Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
MITCHELL BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
MITCHELL BANCORP, INC.
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(Name of Person(s) Filing Proxy Statement)
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:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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[ ] 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:
N/A
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(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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PAGE
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December 16, 1996
Dear Shareholder:
You are cordially invited to attend the First Annual Meeting of
Shareholders of Mitchell Bancorp, Inc. to be held at the Pine Bridge
Conference Center located at Pine Bridge Avenue, Spruce Pine, North Carolina,
on Wednesday, January 29, 1997, at 2:00 p.m., local time. Effective July 12,
1996, the Corporation became the holding company for Mitchell Savings Bank,
Inc., SSB.
The Notice of First Annual Meeting of Shareholders and Proxy Statement
appearing on the following pages describe the formal business to be
transacted at the meeting. During the meeting, we will also report on the
operations of the Corporation. Directors and officers of the Corporation, as
well as a representative of Crisp Hughes & Co., L.L.P., the Corporation's
independent auditors, will be present to respond to appropriate questions of
shareholders.
It is important that your shares are represented at this meeting,
whether or not you attend the meeting in person and regardless of the number
of shares you own. To make sure your shares are represented, we urge you to
complete and mail the enclosed proxy card. If you attend the meeting, you
may vote in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/Edward Ballew, Jr.
Edward Ballew, Jr.
Executive Vice President and Chief
Executive Officer
PAGE
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MITCHELL BANCORP, INC.
210 Oak Avenue
Spruce Pine, North Carolina 28777
(704) 765-7324
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NOTICE OF FIRST ANNUAL MEETING OF SHAREHOLDERS
To Be Held On January 29, 1997
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NOTICE IS HEREBY GIVEN that the First Annual Meeting of Shareholders of
Mitchell Bancorp, Inc. ("Corporation") will be held at the Pine Bridge
Conference Center located at Pine Bridge Avenue, Spruce Pine, North Carolina,
on Wednesday, January 29, 1997, at 2:00 p.m., local time, for the following
purposes:
(1) To elect five directors to serve until the 1997 Annual
Meeting of Shareholders;
(2) To consider and vote upon a proposal to adopt the
Mitchell Bancorp, Inc. 1996 Stock Option Plan;
(3) To consider and vote upon a proposal to adopt the
Mitchell Bancorp, Inc. 1996 Management Recognition and
Development Plan; and
(4) To consider and act upon such other matters as may
properly come before the meeting or any adjournments
thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Any action may be taken on the foregoing proposals at the meeting on the
date specified above or on any date or dates to which, by original or later
adjournment, the meeting may be adjourned. Shareholders of record at the
close of business on December 9, 1996 are entitled to notice of and to vote
at the meeting and any adjournments or postponements thereof.
You are requested to complete and sign the enclosed form of proxy, which
is solicited by the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the meeting and
vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Emma Lee M. Wilson
EMMA LEE M. WILSON
SECRETARY
Spruce Pine, North Carolina
December 16, 1996
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
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PROXY STATEMENT
OF
MITCHELL BANCORP, INC.
210 OAK AVENUE
SPRUCE PINE, NORTH CAROLINA 28777
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FIRST ANNUAL MEETING OF SHAREHOLDERS
JANUARY 29, 1997
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mitchell Bancorp, Inc. ("Corporation"),
the holding company for Mitchell Savings Bank, Inc., SSB ("Savings Bank"), to
be used at the First Annual Meeting of Shareholders of the Corporation
("Annual Meeting"). The Annual Meeting will be held at the Pine Bridge
Conference Center located at Pine Bridge Avenue, Spruce Pine, North Carolina
on Wednesday, January 29, 1997, at 2:00 p.m., local time. This Proxy
Statement and the enclosed proxy card are being first mailed to shareholders
on or about December 16, 1996.
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VOTING AND PROXY PROCEDURE
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Shareholders of record as of the close of business on December 9, 1996
are entitled to one vote for each share of common stock ("Common Stock") of
the Corporation then held. As of December 9, 1996, the Corporation had
979,897 shares of Common Stock issued and outstanding. The presence, in
person or by proxy, of at least a majority of the total number of outstanding
shares of Common Stock entitled to vote is necessary to constitute a quorum
at the Annual Meeting. Abstentions will be counted as shares present and
entitled to vote at the Annual Meeting for purposes of determining the
existence of a quorum. Broker non-votes will not be considered shares
present and will not be included in determining whether a quorum is present.
The Board of Directors solicits proxies so that each shareholder has the
opportunity to vote on the proposals to be considered at the Annual Meeting.
When a proxy card is returned properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. Where no instructions are indicated, proxies will be voted FOR
the nominees for directors set forth below, FOR adoption of the Mitchell
Bancorp, Inc. 1996 Stock Option Plan and FOR adoption of the Mitchell
Bancorp, Inc. 1996 Management Recognition and Development Plan. If a
shareholder attends the Annual Meeting, he or she may vote by ballot. If a
shareholder does not return a signed proxy card or does not attend the Annual
Meeting and vote in person, his or her shares will not be voted.
Shareholders who execute proxies retain the right to revoke them at any
time. Proxies may be revoked by written notice delivered in person or mailed
to the Secretary of the Corporation or by filing a later proxy prior to a
vote being taken on a particular proposal at the Annual Meeting. Attendance
at the Annual Meeting will not automatically revoke a proxy, but a
shareholder in attendance may request a ballot and vote in person, thereby
revoking a prior granted proxy.
The five directors to be elected at the Annual Meeting will be elected
by a plurality of the votes cast by shareholders present in person or by
proxy and entitled to vote. Shareholders are not permitted to cumulate their
votes for the election of directors. With respect to the election of
directors, votes may be cast for or withheld from each nominee. Votes that
are withheld and broker non-votes will have no effect on the outcome of the
election because directors will be elected by a plurality of votes cast.
With respect to the other proposals to be voted upon, shareholders may vote
for a proposal, against a proposal or may abstain from voting. Adoption of
the 1996 Stock Option Plan and the 1996 Management Recognition and
Development Plan will require the affirmative vote of a majority of the
outstanding shares. Thus, abstentions and broker non-votes will have the
same effect as a vote against adoption of the 1996 Stock Option Plan and the
1996 Management Recognition and Development Plan.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Persons and groups who beneficially own in excess of 5% of the
Corporation's Common Stock are required to file certain reports disclosing
such ownership pursuant to the Securities Exchange Act of 1934, as amended
("Exchange Act"). Based on such reports, the following table sets forth, as
of December 9, 1996, certain information as to those persons who were
beneficial owners of more than 5% of the outstanding shares of Common Stock.
Management knows of no persons other than those set forth below who
beneficially owned more than 5% of the outstanding shares of Common Stock at
December 9, 1996. The following table also sets forth, as of December 9,
1996, information as to the shares of Common Stock beneficially owned by each
director, by the named executive officers of the Corporation, and by all
executive officers and directors of the Corporation as a group.
Number of Shares Percent of Shares
Name Beneficially Owned (1) Outstanding
- --------- ----------------------- -----------------
Beneficial Owners of
More Than 5%
Mitchell Savings Bank, Inc.,
SSB Employee Stock Ownership
Plan Trust 78,391 8.00%
Jerome H. and Susan
B. Davis (2) 97,880 9.98%
Great Meadows, Inc. (3)
Samuel L. Phillips
Van F. Phillips
G. Byron Phillips
Gina A. Phillips 97,650 9.97%
Directors
Calvin F. Hall 12,190 1.2%
Emma Lee M. Wilson 11,000 1.1%
Baxter D. Johnson 2,000 *
Lloyd Hise, Jr. 5,005 *
Named Executive Officers(4)
Edward Ballew, Jr. 12,190 1.2%
All Executive Officers and 42,385 4.3%
Directors as a Group (5
persons)
_______________
* Less than 1 percent of shares outstanding.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
deemed to be the beneficial owner, for purposes of this table, of any
shares of Common Stock if he or she has voting or investment power with
respect to such security. The table includes shares owned by spouses,
other immediate family members in trust, shares held in retirement
accounts or funds for the benefit of the named individuals, and other
forms of ownership, over which shares the persons named in the table
may possess voting and/or investment power.
(2) This information is based on a Schedule 13D filed with the Securities
and Exchange Commission ("SEC") on July 19, 1996, as subsequently
amended on November 19, 1996.
(3) This information is based on a Schedule 13D filed with the SEC on
August 19, 1996.
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(4) Under SEC regulation, the term "named executive officer" is defined to
include the chief executive officer, regardless of compensation level,
and the four most highly compensated executive officers, other than the
chief executive officer, whose total annual salary and bonus for the
last completed fiscal year exceeded $100,000. Edward Ballew, Jr. was
the Corporation's only "named executive officer" for the fiscal year
ended June 30, 1996. He is also a director of the Corporation.
