the shares of Common
Stock issued in connection with the Bank's conversion from a North Carolina-
chartered mutual savings bank to a North Carolina-chartered stock savings bank
(the "Conversion"), or 146,004 shares.
Collateral for the Company's loan to the ESOP is the Common Stock purchased
by the ESOP. It is expected that the loan will be repaid within fifteen years
principally from the Bank's discretionary contributions to the ESOP. Dividends,
if any, paid on shares held by the ESOP may be and have been used to reduce the
loan. Dividends of $585,220 which includes a special dividend of $4.00 per
share totaling $521,600 were used to pay down the loan in the fiscal year ended
December 31, 1997. The loan is not guaranteed by the Bank. Shares purchased by
the ESOP and pledged as security f or the loan are held in a suspense account
for allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account in
an amount proportional to the repayment of the ESOP loan are allocated among
ESOP participants on the basis of relative compensation in the year of
allocation. Benefits will vest in full upon five years of service with credit
given for years of service prior to the conversion of the Bank from mutual to
stock form of ownership. Benefits immediately vest upon death or disability.
14
<PAGE>
The Bank's contributions to the ESOP are not fixed, so benefits payable
under the ESOP cannot be estimated. Principal and interest payments totaling
$764,731 were made on the loan from the Company to the ESOP in the fiscal
year ended December 31, 1997. During the same period, 23,617 shares, with a
market value of $523,825 ($22.18 per share) at December 31, 1997, were allocated
to participants in the ESOP during the same period.
The Bank has established a committee of the Board of Directors to
administer the ESOP. The Trustees for the ESOP are Messers Hall, Harris and
Martin. The ESOP committee may instruct the trustees regarding investment of
funds contributed to the ESOP. Participating employees shall instruct the
trustees as to the voting of all shares allocated to their respective accounts
and held in the ESOP. The unallocated shares held in the suspense account, and
all allocated shares for which voting instructions are not received, will be
voted by the trustees in their discretion subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
Stock Option Plan. The Stock Option Plan is administered by a committee of
the Company's Board of Directors (the "Stock Option Plan Committee"). The
Company has reserved 182,050 shares of Common Stock for issuance upon the
exercise of options which have been granted under the Stock Option Plan. All
directors, officers and employees of the Company, the Bank, and any of the
Bank's subsidiaries are eligible for participation in the Stock Option Plan.
The Stock Option Plan committee, in its sole discretion, determines who will
participate in the Stock Option Plan. Options to purchase 172,244 shares of the
Common Stock were granted during fiscal year 1997 and are outstanding at
December 31, 1997.
Options granted under the Plan were granted in tandem with stock
appreciation rights, pursuant to which optionees have the right to surrender
exercisable options in exchange for payment by the Company of an amount equal to
the excess of the market value of shares of Common Stock subject to the
surrendered options over the exercise price of the surrender options. At the
discretion of the Stock Option Plan Committee, this payment may be made in cash
or in shares of Common Stock or partly in cash and partly in Common Stock.
Stock appreciation rights terminate upon the exercise of the options to which
they are attached. Stock appreciation rights are subject to the same vesting
and termination provisions as are applicable to the stock options to which they
are attached.
In the event of a stock split, reverse stock split or stock dividend, the
number of shares of Common Stock under the Stock Option Plan, the number of
shares to which any option relates and the exercise price per share under any
option shall be adjusted to reflect such increase or decrease in the total
number of shares of Common Stock outstanding. In addition, in the event the
Company declares a special cash dividend or return of capital, the per share
exercise price of all previously granted options which remain unexercised as of
the date of such declaration may be adjusted to give effect to such special cash
dividend or return of capital.
15
<PAGE>
The following table provides certain information with respect to the grant
of stock options to Mr. Dunn made during the year ended December 31, 1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at Assumed
Annual Rates for Stock Price
Individual Grants Appreciation for Option Term
--------------------------------------------------------------------------- --------------------------------------
Number of Securities % of Total Exercise
Underlying Options/SARs Granted to Or Base Expiration 5% 10%
Name Granted/1/ Employees in Fiscal Year Price/2/ Date Appreciation Appreciation/4/
- - ---- -------------------------- ------------------------ --------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
J. Charles Dunn 45,626/45,626 38.83%/38.83% $21.75 May 9, 2007 $624,164 $1,581,397
Allen W. Carter 27,376/27,376 23.30%/23.30% $21.75 May 9, 2007 $374,504 $ 948,852
</TABLE>
- - -----------------------------
1 20% of the options granted vested on May 9, 1997 and 20% each
year thereafter until all such options are vested on May 9, 2001.
