<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Century Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
CENTURY BANCORP, INC.
22 Winston Street
Thomasville, North Carolina 27360
__________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on February 17, 1998
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of Century Bancorp, Inc. (the "Company") will be held on February 17,
1998, at 5:00 p.m., Eastern Time, at the main office of the Company at 22
Winston Street, Thomasville, North Carolina.
The Special Meeting is for the purpose of considering and voting upon the
following matters:
1. To approve the Century Bancorp, Inc. Stock Option Plan;
2. To approve the Home Savings, Inc., SSB Management Recognition Plan.
The Board of Directors has established December 31, 1997, as the record
date for the determination of stockholders entitled to notice of and to vote at
the Special Meeting and any adjournments thereof. In the event there are not
sufficient shares present in person or by proxy to constitute a quorum at the
time of the Special Meeting, the Special Meeting may be adjourned in order to
permit further solicitation of proxies by the Company.
By Order of the Board of Directors
/s/ Drema A. Michael
Drema A. Michael
Secretary
Thomasville, North Carolina
January __, 1998
A form of proxy is enclosed to enable you to vote your shares at the Special
Meeting. You are urged, regardless of the number of shares you hold, to
complete, sign, date and return the proxy promptly. A return envelope, which
requires no postage if mailed in the United States, is enclosed for your
convenience.
<PAGE>
CENTURY BANCORP, INC.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
February 17, 1998
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
Solicitation and Voting of Proxies
This Proxy Statement is being furnished to stockholders of Century Bancorp,
Inc. (the "Company") in connection with the solicitation by the board of
directors of the Company (the "Board of Directors" or "Board") of proxies to be
used at a special meeting of stockholders (the "Special Meeting") to be held on
February 17, 1998, at 5:00 p.m., Eastern Time, at the main office of the Company
at 22 Winston Street, Thomasville, North Carolina, and any adjournments thereof.
This Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on or about January __, 1998. The Company's office is located at
22 Winston Street, Thomasville, North Carolina 27360 and its telephone number is
(336) 475-4663.
Regardless of the number of shares of Common Stock owned, it is important
that stockholders be present in person or represented by proxy at the Special
Meeting. Stockholders are requested to vote by completing, signing, dating and
returning the enclosed proxy in the enclosed postage-paid envelope. Any
stockholder may vote for, against, or withhold authority to vote on any matter
to come before the Special Meeting. If the enclosed proxy is properly
completed, signed, dated and returned, and not revoked, it will be voted in
accordance with the instructions therein. If a proxy is returned with no
instructions given, the proxy will be voted FOR approval of the Century Bancorp,
Inc. Stock Option Plan (the "Stock Option Plan") and the Home Savings, Inc., SSB
Management Recognition Plan (the "Management Recognition Plan" or "MRP"). If
instructions are given with respect to one but not both proposals, such
instructions as are given will be followed and the proxy will be voted FOR the
Stock Option Plan or the MRP if no instructions on either such proposal are
given.
Other than the matters listed on the attached Notice of Special Meeting of
Stockholders, the Board of Directors knows of no matters that will be presented
for consideration at the Special Meeting. Execution of a proxy, however,
confers on the designated proxyholders discretionary authority to vote the
shares represented thereby in accordance with their best judgment on such other
business, if any, that may properly come before the Special Meeting or any
adjournments thereof.
A proxy may be revoked at any time prior to its exercise by the filing of a
written notice of revocation with the Secretary of the Company, by delivering to
the Company a duly executed proxy bearing a later date, or by attending the
Special Meeting and voting in person. However, if you are a beneficial owner of
shares of the Company's outstanding common stock (the "Common Stock") that are
not registered in your own name, you will need appropriate documentation from
the holder of record of your shares to vote personally at the Special Meeting.
The Company will pay the cost of preparing, assembling and mailing this
Proxy Statement and other proxy solicitation expenses, if any. In addition to
the use of the mail, proxies may be solicited personally or by telephone by
directors, officers and regular employees of the Company and its wholly-owned
savings bank subsidiary, Home Savings, Inc. SSB (the "Bank"), without additional
compensation therefor. Brokerage houses and nominees have been requested to
forward these proxy materials to the beneficial owners of shares held of record
by such persons and, upon request, the Company will reimburse such persons for
their reasonable out-of-pocket expenses in doing so.
<PAGE>
Purposes of Special Meeting
The Special Meeting is for the purpose of considering and voting upon the
following matters:
1. To approve the Stock Option Plan; and
2. To approve the Management Recognition Plan.
Voting Securities
The close of business on December 31, 1997 has been fixed by the Board of
Directors as the record date ("Record Date") for the determination of those
stockholders of record entitled to notice of and to vote at the Special Meeting
and any adjournments thereof. As of the Record Date, the Company had
outstanding 407,330 shares of Common Stock. Each share of Common Stock entitles
its owner to one vote on each matter calling for a vote of stockholders at the
Special Meeting.