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PROPOSAL I -- ELECTION OF DIRECTORS
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The Corporation's Board of Directors consists of five members. Pursuant
to the Corporation's Bylaws, all five of the Corporation's Directors are
standing for election at the Annual Meeting. The following table sets forth
the names of the Board of Directors' nominees for election as directors. All
nominees are current members of the Board of Directors.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend or the Board of Directors may adopt a resolution to
amend the Bylaws and reduce the size of the Board. At this time the Board of
Directors knows of no reason why any nominee might be unavailable to serve.
The Board of Directors recommends a vote "FOR" each of the nominees
named in the following table as directors of the Corporation.
Year First
Elected Term to
Name Age (1) Director (2) Expire (3)
- ----------------- ------- ------------ ----------
Calvin F. Hall 67 1974 1997
Edward Ballew, Jr. 74 1948 1997
Emma Lee M. Wilson 60 1983 1997
Baxter D. Johnson 86 1952 1997
Lloyd Hise, Jr. 51 1988 1997
______________
(1) As of June 30, 1996.
(2) Includes prior service on the Board of Directors of the
Savings Bank.
(3) Assuming the individual is re-elected.
The present principal occupation and other business experience during
the last five years of each nominee for election and each director continuing
in office is set forth below:
Calvin F. Hall is President and an agent of Fortner Insurance Agency,
Inc., with which he has been affiliated with for over 37 years. Mr. Hall was
appointed President of the Savings Bank in January 1995 to succeed the
retiring President S.W. Enloe. Mr. Hall is a member of the Spruce Pine
Rotary Club.
Edward Ballew, Jr. has been employed as an executive officer by the
Savings Bank since 1947 and serves as its Executive Vice President and Chief
Executive Officer.
Emma Lee M. Wilson has been employed by the Savings Bank since 1958 and
has served in various capacities during that time. Mrs. Wilson is the
Assistant Managing Officer, Secretary and Treasurer of the Savings Bank.
Baxter D. Johnson has been the owner of Johnson Electric, Spruce Pine,
North Carolina, for 66 years.
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<PAGE>
Lloyd Hise, Jr. has been a practicing attorney in Spruce Pine, North
Carolina since 1969.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Boards of Directors of the Corporation and the Savings Bank conduct
their business through meetings of the Boards and through their committees.
During the fiscal year ended June 30, 1996, the Board of Directors of the
Corporation held one meeting in connection with its initial organization and
three subsequent meetings, and the Board of Directors of the Savings Bank
held 18 meetings. No director of the Corporation or the Savings Bank
attended fewer than 75% of the total meetings of the Boards and committees on
which such person served during this period.
The Board of Directors of the Corporation has an Audit Committee
consisting of Directors Hise, Hall and Johnson, which is responsible for
meeting with the Corporation's outside auditor to discuss the results of the
annual audit and any related matters. The Audit Committee is also
responsible for employee compliance issues. The Board also receives and
reviews the reports and findings and other information presented to them by
the Corporation's outside auditor. The Audit Committee meets as needed and,
including meetings of the Savings Bank's Audit Committee prior to the
completion of the Savings Bank's mutual to stock conversion, met one time
during the fiscal year ended June 30, 1996.
The Loan Committee, consisting of Messrs. Hall, Ballew and Mrs. Wilson,
meets as needed and is responsible for reviewing and approving the Savings
Bank's loans. The Loan Committee met 48 times during the fiscal year ended
June 30, 1996.
The Compensation Committee, consisting of Directors Ballew, Hise and
Wilson, makes recommendations to the full Board of Directors concerning
employee compensation. The Compensation Committee meets as needed and met
one time during the fiscal year ended June 30, 1996.
The Board of Directors of the Corporation acts as a nominating committee
for selecting the nominees for election as directors. During the fiscal year
ended June 30, 1996, the Board of Directors met once in its capacity as
nominating committee to select nominees for election at the Annual Meeting.
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DIRECTORS' COMPENSATION
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Board Fees
Except for the President who receives a monthly fee of $1,000, directors
received a fee of $500 per month during the year ended June 30, 1996.
Director fees totalled $48,000 for the year ended June 30, 1996. Directors
do not receive any additional compensation for serving on committees of the
Board of Directors. No separate fees are paid for service on the Board of
Directors of the Corporation.
Directors' Retirement Plan
The Savings Bank established a retirement plan for incumbent directors
in 1994. The intent of the plan is to compensate directors for their past
services to the Savings Bank and to provide incentives for continued service
to the Savings Bank to ensure its continued success and to provide management
of the Savings Bank with the benefits of the expertise and experience of its
directors. Normal retirement age under the plan is age 62. The plan
provides a normal retirement benefit equal to $500 per month for a period of
120 months following retirement. However, the Savings Bank may elect to pay
the normal retirement benefit in a lump sum at any time following a
director's retirement. The plan also provides for the payment of benefits
equal to the normal retirement benefit in
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the case of a director who dies or becomes disabled prior to retirement.
Directors who participate in the plan are subject to a noncompetition
restriction during the benefit payment period. In addition, a retired
director is obligated to provide consulting services to the Savings Bank
during such period. Plan expenses totalled $12,000 for the fiscal year ended
June 30, 1996.
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EXECUTIVE COMPENSATION
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Summary Compensation Table
Annual Compensation (1)
----------------------------------
Other
Annual
Name and Compen-
Position Year Salary($)(2) Bonus($) sation($)(3)
- --------------------- ----- ------------- --------- -------
Edward Ballew, Jr. 1996 $ 74,000 $ 6,200 --
Executive Vice President 1995 68,250 8,100 --
and Chief Executive Officer
_____________
(1) Compensation information for the fiscal year ended June 30, 1994
has been omitted as the Corporation was not a public company, nor
a subsidiary thereof, at such time.
(2) Includes Board of Directors fees of $6,000.
(3) Does not include perquisites which, in the aggregate, did not
exceed the lesser of $50,000 or 10% of salary and bonus.
Employment Agreements
Effective December 31, 1995, the Savings Bank entered into three-year
employment agreements with Mr. Ballew and Mrs. Wilson (individually, the
"Executive"). The agreements provide for the extension of the term of the
agreement for an additional year annually unless the Savings Bank provides
the Executive with prior notice that the current term will not be extended.
The agreements provide for an initial salary level for Mr. Ballew and Mrs.
Wilson of $72,000 and $58,000, respectively. Under the agreements, the
compensation of each Executive is subject to annual review. In addition,
each Executive is eligible to participate in all employee benefit plans or
arrangements which the Savings Bank makes available to its senior executive
officers. The agreements provide that upon the Executive's termination of
employment without cause or the Executive's resignation following the
occurrence of certain events, including a material change in the Executive's
functions, duties or responsibilities, the Savings Bank will make a severance
payment equal to the greater of the payments due to the Executive over the
remaining term of the agreement or three times the average of the Executive's
base salary over the preceding three years. In addition, the Savings Bank is
obligated to continue the Executive's life, dental and disability coverage
through the expiration of the current term of the agreement. The agreements
also restrict the Executive's right to compete against the Savings Bank for a
period of two years from the date of the Executive's termination without
cause or resignation in the circumstances described above.
In connection with the Savings Bank's mutual to stock conversion, the
agreements were amended to provide for severance payments and continuation of
other employee benefits in the event of the Executive's involuntary
termination of employment in connection with any change in control of the
Savings Bank or the Corporation. Severance payments also will be provided on
a similar basis in connection with voluntary termination of employment where,
subsequent to a change in control, Mr. Ballew and Mrs. Wilson are assigned
duties inconsistent with their positions, duties, responsibilities and status
immediately prior to such change in control. The term "change in control"
will be defined as having occurred when, among other things, (i) a person
other than the Corporation purchases shares of Common Stock pursuant to a
tender or exchange offer for such shares, (ii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or
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indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities, (iii)
the membership of the Board of Directors changes as the result of a contested
election, or (iv) shareholders of the Corporation approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's assets, or a plan of partial or complete liquidation.
The severance payments from the Savings Bank will equal 2.99 times each
Executive's average annual compensation during the five-year period preceding
the change in control. Such amount will be paid in a lump sum within 10
business days following the termination of employment. Assuming that a
change in control had occurred at June 30, 1996, Mr. Ballew and Mrs. Wilson
would be entitled to severance payments of approximately $200,000 and
$155,000, respectively. Section 280G of the Internal Revenue Code of 1986,
as amended ("Code"), states that severance payments that equal or exceed
three times the base compensation of the individual are deemed to be "excess
parachute payments" if they are contingent upon a change in control.
Individuals receiving excess parachute payments are subject to a 20% excise
tax on the amount of such excess payments, and the Executives would not be
entitled to deduct the amount of such excess payments.
Compensation Committee Interlocks and Insider Participation.