2 Represents the closing market price per share of the underlying securities at
the date of grant (May 9, 1997) of $25.625 adjusted to $21.75 as a result of
the $4.00 per share special return of capital dividend.
3 The dollar values shown represent the potential realizable value of the grant
of options at an assumed 5% annualized appreciation rate in the price of the
Common Stock. The potential realizable value is calculated under the
following formula: ((A x B) - C) x D, where A = $21.75, the per share market
price at the time of the grant; B - 1.6289, the assumed rate of stock price
appreciation (5%) compounded annually over the 10-year term of the option;
C -$21.75, the per share exercise price of the option; and D = 45,626 for Mr.
Dunn and 27,376 for Mr. Carter, the number of securities underlying the grant
at year end 1997.
4 The dollar values shown represent the potential realizable value of the grant
of options at an assumed 10% annualized appreciation rate in the price of the
Common Stock. The potential realizable value is calculated under the
following formula: ((A x B) - C) x D, where A = $21.75 the per share market
price at the time of the grant; B = 2.5937, the assumed rate of stock priced
appreciation (10%) compounded annually over the 10-year term of the option; C
= $21.75, the per share exercise price of the option; and D - 45,626 for Mr.
Dunn and 27,376 for Mr. Carter, the number of securities underlying the grant
at year end 1997.
No options were exercised by Mr. Dunn or Mr. Carter during the fiscal year
ended December 31, 1997
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercisable in-the-Money
Shares Acquired Value Options/SARS at Options/SARS at
Name On Exercise Realized Fiscal Year End/1/ Fiscal Year End/2/
- - ---- --------------- -------- ---------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
J. Charles Dunn 0 0 9,125/9,125 36,501/36,501 $3,924/$3,924 $15,695/$15,695
Allen W. Carter 0 0 5,475/5,475 21,901/21,901 $2,354/$2,354 $ 9,417/$ 9,417
- - ------------------------
</TABLE>
16
<PAGE>
1 All stock options were granted as of May 9, 1997. Twenty percent of
stock options vested in the year ended December 31, 1997.
2 The exercise price of the stock options is $21.75. On December 31,
1997, the closing market price per share for the Common Stock as
reported on the American Stock Exchange was $22.18.
Although both incentive and non-qualified options have been granted
under the Stock Option Plan, all of the stock options granted to employees are
intended to be incentive stock options. In the case of an incentive stock
option, an optionee is not deemed to have received taxable income upon the grant
or exercise of the stock option, provided the shares are not disposed of by the
optionee for at least one year after the date of exercise and two years after
the date of grant. No compensation deduction may be taken by the Company at the
time of the grant or exercise of an incentive option, assuming these holding
periods are satisfied. In the case of a non-qualified stock option, an optionee
is deemed to receive ordinary income upon exercise of the stock option in an
amount equal to the amount by which the exercise price is exceeded by the fair
market value of the stock. The amount of any ordinary income deemed to be
received by the optionee upon the exercise of a non-qualified stock option is a
deductible expense of the Company for tax purposes.
No cash consideration was paid for the options. Options have an
option exercise price of $21.75, the fair market value of the Common Stock on
the date of grant (May 9, 1997). The exercise price may be paid in cash or by
delivery of shares of Common Stock with a market value equal to the exercise
price. Based upon the closing market price per share paid on March 2, 1998, the
per share market value of the Common Stock underlying the options would be
$20.375. Options granted under the Stock Option Plan have a term of ten years,
are not transferable except upon death and continue to be exercisable upon
retirement.
The Stock Option Plan places certain limitations on termination and
amendment of the Stock Option Plan. It provides that the Stock Option Plan
cannot be terminated upon an acquisition or merger of the Company or the Bank
unless the acquiror provides for an equivalent benefit for all then current
option holders. It provides that the Stock Option Plan may be amended by the
Board of Directors of the Company at any time. It states, however, that
stockholder approval of certain amendments may be necessary in order for the
Stock Option Plan to satisfy the requirements of SEC Rule 16b-3. It provides
that certain Stock Option Plan provisions, including the number of options to be
initially granted, may not be amended more than once every six months, except
under very limited circumstances.
Options granted under the Stock Option Plan have a vesting schedule
which provides that 20% of the options granted vest on the first anniversary of
the date of grant, and 20% will vest on each subsequent anniversary date, so
that the options would be completely vested on the fifth anniversary of the date
of grant. Options become 100% vested upon death or disability, if earlier.
Management Recognition Plan. On April 15, 1997, the stockholders of
the Company approved the Stone Street Bancorp, Inc. Management Recognition Plan.