The presence, in person or by proxy, of the holders of at least a majority
of shares of Common Stock entitled to vote at the Special Meeting is necessary
to constitute a quorum at the Special Meeting. Since many of our stockholders
cannot attend the Special Meeting, it is necessary that a large number be
represented by proxy. Accordingly, the Board of Directors has designated
proxies to represent those stockholders who cannot be present in person and who
desire to be so represented. In the event there are not sufficient stockholders
present, in person or by proxy, to constitute a quorum or to approve or ratify
any proposal at the time of the Special Meeting, the Special Meeting may be
adjourned in order to permit the further solicitation of proxies.
The Stock Option Plan and the MRP will be approved if the votes cast in
favor of such proposals exceed the votes cast opposing the proposals.
Abstentions will be counted for purposes of determining whether a quorum is
present at the Special Meeting. Abstentions will not be counted in tabulating
the votes cast on any proposal submitted to the stockholders. Broker non-votes
will not be counted either for determining the existence of a quorum or for
tabulating votes cast on any proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires that any person who acquires the beneficial ownership of more than 5%
of the Common Stock of the Company notify the Securities and Exchange Commission
(the "SEC") and the Company. Following is certain information, as of the Record
Date, regarding all persons or "groups", as defined in the Exchange Act, who
held of record or who are known to the Company to own beneficially more than 5%
of the Company's Common Stock.
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of Percentage
Name and Address Beneficial of
of Beneficial Owner Ownership/1/ Class/2/
- ------------------- ------------- ------------
<S> <C> <C>
Henry H. Darr 37,586/3/ 9.2%
620 Trindale Road
Trinity, NC 27370
F. Stuart Kennedy 37,586/4/ 9.2%
1100 Dover Drive
Thomasville, NC 27360
Milton T. Riley, Jr. 37,986/5/ 9.3%
605 Burke Trail
Thomasville, NC 27360
Salem Investment Counselors/6/ 20,800 5.1%
480 Shepherd Street [check]
Winston-Salem, NC 27103
</TABLE>
- -------------------------------------
/1/ Unless otherwise noted, all shares are owned directly or indirectly by
the named individuals, by their spouses and minor children, or by other
entities controlled by the named individuals.
/2/ Based upon a total of 407,330 shares of Common Stock outstanding at the
Record Date.
/3/ Mr. Darr serves as a trustee of the Home Savings, Inc. SSB Employee Stock
Ownership Plan (the "ESOP") which holds 32,586 shares of the Company's
Common Stock. The trustees of the ESOP share certain voting and
investment power of such shares.
/4/ Mr. Kennedy serves as a trustee of the ESOP which holds 32,586 shares of
the Company's Common Stock. The trustees of the ESOP share certain voting
and investment power of such shares. This number also includes 3,000
shares owned by a family limited partnership and 800 shares owned by Mr.
Kennedy's wife. Mr. Kennedy disclaims beneficial ownership of shares
owned by his wife.
/5/ Mr. Riley serves as a trustee of the ESOP which holds 32,586 shares of
the Company's Common Stock. The trustees of the ESOP share certain voting
and investment power of such shares. This number also includes 400 shares
owned by Mr. Riley's wife. Mr. Riley disclaims beneficial ownership of
shares owned by his wife.
/6/ Salem Investment Counselors is an investment advisory firm that manages
complete portfolios for its clients. It has no discretionary holdings.
Set forth below is certain information, as of the Record Date, regarding
those shares of Common Stock owned beneficially by each of the members of the
Board of Directors of the Company and each of the directors of the Bank, certain
executive officers of the Company and the Bank, and the directors and executive
officers of the Company and the Bank as a group (all persons listed are
directors of the Company and the Bank).
3
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of Percentage
Beneficial of
Name and Address Ownership/1/ Class/2/
- ---------------- ------------- ----------
<S> <C> <C>
James G. Hudson, Jr., President, Chief 4,500 1.1%
Executive Officer and Treasurer
24 Culbreth Avenue
Thomasville, NC 27360
Drema A. Michael, Secretary and 480 .12%
Assistant Treasurer
444 Hannersville Road
Lexington, NC 27292
John R. Hunnicutt 3,215 .79%
1014 Pine Needle Lane
Thomasville, NC 27360
Milton T. Riley, Jr. 37,986/3/ 9.3%
605 Burke Trail
Thomasville, NC 27360
F. Stuart Kennedy 37,586/3/ 9.2%
1100 Dover Drive
Thomasville, NC 27360
Henry H. Darr 37,586/3/ 9.2%
620 Trindale Road
Trinity, NC 27360
Directors and Executive Officers as a Group 56,181/4/ 13.8%
(7 Persons)
</TABLE>
- --------------------------------
/1/ Unless otherwise noted, all shares are owned directly or indirectly by
the named individuals, their spouses and minor children, or other entities
controlled by the named individuals.
/2/ Based upon a total of 407,330 shares of Common Stock outstanding at the
Record Date.
/3/ Mr. Riley, Mr. Kennedy and Mr. Darr serve as trustees of the ESOP which
holds 32,586 shares of the Company's Common Stock. The trustees of the ESOP
share certain voting and investment power of such shares.