Mr. Ballew, Executive Vice President and Chief Executive Officer of the
Corporation, serves as a member of the Compensation Committee. Although the
Chief Executive Officer recommends compensation to be paid to executive
officers, the entire Board of Directors of the Savings Bank reviews such
recommendations and sets the compensation for Mr. Ballew.
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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Section 16(a) of the Exchange Act requires the Corporation's executive
officers and directors, and persons who own more than 10% of any registered
class of the Corporation's equity securities, to file reports of ownership
and changes in ownership with the SEC. Executive officers, directors and
greater than 10% shareholders are required by regulation to furnish the
Corporation with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms it has received
and written representations provided to the Corporation by the above
referenced persons, the Corporation believes that all filing requirements
applicable to its reporting officers, directors and greater than 10%
shareholders were properly and timely complied with since the date of
completion of the Corporation's initial stock offering (July 12, 1996).
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TRANSACTIONS WITH MANAGEMENT
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Current law requires that all loans or extensions of credit to executive
officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and does not involve more than the
normal risk of repayment or present other unfavorable features. The Savings
Bank therefore is prohibited from making any new loans or extensions of
credit to the Savings Bank's executive officers and directors and at
different rates or terms than those offered to the general public and has
adopted a policy to this effect. The aggregate amount of loans by the
Savings Bank to its executive officers and directors was approximately
$72,000 at June 30, 1996. Such loans (i) were made in the ordinary course of
business, (ii) were made on substantially the same terms and conditions,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the Savings Bank's other customers, and (iii)
did not involve more than the normal risk of collectibility or present other
unfavorable features when made.
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PROPOSAL II -- RATIFICATION OF 1996 STOCK OPTION PLAN
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The Corporation's Board of Directors adopted the 1996 Stock Option Plan
("Option Plan") on December 2, 1996, subject to approval by the Corporation's
shareholders. Assuming shareholder approval, the Option Plan will be
effective on July 13, 1997. By postponing the effective date, the Option
Plan will not be subject to certain regulatory restrictions otherwise
applicable to plans implemented prior to the first anniversary of the Savings
Bank's mutual to stock conversion. The following description of the Option
Plan is qualified in its entirety by reference to the complete text of the
Option Plan which is attached as Exhibit A.
Administration of the Option Plan
The Option Plan is administered by a committee of the Board of Directors
("Committee") consisting of not less than two non-employee members of the
Board of Directors. In addition to determining who will be granted options,
the Committee has the authority and discretion to determine when options will
be granted and the number of options to be granted. In making such
determination, the Committee will consider those non-employee directors,
officers and employees who are expected to make significant contributions to
the long-term success of the Corporation and the Savings Bank. With respect
to awards to officers and employees, the Committee also determines which
options are intended to qualify for special treatment under the Code
("Incentive Stock Options") or to be issued as options which are not intended
to so qualify ("Non-Qualified Stock Options"). The Option Plan provides that
all options granted to non-employee directors are Non-Qualified Stock
Options.
The Board of Directors may from time to time amend or terminate the
Option Plan in any respect. An amendment to the Option Plan may be subject
to shareholder approval if such approval is necessary to comply with any tax
or regulatory requirement. No amendment or termination may retroactively
impair the rights of any person with respect to an option.
Shares Subject to the Option Plan
The Corporation has reserved an aggregate of 97,990 shares of the
Corporation's Common Stock for issuance pursuant to the exercise of stock
options which may be granted to officers, employees and non-employee
directors.
In the event of a merger, consolidation, sale of all or substantially
all of the property of the Corporation, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution, to the extent permitted by the Corporation, an appropriate and
proportionate adjustment shall be made in (i) the maximum number of shares
available, (ii) the number and kind of shares subject to outstanding options,
if any, and (iii) the price for each share.
Option Price
The exercise price of Non-Qualified Stock Options and Incentive Stock
Options may not be less than 100% of the fair market value of the shares of
Common Stock of the Corporation on the date of grant. Any Incentive Stock
Option granted to a person owning more than 10% of the Corporation's
outstanding Common Stock must have an exercise price of at least 110% of fair
market value on the date of grant. The maximum aggregate fair market value
(determined as of the date of grant) of the shares to which Incentive Stock
Options held by an individual become exercisable for the first time during
any calendar year may not exceed $100,000.
Terms of Options
In general, the Committee has the discretion to fix the term of each
option granted to an officer or employee under the Option Plan, except that
the maximum term of each option is 10 years, subject to earlier termination
as
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provided in the Option Plan (five years in the case of Incentive Stock
Options granted to an employee who owns over 10% of the total combined voting
power of all classes of the Corporation's stock). The Option Plan provides
that all awards under the Option Plan will become exercisable in equal
installments over a five-year period following the date of grant. However,
unvested options will become immediately exercisable in the event of the
option holder's death or disability, or upon a change in control (as defined
in the Option Plan) of the Corporation or the Savings Bank.
Except in limited circumstances, an option may not be transferred other
than by will or by laws of descent and distribution and, during the lifetime
of the option holder, may be exercised only by such holder. If any option
expires or terminates for any reason without having been exercised in full,
the unpurchased shares subject to such option will be available again for
purposes of the Option Plan.
Federal Income Tax Consequences of Non-Qualified Options
An option holder who is granted a Non-Qualified Stock Option under the
Option Plan will not realize any income for Federal income tax purposes on
the grant of an option. An option holder will realize ordinary income for
Federal income tax purposes on the exercise of an option, provided the shares
are not then subject to a substantial risk of forfeiture within the meaning
of Section 83 of the Code ("Risk of Forfeiture"), in an amount equal to the
excess, if any, of the fair market value of the shares of Common Stock on the
date of exercise over the exercise price thereof. If the shares are subject
to a Risk of Forfeiture on the date of exercise, the option holder will
realize ordinary income for the year in which the shares cease to be subject
to a Risk of Forfeiture in an amount equal to the excess, if any, of the fair
market value of the shares at the date they cease to be subject to a Risk of
Forfeiture over the exercise price, unless the option holder shall have made
a timely election under Section 83 of the Code to include in his income for
the year of exercise an amount equal to the excess of the fair market value
of the shares of Common Stock on the date of exercise over the exercise
price. The amount realized for tax purposes by an option holder by reason of
the exercise of a Non-Qualified Stock Option granted under the Option Plan is
subject to withholding by the Corporation and the Corporation is entitled to
a deduction in an amount equal to the income so realized by an option holder,
provided all necessary withholding requirements under the Code are met.
Provided that the option holder satisfies certain holding period
requirements provided by the Code, an employee will realize long-term capital
gain or loss, as the case may be, if the shares issued upon exercise of a
Non-Qualified Stock Option are disposed of more than one year after (i) the
shares are transferred to the employee or (ii) if the shares were subject to
a Risk of Forfeiture on the date of exercise and a valid election under
Section 83 of the Code shall not have been made, the date as of which the
shares cease to be subject to a Risk of Forfeiture. The amount recognized
upon such disposition will be the difference between the option holder's
basis in such shares and the amount realized upon such disposition.
Generally, an option holder's basis in the shares will be equal to the
exercise price plus the amount of income recognized upon exercise of the
option.
Federal Income Tax Consequences of Incentive Stock Options
An Incentive Stock Option holder who meets the eligibility requirements
of Section 422 of the Code will not realize income for Federal income tax
purposes, and the Corporation will not be entitled to a deduction, on either
the grant or the exercise of an Incentive Stock Option. If the Incentive
Stock Option holder does not dispose of the shares acquired within two years
after the date the Incentive Stock Option was granted to him or within one
year after the transfer of the shares to him, (i) any proceeds realized on a
sale of such shares in excess of the option price will be treated as
long-term capital gain and (ii) the Corporation will not be entitled to any
deduction for Federal income tax purposes with respect to such shares.
If an Incentive Stock Option holder disposes of shares during the
two-year or one-year periods referred to above (a "Disqualifying
Disposition"), the Incentive Stock Option holder will not be entitled to the
favorable tax treatment afforded to incentive stock options under the Code.
Instead, the Incentive Stock Option holder will realize ordinary income for
Federal income tax purposes in the year the Disqualifying Disposition is
made, in an amount
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equal to the excess, if any, of the fair market value of the shares of Common
Stock on the date of exercise over the exercise price.
An Incentive Stock Option holder generally will recognize long-term
capital gains or loss, as the case may be, if the Disqualifying Disposition
is made more than one year after the shares are transferred to the Incentive
Stock Option holder. The amount of any such gain or loss will be equal to
the difference between the amount realized on the Disqualifying Disposition
and the sum of (x) the exercise price and (y) the ordinary income realized by
the Incentive Stock Option holder as the result of the Disqualifying
Disposition.
The Corporation will be allowed in the taxable year of a Disqualifying
Disposition a deduction in the same amount as the ordinary income recognized
by the Incentive Stock Option holder provided all necessary withholding
requirements are met.