Effective May 9, 1997, restricted stock awards of 68,896 shares of the Common
Stock were made to 23 directors, officers and employees of the Bank.
The MRP serves as a means of providing the directors, officers, and
employees with an ownership interest in the Company in a manner designed to
encourage such persons to continue their service to the Company and the Bank and
to provide performance incentives. The MRP is administered by a committee of
the Bank's Board of directors (the "MRP Committee"). All directors, officers,
and employees of the Company and the Bank and its wholly owned subsidiary are
eligible for participation in the MRP. Except with regard to the initial awards
made on May 9, 1997, the MRP Committee, in its sole discretion, will determine
who will participate in the MRP. Initially, 68,896 of the shares authorized
under the MRP were allocated pursuant to the Plan leaving 4,106 shares
unallocated at December 31, 1997. Once the remaining 4,106 shares are
allocated, only forfeited shares are subject to allocation later, unless the
plan is amended.
The shares awarded under the MRP were issued from authorized but
unissued shares of Common Stock. Shares issued under the MRP are issued at no
cost to recipients.
17
<PAGE>
Recipients are entitled to vote MRP shares and receive all dividends
and cash distributions with respect thereto. The shares granted pursuant to the
MRP vest at a rate of 20% on the first anniversary of the effective date of the
award, and 20 % on each subsequent anniversary date, so that the shares would be
completely vested at the end of five years after the date of award and in
addition; would immediately vest upon the end of five years after the date of
award. Awards of Common stock under the MRP would immediately vest upon the
disability or death of a recipient. The MRP cannot be terminated upon an
acquisition or merger of the Company or the Bank unless the acquiror provides
for an equivalent benefit for all then current MRP participants. The awards are
not forfeitable upon vesting.
The MRP may be amended by the Board of Directors at any time.
However, stockholder approval of certain amendments may be necessary in order
for the MRP to satisfy the requirements of Rule 16b-3 promulgated under the
Exchange Act. Certain MRP provisions, including the number of shares of Common
Stock to be awarded initially, may not be amended more than once every six
months, except under very limited circumstances.
Compensation Committee Interlocks and Insider Participation. The
Personnel Committee of the Bank's board of directors serves the role of the
compensation committee. The Personnel committee determines the compensation of
the executive officers and the Bank's other employees. During the fiscal year
ended December 31, 1997, the Personnel Committee consisted of directors Dunn,
Hall, Harris and Martin.
Report Of Compensation Committee Of Executive Compensation. It is
the responsibility of the Bank's Personnel Committee which is comprised of
Robert B. Hall, J. Roy Harris, George W. Martin and J. Charles Dunn to review
and evaluate performance of the Bank's executive officers. The salary of each
executive officer, including Mr. Dunn, the Chief Executive Officer, is
determined based upon the executive officer's contributions to the Bank's
overall profitability, maintenance of regulatory compliance standards,
professional leadership, and management effectiveness in meeting the needs of
day to day operations. In addition, the executive officers of the Bank are
eligible to receive discretionary bonuses based on profit--as are all other
employees--declared by the Bank's board of directors based upon after-tax net
income of the Bank. Mr. Dunn does not participate in any deliberations of the
Personnel Committee concerning his compensation as an executive officer.
Performance Graph
The following graph compares the Company's cumulative shareholder
return on the Common Stock with a AMEX (U.S. companies) index and with a savings
institution peer group whose stock is quoted on AMEX. The graph was prepared
using data through December 31, 1997
18
<PAGE>
[LETTERHEAD APPEARS HERE]
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
Stone Street Bancorp, Inc.
Prepared by the Center for Research in Security Prices
Produced on 03/14/98 including data to 12/31/97
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Stone Street Bancorp, Inc. 119.3 154.9
AMEX Stock Market (US Companies) 68.9 81.0 75.6 97.2 98.8 123.5
AMEX Stocks (SIC 6030-6039 US Companies)
Savings Institutions 37.2 69.4 53.5 89.6 105.9 179.3
Notes:
</TABLE>
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 04/01/96.
19
<PAGE>
Certain Indebtedness and Transactions of Management
The Bank makes loans to executive officers and directors of the Bank in the
ordinary course of its business. These loans are made on the same terms,
including interest rates and collateral, as those then prevailing for comparable
transactions with nonaffiliated persons, and do not involve more than the normal
risk of collectibility or present any other unfavorable features. Applicable
regulations prohibit the Bank from making loans to executive officers and
directors of the Bank on terms more favorable than could be obtained by persons
not affiliated with the Bank. The Bank's policy concerning loans to executive
officers and directors complies with such regulations.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
Weir Smith Jones Miller & Elliott, CPA PA was the Company's independent
auditor for the year ended December 31, 1997 and has been selected as the
Company's independent auditor for the year ending December 31, 1998. Such
selection is being submitted to the Company's stockholders for ratification.
Representatives of Weir Smith Jones Miller & Elliott, CPA PA are expected to
attend the Meeting and will be afforded an opportunity to make a statement, if
they so desire, and to respond to appropriate questions form stockholders.
The Board of Directors recommends that the stockholders vote FOR ratification
---
of the selection of Weir Smith Jones Miller & Elliott, CPA PA as independent
auditor for the Company for the 1998 fiscal year.
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
It is presently anticipated that the 1999 Annual meeting of Stockholders will
be held in April, 1999. In order for stockholder proposals to be included in
the proxy material for that meeting, such proposals must be received by the
Secretary of the Company at the Company's principal executive office not later
than November 27, 1998, and meet all other applicable requirements for inclusion
therein.
OTHER MATTERS
Management knows of no other matters to be presented for consideration at the
Meeting or any adjournments thereof. If any other matters shall properly come
before the Meeting, it is intended that the proxyholders named in the enclosed
form of proxy will vote the shares represented thereby in accordance with their
judgment, pursuant to the discretionary authority granted therein.
MISCELLANEOUS
The Annual Report of the Company for the year ended December 31, 1997, which
includes financial statements audited and reported upon by the Company's
independent auditor, is being mailed along with this Proxy Statement; however,
it is not intended that the Annual Report be deemed a part of this Proxy
Statement or a solicitation of proxies.
20
<PAGE>
THE FORM 10-K FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, WILL BE
PROVIDED FREE OF CHARGE UPON WRITTEN REQUEST DIRECTED TO: STONE STREET BANCORP,
INC., 232 SOUTH MAIN STREET, MOCKSVILLE, NC 27028, ATTENTION: J. CHARLES DUNN.
By the Order of the Board of Directors
/s/ Sandra M. Hadley
Sandra M. Hadley
Secretary
Mocksville, North Carolina
March 27, 1998
21
<PAGE>
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE STONE STREET BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1998
5:00 p.m.
The undersigned hereby appoints the official proxy committee consisting of the
Board of Directors of Stone Street Bancorp, Inc. (the "Company"), to act as
attorney and proxy for the undersigned, and to vote all shares of Common Stock
of the Company which the undersigned is entitled to vote only at the Annual
Meeting of Stockholders, to be held at the Davie County Public Libray, 371 North
Main Street, Mocksville, North Carolina 27028, on April 21, 1998, at 5:00 p.m.
and at any and all adjournments thereof, as follows:
1. The approval of the election of the following named directors:
With- For All
For hold Except
[_] [_] [_]
(a) J. Charles Dunn, who will serve as a director of the Company until the 2001
Annual Meeting of Stockholders or until his successor is duly elected and
qualifies;
(b) J. Roy Harris who will serve as a director of the Company until the 2001
Annual Meeting of Stockholders or until his successor is duly elected and
qualifies; and
(c) Claude R. Horn, Jr. who will serve as a director of the Company until the
2001 Annual Meeting of Stockholders or until his successor is duly elected
and qualifies;
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- - --------------------------------------------------------------------------------
For Against Abstain
2. The ratification of Weir Smith Jones Miller &
Elliott, Certified Public Accountants, as the
independent auditors of the Company for
the year ending December 31, 1998. [_] [_] [_]
PLEASE CHECK BOX IF YOU PLAN TO ATTEND
THE ANNUAL MEETING. [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
_____________________
Please be sure to sign and date Date
this Proxy in the box below.
_______________________________________________________________
___Stockholder sign above_______Co-holder (if any) sign above__
. Detach above card, sign, date and mail in postage paid envelope provided .
STONE STREET BANCORP, INC.
- - --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
If no instructions are given, the Proxy will be voted for the nominees
---
for election to the Board of Directors named in this Revocable Proxy and for the
other proposal described above. If instructions are given with respect to some
but not all proposals, such instructions as are given will be followed and the
Proxy will be voted for the proposals on which no instructions are given. If
---
any other business is presented at the Annual Meeting, this Proxy will be voted
as determined, in its discretion, by the Board of Directors of Stone Street
Bancorp, Inc. At the present time, the Board of Directors knows of no other
matters to be presented at the Annual Meeting.
The above signed acknowledges receipt from the Company, prior to the
execution of this Proxy, of a Notice of the Meeting and a Proxy Statement dated
March 27, 1998.
Please sign exactly as your name appears on this proxy card. When signing
as attorney, executor, administrator, trustee or guardian, please give your
full title. If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- - --------------------------------------------------------------------------------