Notwithstanding the foregoing, if the Disqualifying Disposition is made
in a transaction with respect to which a loss (if sustained) would be
recognized to the Incentive Stock Option holder, then the amount of ordinary
income required to be recognized upon the Disqualifying Disposition will not
exceed the amount by which the amount realized from the disposition exceeds
the exercise price. Generally, a loss may be recognized if the transaction
is not a "wash" sale, a gift or a sale between certain persons or entities
classified under the Code as "related persons."
Alternative Minimum Tax
For purposes of computing the alternative minimum tax with respect to
shares acquired pursuant to the exercise of Incentive Stock Options, the
difference between the fair market value of the shares on the date of
exercise over the exercise price will be an item of tax preference in the
year of exercise if the shares are not subject to a Risk of Forfeiture; if
the shares are subject to a Risk of Forfeiture, the amount of the tax
preference taken into account in the year the Risk of Forfeiture ceased will
be the excess of the fair market value of the shares at the date they cease
to be subject to a Risk of Forfeiture over the exercise price. The basis of
the shares for alternative minimum tax purposes, generally, will be an amount
equal to the exercise price, increased by the amount of the tax preference
taken into account in computing the alternative minimum taxable income.
New Plan Benefits
The following table sets forth information regarding the number of
options anticipated to be granted under the Option Plan as of the effective
date of the Option Plan. Each option award specified below is intended to be
granted at 100% of the fair market value of the Corporation's Common Stock on
the date of grant and that each award will become exercisable in equal
installments over a five-year period.
Position with Anticipated Stock
Name the Corporation Option Grant
- ------------------------- ----------------- -----------------
Edward Ballew, Jr. Executive Vice
President and
Chief Executive
Officer 24,498
All current executive
officers as
a group (two persons) -- 44,096
(table continued on following page)
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Position with Anticipated Stock
Name the Corporation Option Grant
- ------------------------- ----------------- -----------------
All non-employee directors
(three persons) -- 14,700
All non-executive officers/
employees as a group
(four persons) -- 9,800
The balance of the options that may be granted under the Option Plan are
expected to be allocated in the future to current and prospective
non-employee directors, subsidiary directors, officers and employees.
Adoption of the Option Plan
Subject to approval by the Corporation's shareholders, the Board of
Directors adopted the Option Plan to encourage stock ownership by employees
and non-employee directors of the Corporation and its subsidiaries by issuing
options to purchase shares of the Corporation's Common Stock enabling such
directors, officers and employees to acquire or increase their proprietary
interest in the Corporation and thereby encourage them to remain in the
employ or remain directors of the Corporation and its subsidiaries. The
Board of Directors has determined that the Option Plan is desirable, cost
effective and produces incentives which will benefit the Corporation and its
shareholders. Moreover, the Board of Directors believes that the terms of
the Option Plan are consistent with the terms of similar stock compensation
programs implemented by other recently converted financial institutions in
the Savings Bank's peer group. The Option Plan must be approved by a
majority of the outstanding shares of Common Stock of the Corporation. The
Board of Directors recommends a vote "FOR" the adoption of the 1996 Stock
Option Plan attached as Exhibit A.
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PROPOSAL III -- RATIFICATION OF THE 1996 MANAGEMENT
RECOGNITION AND DEVELOPMENT PLAN
- ----------------------------------------------------------------------------
The Board of Directors of the Corporation adopted a Management
Recognition and Development Plan ("MRDP") on December 2, 1996 for the benefit
of officers, employees and non-employee directors of the Corporation and its
subsidiaries subject to approval by the shareholders of the Corporation.
Assuming shareholder approval, the MRDP will be effective on July 13, 1997.
By postponing the effective date, the MRDP will not be subject to certain
regulatory restrictions otherwise applicable to plans implemented prior to
the first anniversary of the Savings Bank's mutual to stock conversion. The
following description of the MRDP is qualified in its entirety by reference
to the complete text of the MRDP which is attached as Exhibit B.
The purpose of the MRDP is to encourage and provide an additional
incentive to non-employee directors, officers and employees of the
Corporation and its subsidiaries to increase the value of the Corporation and
its Common Stock by permitting them to acquire a significant equity interest
in the Corporation. The MRDP is also intended to assist the Corporation in
attracting and retaining superior personnel and to encourage them to remain
as directors or employees of the Corporation. All awards under the MRDP are
made by a committee of the Board of Directors consisting of at least two
non-employee directors.
MRDP awards are made in the form of restricted stock that is subject to
restrictions on transfer of ownership. MRDP awards vest over a five-year
period in equal installments beginning on the first anniversary of the
effective date of the MRDP. If the employee or non-employee director
terminates service for reasons other than death or disability, the employee
or director forfeits all rights to the allocated shares under restriction.
If the employee's or director's termination is caused by death or disability,
all restrictions expire and all shares allocated become unrestricted. MRDP
awards will also become fully vested upon a change in control (as defined in
the MRDP) of the Corporation or the Savings Bank. Compensation expense in
the amount of the fair market value of
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the Common Stock at the date of the grant to the officer or director will be
recognized during the years in which the shares vest. An eligible officer or
director will not be entitled to voting and other shareholder rights with
respect to the shares while restricted. Furthermore, the shares, while
restricted, may not be sold, pledged or otherwise disposed of and dividends
paid during the period of restriction will be held in escrow.
A recipient of an award who receives a grant of restricted stock who
does not elect to be taxed at the time of grant will not recognize income
upon an award of shares of Common Stock, and the Corporation will not be
entitled to a deduction until the termination of the restrictions. Upon such
termination, the recipient will recognize ordinary income in an amount equal
to the fair market value of the Common Stock at the time (less any amount
paid by the recipient for such shares) and the Corporation will be entitled
to a deduction in the same amount after satisfying federal income tax
withholding requirements. However, the recipient may elect to recognize
ordinary income in the year the restricted stock is granted in an amount
equal to the fair market value of the shares at that time, determined without
regard to the restrictions. In that event, the Corporation will be entitled
to a deduction in such year and in the same amount. Any gain or loss
recognized by the recipient upon subsequent disposition of the stock will be
capital in nature.
The MRDP may utilize authorized but unissued shares of Common Stock from
the Corporation in fulfillment of awards. Any such use of shares by the MRDP
could dilute the holdings of the Corporation's shareholders. The MRDP also
may purchase Common Stock in the open market through a trust established in
connection with the MRDP and funded with contributions from the Corporation.
No more than 39,196 shares may be issued under the MRDP, subject to
adjustment in the event of a stock dividend, stock split, or similar event.
The Board of Directors can terminate the MRDP at any time, and if it does so,
any shares not allocated will revert to the Corporation.
New Plan Benefits
The following table sets forth information regarding the number of
restricted shares anticipated to be granted under the MRDP as of the date the
MRDP is approved by shareholders. Each award specified below is intended to
vest in equal installments over a five-year period.
Position with Anticipated Restricted
Name the Corporation Stock Grant
- -------------------- --------------- ----------------------
Edward Ballew, Jr. Executive Vice
President and Chief
Executive Officer 9,799
All current executive
officers as a group
(two persons) -- 17,638
All non-employee directors
(three persons) -- 5,880
Non-executive officers
as a group (four persons) -- 7,840
The balance of the shares that may be issued pursuant to the MRDP is
expected to be allocated in the future to current and prospective
non-employee directors, subsidiary directors, officers and employees.
The Board of Directors has determined that the MRDP is desirable and will
produce incentives for management which will benefit the Corporation and its
shareholders. The Board of Directors believes that the MRDP will be a
significant factor in aligning the interests of management with those of
shareholders and that the terms of the MRDP are consistent with the terms of
similar stock compensation programs implemented by other
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recently converted financial institutions in the Savings Bank's peer group.
The MRDP must be approved by a majority of the outstanding shares of Common
Stock of the Corporation. The Board of Directors recommends a vote "FOR" the
adoption of the MRDP attached as Exhibit B.
- -----------------------------------------------------------------------------
AUDITORS
- -----------------------------------------------------------------------------
The Board of Directors has appointed Crisp Hughes & Co., L.L.P.,
independent public accountants, to serve as the Corporation's auditors for
the fiscal year ending June 30, 1997. A representative of Crisp Hughes &
Co., L.L.P. is expected to be present at the Annual Meeting to respond to
appropriate questions from shareholders and will have the opportunity to make
a statement if he or she so desires.
- -----------------------------------------------------------------------------
OTHER MATTERS
- -----------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy
Statement. However, if any other matters should properly come before the
Annual Meeting, it is intended that proxies in the accompanying form will be
voted in respect thereof in accordance with the judgment of the person or
persons voting the proxies.
- -----------------------------------------------------------------------------
MISCELLANEOUS
- -----------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Corporation.
The Corporation will reimburse brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of the Common Stock. In addition to
solicitations by mail, directors, officers and regular employees of the
Corporation may solicit proxies personally or by telecopier or telephone
without additional compensation.
The Corporation's 1996 Annual Report to Shareholders, including
consolidated financial statements, has been mailed to all shareholders of
record as of the close of business on December 9, 1996. Any shareholder who
has not received a copy of the Annual Report may obtain a copy by writing to
the Corporation. The Annual Report is not to be treated as part of the proxy
solicitation material or having been incorporated herein by reference.
A copy of the Corporation's Form 10-KSB for the fiscal year ended June
30, 1996, as filed with the SEC, will be furnished without charge to
shareholders of record as of December 9, 1996 upon written request to Emma
Lee M. Wilson, Secretary, Mitchell Bancorp, Inc., 210 Oak Avenue, Spruce
Pine, North Carolina 28777.
- ----------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- ----------------------------------------------------------------------------
Proposals of shareholders intended to be presented at the Corporation's
annual meeting to be held in October 1997 must be received by the Corporation
no later than May 30, 1997 to be considered for inclusion in the proxy
solicitation materials and form of proxy relating to such meeting. Any such
proposals shall be subject to the requirements of the proxy solicitation
rules adopted under the Exchange Act.
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The Corporation's Bylaws provide that in order for a shareholder to make
nominations for the election of directors at the Annual Meeting, a
shareholder must deliver written notice of such nominations to the Secretary
not less than 50 nor more than 90 days prior to the date of the Annual
Meeting; provided that if less than 21 days' notice of the Annual Meeting is
given to shareholders, such notice must be delivered to the Secretary of the
Corporation not later than the close of business on the seventh day following
the day on which notice of the Annual Meeting was mailed to shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Emma Lee M. Wilson
EMMA LEE M. WILSON
SECRETARY
Spruce Pine, North Carolina
December 16, 1996
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EXHIBIT A
Mitchell Bancorp, Inc.
1996 Stock Option Plan
SECTION 1. Purpose. The purposes of the Mitchell Bancorp, Inc. 1996 Stock
Option Plan are to promote the interests of the Company, its affiliates, and
its shareholders by (i) attracting and retaining exceptional executive
personnel and other key employees and directors of the Company and its
affiliates; (ii) motivating such employees and Eligible Directors by means of
performance-related incentives to achieve longer-range performance goals; and
(iii) enabling such employees and Eligible Directors to participate in the
long-term growth and financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms shall have
the meanings set forth below:
"Affiliate" shall mean the Bank and any other "subsidiary" of the
Company as defined in Section 424(f) of the Code.
"Award" shall mean any grant of Options or Director Options.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Bank" shall mean Mitchell Savings Bank, Inc., SSB, Spruce Pine, North
Carolina.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean an event deemed to occur if and when (a)
an offeror other than the Company purchases shares of the common stock of the
Company or the Bank pursuant to a tender or exchange offer for such shares,
(b) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company or the Bank representing twenty-five percent (25%)
or more of the combined voting power of the Company's or the Bank's then
outstanding securities, (c) the membership of the board of directors of the
Company or the Bank changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24) month
period (whether commencing before or after the date of adoption of this Plan)
do not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Company or the Bank approve a merger, consolidation, sale
or disposition of all or substantially all of the Company's or the Bank's
assets, or a plan of partial or complete liquidation. If any of the events
enumerated in clauses (a) - (d) occur, the Board shall determine the
effective date of the change in control resulting therefrom, for purposes of
the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean a committee of the Board consisting of at least
two nonemployee directors designated by the Board to administer the Plan. If
a separate committee is not so designated, the Board shall serve as the
Committee for all purposes under the Plan.
"Company" shall mean Mitchell Bancorp, Inc., a North Carolina
corporation.
"Director Option" shall mean a Non-Qualified Stock Option granted to an
Eligible Director pursuant to Section 6(e).
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"Disability" shall have the meaning set forth in Section 22(e)(3) of the
Code. For purposes of the Plan, all determinations as to whether a
Participant has become disabled shall be made by a majority of the Board upon
the basis of such evidence as it deems necessary or desirable, and shall be
final and binding on all interested persons.
"Effective Date" shall mean the date specified in Section 9(a) of the
Plan.
"Eligible Director" shall mean, on any date, a person who is serving as
a member of the Board but shall not include a person who is an Employee.
"Employee" shall mean an employee of the Company or any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall be determined as follows:
(a) If the Shares are traded or quoted on the Nasdaq Stock
Market or other national securities exchange at the time of
grant of the Award, then the Fair Market Value shall be the
average of the highest and lowest selling price on such
exchange on the date such Award is granted or, if there
were no sales on such date, then on the next prior
business day on which there was a sale.
(b) If the Shares are not traded or quoted on the Nasdaq Stock
Market or other national securities exchange, then the Fair
Market Value shall be a value determined by the Committee
in good faith on such basis as it deems appropriate.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.
"Non-Qualified Stock Option" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is not
intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option but shall not include a Director Option.
"Participant" shall mean any Employee or Eligible Director selected by
the Committee to receive an Award of Options or Director Options, as
appropriate.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"Plan" shall mean the Mitchell Bancorp, Inc. 1996 Stock Option Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the staff thereof.
"Shares" shall mean common shares of the Company, or such other
securities of the Company as may be designated by the Committee from time to
time.
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"Ten Percent Shareholder" shall mean any shareholder who, at the time an
Incentive Stock Option is granted to such shareholder, owns (within the
meaning of Section 424(d) of the Code) more than ten percent (10%) of the
voting power of all classes of stock of the Company.
"Termination for Cause" shall mean termination because of a
Participant's personal dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule, or regulation (other than
traffic violations or similar offenses) or material breach of any provision
of any employment agreement between the Company and/or, the Bank and a
Participant.
SECTION 3. Administration.
(a) The Plan shall be administered by the Committee. Subject to the
terms of the Plan and applicable law, and in addition to other express powers
and authorizations conferred on the Committee by the Plan, the Committee
shall: (i) designate Participants; (ii) determine the type or types of Awards
to be granted to an eligible Employee; (iii) determine the number of Shares
to be covered by, or with respect to which payments, rights, or other matters
are to be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under
what circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property,
and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (viii) establish, amend, suspend,
or waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or
with respect to the Plan or any Award shall be within the sole discretion of
the Committee, may be made at any time and shall be final, conclusive, and
binding upon all Persons, including the Company, and Participant, any holder
or beneficiary of any Award, any shareholder and any Employee.
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section
4(b), the number of Shares with respect to which Options and Director Options
may be granted under the Plan shall be 97,990. If, after the effective date
of the Plan, any Shares covered by an Option or Director Option granted under
the Plan, or to which such an Option or Director Option relates, are
forfeited, or if an Option or Director Option otherwise terminates or is
canceled without the delivery of Shares, then the Shares covered by such
Option or Director Option, or to which such Option or Director Option
relates, or the number of Shares otherwise counted against the aggregate
number of Shares with respect to which Options and Director Options may be
granted, to the extent of any such settlement, forfeiture, termination or
cancellation, shall again be, or shall become, Shares with respect to which
Options and Director Options may be granted. In the event that any Option or
Director Option is exercised through the delivery of Shares, the number of
Shares available for Awards under the Plan shall be increased by the number
of Shares surrendered.
(b) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company,
issuance of warrants or other rights to purchase Shares or other securities
of the Company, or other similar corporate transaction or event affects the
Shares such that an adjustment is necessary in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall proportionately adjust any
or all (as necessary) of (i) the number of Shares or other securities of the
Company (or number and kind of other securities or property) with respect to
which Awards may be granted, (ii) the number
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of Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Awards, and (iii) the grant or
exercise price with respect to any Award; provided, in each case, that with
respect to Awards of Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code, as from time to time amended.
(c) Sources of Shares. Any Shares delivered pursuant to an Option or
Director Option may consist, in whole or in part, of authorized and unissued
Shares or of treasury Shares.
SECTION 5. Eligibility. An Employee, including any officer or
employee-director of the Company, shall be eligible to be designated a
Participant. Each Eligible Director shall be eligible to receive Director
Options in accordance with Section 6(e) hereof.
SECTION 6. Options and Director Options.
(a) Grant. Subject to the provisions of the Plan and the
recommendation of the Board, the Committee shall determine the Employees to
whom Options shall be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and limitations
applicable to the exercise of the option. The Committee shall have the
authority to grant Incentive Stock Options, or to grant Non-Qualified Stock
Options, or to grant both types of options. In such case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and
comply with such rules as may be prescribed by Section 422 of the Code, as
from time to time amended, and any regulations implementing such statute,
including without limitation, the requirements of Code Section 422(d), which
limits the aggregate fair market value of Shares of which Incentive Stock
Options are exercisable for the first time to one hundred thousand dollars
($100,000) per calendar year. Each provision of the Plan and of each written
option agreement relating to an Option designated an Incentive Stock Option
shall be construed so that such Option qualifies as an Incentive Stock
Option, and any provision that cannot be so construed shall be disregarded.
(b) Exercise Price. The Committee shall establish the exercise price
at the time each Option or Director Option is granted, which price shall not
be less than one hundred percent (100%) of the per Share Fair Market Value on
the date of grant. Notwithstanding any provision contained herein, in the
case of an Incentive Stock Option, the exercise price at the time such
Incentive Stock Option is granted to any Employee who, at the time of such
grant, is a Ten Percent Shareholder, shall not be less than one hundred ten
percent (110%) of the per Share Fair Market Value on the date of grant.
(c) Exercise. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter;
provided, however, that in the case of an Incentive Stock Option, a
Participant may not exercise such Option as an Incentive Stock Option after
the earlier of (i) the date which is ten (10) years (five (5) years in the
case of a Participant who is a Ten Percent Shareholder) after the date on
which such Incentive Stock Option is granted, or (ii) the date which is three
(3) months (twelve (12) months in the case of a Participant who becomes
Disabled, or who dies) after the date on which he ceases to be an employee of
the Company or an Affiliate; provided, further, that no Award of Options
under the Plan shall vest more rapidly than ratably over a five (5) year
period whereby twenty percent (20%) of the Award shall vest on each of the
first through the fifth anniversaries of the date of grant so long as the
Participant remains an Employee of the Company or an Affiliate; provided,
further, that an Award of Options shall be one hundred percent (100%) vested
upon a Participant's death or Disability. In the event of an Employee's
Termination for Cause, his Options shall be canceled on the date he ceases to
be an Employee. The Committee may impose such conditions with respect to the
exercise of Options, including without limitation, any relating to the
application of federal or state securities laws, as it may deem necessary or
advisable.
(d) Payment. No Shares shall be delivered pursuant to any exercise
of an Option or Director Option until payment in full of the option price
therefor is received by the Company. Such payment may be made in cash or its
equivalent, or, if and to the extent permitted by the Committee, by
exchanging Shares owned by the optionee (which
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are not the subject of any pledge or other security interest), or by a
combination of the foregoing, provided that the combined value of all cash
and cash equivalents and the Fair Market Value of any such Shares so tendered
to the Company as of the date of such tender is at least equal to such option
price. The Committee may, in its discretion, arrange procedures for the
payment of the exercise price with one or more stock brokerage firms for the
purpose of allowing a Participant to make a "cashless exercise" of an Option
or Director Option.
(e) Director Options. Subject to the provisions of the Plan and the
recommendation of the Board, the Committee shall determine the Eligible
Directors to whom Director Options shall be granted, the number of shares to
be covered by each Director Option and the condition and limitations
applicable to the exercise of each Director Option. Each Award of Director
Options shall vest ratably over a five (5) year period whereby twenty percent
(20%) of the Award shall vest on each of the first through the fifth
anniversaries of the date of grant so long as the Eligible Director continues
to serve as a member of the Board; provided, however, that the Award shall be
one hundred percent (100%) vested in the event of the Eligible Director's
death or Disability. A Director Option shall be exercisable until the
earlier to occur of the following two (2) dates (i) the tenth anniversary of
the date of grant of such Director Option or (ii) one (1) year (two (2) years
in the case of an Eligible Director who becomes Disabled, or who dies) after
the date the Eligible Director ceases to be a member of the Board, except
that if the Eligible Director ceases to be a member of the Board upon
Termination for Cause, his Director Option shall be canceled on the date he
ceases to be a member of the Board. An Eligible Director may pay the
exercise price of a Director Option in the manner described in Section 6(d).
(f) Effect of a Change in Control. In the event of a Change in
Control, all then outstanding Options and Director Options, shall become one
hundred percent (100%) vested and exercisable as of the effective date of the
Change in Control. If, in connection with or as a consequence of a Change in
Control, the Company or the Bank is merged into or consolidated with another
corporation, or if the Company or the Bank sells or otherwise disposes of
substantially all of its assets to another corporation, then unless
provisions are made in connection with such transaction for the continuance
of the Plan and/or the assumption or substitution of then outstanding Options
and Director Options with new options covering the stock of the successor
corporation, or parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices, such Options or Director Options
shall be canceled as of the effective date of the merger, consolidation, or
sale and the Participant or Eligible Director shall be paid in cash an amount
equal to the difference between the Fair Market Value of the Shares subject
to the Options or Director Options as of the effective date of such corporate
event and the exercise price of the Options or Director Options, as
appropriate.
(g) Limitation on Awards. Notwithstanding anything herein to the
contrary, (i) no Employee shall receive an Award covering in excess of twenty
five percent (25%), (ii) no Eligible Director shall receive an Award covering
in excess of five percent (5%) and (iii) Eligible Directors shall not receive
Awards covering in excess of thirty percent (30%) in the aggregate, of the
number of shares reserved for issuance under the Plan.
SECTION 7. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall be made without shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement with which the
Committee deems it necessary or appropriate to comply.
(b) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided, however, that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the rights of
any Participant or any holder or beneficiary of any Award theretofore granted
shall not to that extent be effective without the consent of the affected
Participant, holder or beneficiary.
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(c) Cancellation. Any provision of this Plan or any Award Agreement
to the contrary notwithstanding, the Committee may cause any Award of Options
granted hereunder to be canceled in consideration of the granting to the
holder of an alternative Award of Options having a Fair Market Value equal to
the Fair Market Value of such canceled Award.
SECTION 8. General Provisions.
(a) Nontransferability.
(i) Each Award, and each right under any Award, shall be
exercisable only by the Participant during his lifetime, or, if permissible
under applicable law, by the Participant's guardian or legal representative
or a transferee receiving such Award pursuant to a domestic relations order
or Section 8(a)(ii) as determined by the Committee.
(ii) No Award may be assigned, alienated, pledged, attached, sold
or otherwise transferred or encumbered by a Participant otherwise than by
will or by the laws of descent and distribution or pursuant to a domestic
relations order, and any such purported assignment, alienation, pledge,
attachment, sale, transfer or encumbrance shall be void and unenforceable
against the Company; provided, however, that the designation of a beneficiary
shall not constitute an assignment, alienation, pledge, attachment, sale,
transfer or encumbrance. Notwithstanding the preceding sentence, the
Committee shall have discretionary authority to permit the transfer of any
Non-Qualified Stock Option to members of a Participant's immediate family,
including trusts for the benefit of such family members and partnerships in
which such family members are the only partners; provided, however, that a
transferred Non-Qualified Stock Option may be exercised by the transferee on
any date only to the extent that the Participant would have been entitled to
exercise the Non-Qualified Stock Option on such date had the Non-Qualified
Stock Option not been transferred. Any transferred Non-Qualified Stock
Option shall remain subject to the terms and conditions of the Participant's
Award Agreement.
(b) No Rights to Awards. No Employee, Participant or other Person
shall have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or
beneficiaries of Awards. The terms and conditions of Awards need not be the
same with respect to each recipient.
(c) Share Certificates. All Shares or other securities of the
Company delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions
as the Committee may deem advisable under the Plan or the rules, regulations,
and other requirements of the SEC, any stock exchange or national securities
association upon which such Shares or other securities are then listed, and
any applicable Federal or state laws, and the Committee may cause a legend or
legends to be put on any certificates representing such Shares or other
securities to make appropriate reference to such restrictions.
(d) Delegation. Subject to the terms of the Plan and applicable law,
the Committee may delegate to one or more officers or managers of the
Company, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by, Employees who are
not officers or directors of the Company for purposed of Section 16 of the
Exchange Act, or any successor section thereto, or who are otherwise not
subject to such Section.
(e) Withholding. A Participant shall be required to pay to the
Company and the Company is hereby authorized to withhold from any Award, from
any payment due or transfer made under any Award or from any compensation or
other amount owing to a Participant the amount of any applicable withholding
taxes in respect of an Award, its exercise, or any payment or transfer under
an Award and to take such other action as may be necessary in the opinion of
the Company to satisfy all obligations for the payment of such taxes,
including, but not limited to, the withholding of the issuance of Shares to
be issued upon the exercise of any Option or Director Option until the
Participant reimburses the Company for any amount required to be withheld.
A-6
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(f) Award Agreements. Each Award hereunder shall be evidenced by an
Award Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Award and any rules applicable thereto.
(g) No Limit on Other Compensation Arrangements. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of options, restricted stock, Shares and other
types of Awards provided for hereunder (subject to shareholder approval if
such approval is required), and such arrangements may be either generally
applicable or applicable only in specific cases.
(h) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of
the Company or an Affiliate. Further, the Company may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(i) No Rights as Shareholder. Subject to the provisions of the
applicable Award, no Participant or holder or beneficiary of any Award shall
have any rights as a shareholder with respect to any Shares to be distributed
under the Plan until he has become the holder of such Shares.
(j) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of
North Carolina, without giving effect to the choice of law principles
thereof.
(k) Severability. If any provisions of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to the applicable laws, or if
it cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Person or Award and the
remainder of the Plan and any such Award shall remain in full force and
effect.
(l) Other Laws. The Committee may refuse to issue or transfer any
Shares or other consideration under an Award if, acting in its sole
discretion, it determines that the issuance or transfer of such Shares or
such other consideration might violate any applicable law or regulation or
entitle the Company to recovery under Section 16(b) of the Exchange Act, and
any payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder or beneficiary. Without
limiting the generality of the foregoing, no Award granted hereunder shall be
construed as an offer to sell securities of the Company, and no such offer
shall be outstanding, unless and until the Committee in its sole discretion
has determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws.
(m) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments
from the Company pursuant to an Award, such rights shall be no greater than
the right of any unsecured general creditor of the Company.
(n) Rule 16b-3 Compliance. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable terms and conditions of Rule 16b-3 and any
successor provisions. To the extent that any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
A-7
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<PAGE>
(o) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
(p) No Impact on Benefits. Unless specifically provided under any
other benefit plan of the Company or its Affiliates, Awards shall not be
treated as compensation for purposes of calculating an Employee's or Eligible
Director's rights under such benefit plans.
(q) Indemnification. Each person who is or shall have been a member
of the Committee or of the Board shall be indemnified and held harmless by
the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be made a party
or in which he may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in
satisfaction of any judgement in any such action, suit, or proceeding against
him, provided he shall give the Company an opportunity, at its own expense,
to handle and defend the same before he undertakes to handle and defend it on
his own behalf. The foregoing right of indemnification shall not be
exclusive and shall be independent of any other rights of indemnification to
which such persons may be entitled under the Company's articles of
incorporation or bylaws, by contract, as a matter of law, or otherwise.
SECTION 9. Term of the Plan.
(a) Effective Date. The Plan shall become effective on July 13, 1997
but only if, prior to such date, the Plan is approved by a majority of the
Company's shareholders at an annual or special meeting of shareholders of the
Company held not less than six (6) months after the date of consummation of
the Company's mutual-to-stock conversion nor more than twelve (12) months
after the date of adoption of the Plan by the Board.
(b) Expiration Date. The Plan shall terminate on and no Award shall
be granted under the Plan after the tenth anniversary of the Effective Date.
Unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted hereunder may, and the authority of the Board or
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under any such Award shall,
continue after the tenth anniversary of the Effective Date.
A-8
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<PAGE>
EXHIBIT B
Mitchell Bancorp, Inc.
1996 Management Recognition and Development Plan
1. Purpose; Definitions.
The purpose of the Plan is to increase the proprietary and vested
interest of the key Employees and Eligible Directors of the Company and its
Affiliates in the growth, development and financial success of the Company
and its Affiliates by granting them awards of Restricted Shares.
Whenever the following terms are used in the Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
"Affiliate" shall mean the Bank and any other "subsidiary" of the
Company as defined in Section 424(f) of the Code.
"Award" shall mean an award of Restricted Shares under the Plan.
"Bank" shall mean Mitchell Savings Bank, Inc., SSB, Spruce Pine, North
Carolina, or any successor thereto.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean an event deemed to occur if and when (a)
an offeror other than the Company purchases shares of the common stock of the
Company or the Bank pursuant to a tender or exchange offer for such shares,
(b) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company or Bank representing twenty-five percent (25%) or
more of the combined voting power of the Company's or the Bank's then
outstanding securities, (c) the membership of the board of directors of the
Company or the Bank changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24) month
period (whether commencing before or after the date of adoption of this Plan)
do not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Company or the Bank approve a merger, consolidation, sale
or disposition of all or substantially all of the Company's or the Bank's
assets or a plan of partial or complete liquidation. If any of the events
enumerated in clauses (a) - (d) occur, the Board shall determine the
effective date of the change in control resulting therefrom.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean a committee of the Board consisting of at least
two nonemployee directors designated by the Board to administer the Plan. If
a separate committee is not designated by the Board, the Board shall serve as
the Committee for all purposes under the Plan.
"Company" shall mean Mitchell Bancorp, Inc., a North Carolina
corporation.
"Designated Beneficiary" shall have the meaning set forth in Section 2.2
hereof.
"Disability" shall have the meaning set forth in Section 22(e)(3) of the
Code. For purposes of the Plan, all determinations as to whether a
Participant has become disabled shall be made by a majority of the Committee,
upon the basis of such evidence as it deems necessary or desirable, and shall
be final and binding on all interested persons.
"Effective Date" shall have the meaning set forth in Section 5.1 hereof.
<PAGE>
<PAGE>
"Eligible Director" shall mean a member of the Board on the Effective
Date who is not also an Employee.
"Employee" shall mean any person who is employed by the Company or an
Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Participant" shall mean an Employee or Eligible Director to whom an
award of Restricted Shares is granted pursuant to the Plan.
"Plan" shall mean this Mitchell Bancorp, Inc. 1996 Management
Recognition and Development Plan, as hereinafter amended from time to time.
"Restricted Shares" shall mean Shares which are awarded to an Employee
or Eligible Director that are subject to the transfer and forfeitability
restrictions described in Section 4.2.
"Share" shall mean a share of the Company's common stock, par value $.01
per share.
2. Administration.
2.1 Administration
The Plan shall be administered by the Committee, which shall have the
power to interpret the Plan and to adopt such rules for the administration,
interpretation and application of the Plan and Awards thereunder as are
consistent with its terms and provisions and to interpret, amend or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee shall be binding upon all persons, including the
Company, shareholders, Participants and Designated Beneficiaries. The
Secretary of the Company shall be authorized to implement the Plan in
accordance with its terms, and to take such actions of a ministerial nature
as shall be necessary to effectuate the intent and purposes thereof. No
member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan
or the Awards thereunder, and all members of the Committee shall be fully
protected by the Company in respect to any such action, determination or
interpretation.
2.2 Designated Beneficiaries
If a Participant dies prior to receiving any payment due under the Plan,
such payment shall be made to his Designated Beneficiary. A Participant's
Designated Beneficiary shall be the beneficiary specifically designated by a
Participant in writing to receive amounts due the Participant in the event of
the Participant's death. In the absence of an effective designation by the
Participant, Designated Beneficiary shall mean the Participant's surviving
spouse or, if none, his estate.
3. Shares Subject To The Plan.
3.1 Shares Subject to the Plan
The maximum number of Shares that may be the subject of Awards under
this Plan shall be 39,196. The Company shall reserve such number of Shares
for the purposes of the Plan out of its authorized but unissued Shares or out
of Shares held in the Company's treasury, or partly out of each. In the
event that a trust is established in connection with the Plan pursuant to
Section 5.4, the Company may authorize the trustees of the trust to purchase
Shares in the open market with funds contributed by the Company or an
Affiliate and such shares shall be included in the number of shares that may
be the subject of Awards. In the event that Restricted Shares are forfeited
for any reason, such Shares shall thereafter again be available for award
pursuant to the Plan.
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3.2 Changes in the Company's Shares
In the event that the Committee shall determine that any
recapitalization, reorganization, merger, consolidation, stock split,
spin-off, combination, or exchange of Shares, or other similar corporate
event affects the Shares such that an adjustment is required in order to
preserve the benefits or potential benefits intended under this Plan, the
Committee shall, in such manner as it may deem equitable, adjust any or all
of the number and kind of Shares which thereafter may be awarded under the
Plan, or the number and kind of Shares subject to outstanding awards;
provided, however, that the number of Shares subject to any award shall
always be a whole number.
4. Restricted Shares
4.1 Eligibility; Awards Under the Plan
(a) Eligibility. Employees (including officers and employee
directors of the Bank) and Eligible Directors shall be eligible to
participate in the Plan upon designation by the Committee. To the extent
that Shares are available for grant under the Plan, then upon recommendation
of the Board, the Committee shall determine which of the Employees and
Eligible Directors shall be granted an Award and the number of Restricted
Shares covered by each Award. In selecting those Employees to whom Awards
will be granted and the number of Shares covered by such Awards, the
Committee shall consider the position and responsibilities of the eligible
Employees, the length and value of their services to the Company and its
Affiliates, the compensation paid to the Employees and any other factors the
Committee may deem relevant, and the Committee may request the written
recommendation of the chief executive officer and other senior executive
officers of the Company and its Affiliates.
(b) Limitation on Awards. Notwithstanding anything herein to the
contrary, (i) no Employee shall receive Awards covering in excess of twenty
five percent (25%), (ii) no Eligible Director shall receive Awards covering
in excess of five percent (5%) and (iii) Eligible Directors shall not receive
Awards covering in excess of thirty percent (30%) in the aggregate, of the
number of shares reserved for issuance under the Plan.
(c) Fractions of Shares. Whenever under the terms of the Plan a
fractional share would be required to be issued, the fractional share shall
be rounded up to the next full share.
4.2 Terms of Awards
The Restricted Shares awarded hereunder shall be awarded only pursuant
to a written agreement, which shall be executed by the Participant and a duly
authorized officer of the Company and which shall contain the following terms
and conditions:
(a) Acceptance of Award. An award of Restricted Shares must be
accepted by the Participant within a period of sixty (60) days (or such other
period as the Committee may specify at grant) after the award date by the
execution of a Restricted Share award agreement in the form provided by the
Company.
(b) Restrictions and Conditions. The Restricted Shares awarded to a
Participant pursuant to this Section 4 shall be subject to the following
restrictions and conditions:
(i) A Participant shall not be permitted to vote, sell,
transfer, pledge, assign or otherwise encumber Restricted Shares awarded
under the Plan prior to the date on which such shares vest in accordance with
clause (iii), except in accordance with the laws of descent and distribution.
(ii) On the date an Award of Restricted Shares vests in
accordance with clause (iii), a Participant (or his beneficiary) shall be
entitled to receive any cash dividends previously paid with respect to the
Restricted Shares, together with interest accrued thereon (at a reasonable
rate established from time to time by the Committee). Prior to such date,
cash dividends shall be held by the Company for the account of the
Participant.
B-3
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<PAGE>
Stock dividends, if any, issued with respect to Restricted Shares shall be
treated as additional Restricted Shares that are subject to the same
restrictions and other terms and conditions that apply with respect to the
Restricted Shares with respect to which such dividends are paid.
(iii) Subject to the applicable provisions of the Restricted
Share award agreement and this Section, a Participant's interest in Shares
shall immediately become fully vested and nonforfeitable, and the
restrictions set forth in this Section 4.2 shall lapse (x) ratably over a
five (5) year period whereby twenty percent (20%) of the Award shall vest on
each of the first through the fifth anniversaries of the date of grant so
long as the Participant remains an Employee or Eligible Director (y) upon the
Participant's death or Disability, or (z) upon a Change in Control.
4.3 Stock Certificates
Except as otherwise provided herein, a stock certificate registered in
the name of each Participant receiving a Restricted Share award (or in the
name of a trustee for the benefit of each Participant) shall be issued in
respect of such shares. Such certificate shall bear whatever appropriate
legend referring to the terms, conditions, and restrictions applicable to
such award as the Committee shall determine. The Committee may, in its sole
discretion, require that the stock certificates evidencing Restricted Shares
be held in custody by the Company (or in trust by a trustee) until the
restrictions thereon shall have lapsed. If a trust is established in
connection with the Plan, a certificate or certificates may be solely issued
in the name of the trust; provided, however, that the trustee shall maintain
a record of Awards authorized under the Plan and the amount of cash dividends
payable to a Participant upon the vesting of any Award or installment
thereof.
5. Miscellaneous.
5.1 Shareholder Approval; Effective Date; Term
The Plan shall become effective on July 13, 1997 but only if, prior to
such date, the Plan is approved by a majority of the Company's shareholders
at an annual or special meeting of shareholders of the Company held not less
than six (6) months after the date of consummation of the Bank's mutual-to-
stock conversion. The Plan shall continue in effect until the tenth
anniversary of the Effective Date.
5.2 Amendment, Suspension or Termination of the Plan
The Plan may be wholly or partially amended or otherwise modified,
suspends or terminated at any time or from time to time by the Board;
provided, however, that no amendment or modification shall be made without
shareholder approval if such approval is necessary to comply with any tax or
regulatory requirement with which the Board deems it necessary or appropriate
to comply.
From and after the Effective Date, neither the amendment, suspension nor
termination of the Plan shall, without the consent of the Participant, alter
or impair any rights or obligations under any award theretofore granted. No
awards may be granted during any period of suspension nor after termination
or expiration of the Plan.
5.3 Regulations and Other Approvals
(a) The obligation of the Company to deliver Shares with respect to
any award granted under the Plan shall be subject to all applicable laws,
rules and regulations, including all applicable federal and state securities
laws, and the obtaining of all such approvals by governmental agencies as may
be deemed necessary or appropriate by the Board.
(b) The Board may make such changes to the Plan as may be necessary
or appropriate to comply with the rules or requirements of any governmental
authority.
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<PAGE>
(c) Each award of Shares is subject to the requirement that, if at
any time the Board determines, in its sole discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any United States, state or
federal law, or the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of, or in connection with, issuance
of Shares, no Shares shall be issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or
obtained free of any conditions as acceptable to the Board.
(d) In the event that the disposition of Shares acquired pursuant to
the Plan is not covered by a then current registration statement under the
Securities Act of 1933, and is not otherwise exempt from such registration,
such Shares shall be restricted against transfer to the extent required by
the Securities Act of 1933 or regulations thereunder, and the Board may
require any individual receiving Shares pursuant to the Plan, as a condition
precedent to receipt of such Shares, to represent to the Company in writing
that the Shares acquired by such individual are acquired for investment only
and not with a view to distribution. The certificate for any Shares acquired
pursuant to the Plan shall include any legend that the Board deems
appropriate to reflect any restrictions on transfer.
(e) At the time of grant of any award, the Board may provide in the
Restricted Share award agreement that any Shares received as a result of such
grant shall be subject to a right of first refusal in favor of the Company,
pursuant to which the Participant shall be required to offer to the Company
any Shares that he wishes to sell, with the price being the then fair market
value of such Shares, subject to such other terms and conditions as the Board
may specify in the award agreement.
(f) With respect to persons subject to Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with all applicable
terms and conditions of Rule 16b-3 and any successor provisions. To the
extent that any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
(g) A Participant shall be required to pay to the Company or an
Affiliate the amount of any applicable withholding taxes in respect of an
Award and the Company shall be authorized to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes, including, but not limited to, the withholding of the
issuance of Shares to be issued upon the vesting of any Award, until the
Participant reimburses the Company for any amount required to be withheld.
5.4 Trust Arrangement
All benefits under the Plan represent an unsecured promise to pay by the
Company. The Plan shall be unfunded and the benefits hereunder shall be paid
only from the general assets of the Company resulting in the Participants
having no greater rights than the Company's general creditors; provided,
however, that nothing herein shall prevent or prohibit the Company from
establishing a trust or other arrangement for the purpose of providing for
the payment of the benefits payable under the Plan.
5.5 Governing Law
The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of North
Carolina without giving effect to the choice of law principles thereof.
5.6 Titles; Construction
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of the Plan. The masculine
pronoun shall include the feminine and neuter and the singular shall include
the plural, when the context so indicates.
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<PAGE>
REVOCABLE PROXY
MITCHELL BANCORP, INC.
FIRST ANNUAL MEETING OF SHAREHOLDERS
JANUARY 29, 1997
The undersigned hereby appoints the official Proxy Committee of the
Board of Directors of Mitchell Bancorp, Inc. ("Corporation") with full powers
of substitution to act as attorneys and proxies for the undersigned, to vote
all shares of Common Stock of the Corporation which the undersigned is
entitled to vote at the First Annual Meeting of Shareholders, to be held at
the Pine Bridge Conference Center at Pine Bridge Avenue, Spruce Pine, North
Carolina, on Wednesday, January 29, 1997, at 2:00 p.m., local time, and at
any and all adjournments thereof, as follows:
VOTE
FOR WITHHELD
---- --------
1. The election as director of the
nominees listed below (except as
marked to the contrary below). [ ] [ ]
Calvin F. Hall
Edward Ballew, Jr.
Emma Lee M. Wilson
Baxter D. Johnson
Lloyd Hise, Jr.
INSTRUCTIONS: To withhold your vote
for any individual nominee, write the
nominee's name(s) on the line below.
______________________________________
FOR AGAINST ABSTAIN
---- ------- -------
2. The adoption of the Mitchell
Bancorp, Inc. 1996 Stock Option Plan. [ ] [ ] [ ]
3. The adoption of the Mitchell Bancorp, [ ] [ ] [ ]
Inc. 1996 Management Recognition and
Development Plan.
4. In their discretion, upon such other matters
as may properly come before the meeting.
The Board of Directors recommends a vote "FOR" the listed propositions.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED
THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE BOARD OF
DIRECTORS IN ITS BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. THIS PROXY
ALSO CONFERS DISCRETIONARY AUTHORITY ON THE BOARD OF DIRECTORS TO VOTE WITH
RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEES ARE
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE
CONDUCT OF THE ANNUAL MEETING.<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary
of the Corporation at the Annual Meeting of the shareholder's decision to
terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from the Corporation prior to the
execution of this proxy of the Notice of First Annual Meeting of
Shareholders, a Proxy Statement for the First Annual Meeting, dated December
16, 1996 and the 1996 Annual Report to Shareholders.
Dated: , 1996
--------------------
- ------------------------- --------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
- ------------------------- --------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on the enclosed 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 COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