/4/ The 32,586 shares held by the ESOP for which the trustees, Messrs.
Darr, Riley and Kennedy, share voting and investment power have been included
only once in the total number of shares owned beneficially by the directors and
executive officers as a group.
Director Compensation
Board Fees. Members of the Board of Directors receive no fees or
compensation for their service. However, all members of the Company's Board of
Directors are also directors of the Bank. For their service on the Bank's board
of directors, all members of the Bank board receive $900 per month.
4
<PAGE>
In addition, all non-employee directors who serve on the Bank's board
committees receive $150 per meeting for their service. Board fees are subject to
adjustment annually.
Executive Officers
The following table sets forth certain information with respect to the
persons who are executive officers of the Company and the Bank.
<TABLE>
<CAPTION>
Employed By
the Bank or
Age on Positions and Occupations the Company
Name June 30, 1997 During Last Five Years Since
- ---- ------------- ----------------------- -----
<S> <C> <C> <C>
James G. Hudson, Jr. 57 President, Chief Executive Officer, and 1972
Treasurer of the Company and the Bank
John E. Todd 51 Vice President of the Company and the 1979
Bank
Drema A. Michael 44 Secretary and Assistant Treasurer of 1974
the Company and the Bank
</TABLE>
Management Compensation
Summary Compensation Table. The following table sets forth for the
fiscal years ended June 30, 1997 and 1996 certain information as to the cash
compensation received by Mr. Hudson, the President, Chief Executive Officer and
Treasurer of the Company and the Bank. There were no other executive officers
whose cash compensation exceeded $100,000 for services rendered in all
capacities.
<TABLE>
<CAPTION>
Other Annual
Name and Compensation All Other
Principal Position Year Salary Bonus ($)/3/ Compensation
- ------------------ ---- ------ ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
James G. Hudson, Jr. 1997 $105,400/1/ $24,020/2/ $ -0- $22,000/4/
President, Chief Executive
Officer, Treasurer and Director
1996 $100,800/5/ $13,745/6/ $ -0- $22,000/7/
</TABLE>
- ----------------------
/1/ Includes director's fees of $9,600 for Mr. Hudson's service on the Bank's
board of directors.
/2/ Includes $20,420 in bonuses paid under the Bank's bonus compensation plan
and $3,600 in holiday bonuses. See "--Bonus Compensation."
/3/ Under the "Other Annual Compensation" category, perquisites for the fiscal
years ended June 30, 1996 and June 30, 1997 did not exceed the lesser of
$50,000, or 10% of salary and bonus as reported for Mr. Hudson.
/4/ This represents the amount accrued under supplemental income agreements
established for the benefit of Mr. Hudson.
/5/ Includes director's fees of $9,000 for Mr. Hudson's services on the Bank's
board of directors.
/6/ Includes $10,283 in bonuses paid under the Bank's bonus compensation plan
and $3,462 in holiday bonuses. See "--Bonus Compensation."
/7/ This represents the amount accrued under supplemental income agreements
established for the benefit of Mr. Hudson.
5
<PAGE>
Bonus Compensation
The Bank has approved a bonus compensation plan pursuant to which James
G. Hudson, Jr., President, Chief Executive Officer and Treasurer, receives bonus
compensation equal to 1% of the Bank's income before taxes and John E. Todd,
Vice President, and Drema A. Michael, Secretary and Assistant Treasurer, are
each entitled to receive bonuses equal to 0.5% of the Bank's income before
taxes. During the fiscal years ended June 30, 1997, 1996, and 1995, the bonuses
paid to Mr. Hudson totaled $20,420, $10,283 and $15,861, respectively; and the
bonuses paid to each of Mr. Todd and Ms. Michael totaled $10,210, $5,142 and
$7,932, respectively. In addition, employees receive annual discretionary
holiday bonuses, which during the fiscal years 1997, 1996 and 1995 totaled
$14,000, $13,000 and $12,000, in the aggregate for all employees. As is the case
with the Bank's compensation arrangements in general, the Bank's bonus
compensation plan is subject to regulatory oversight and, therefore, could be
changed in the future in response to regulatory requirements or otherwise.
Supplemental Income Plans
The Bank has entered into two separate Supplemental Income Agreements
with James G. Hudson, Jr., President, Chief Executive Officer and Treasurer.
These agreements provide that Mr. Hudson will receive certain specified monthly
payments for 15 years upon reaching 65 years of age. In the event of Mr.
Hudson's death before all payments have been made, benefits would be payable to
designated beneficiaries. In addition, if Mr. Hudson should die prior to
reaching 65 years of age, certain monthly payments would be made for a 15-year
period to designated beneficiaries. In the event Mr. Hudson terminates his
employment, for reasons other than death, prior to reaching 65 years of age, the
monthly retirement benefit payment would be reduced. The benefits payable under
the Supplemental Income Agreements are funded by the purchase of life insurance.
During the fiscal year ended June 30, 1997, the Bank accrued $22,000 towards the
cost of the benefits to be provided to Mr. Hudson under the supplemental income
plans.
Employment Agreement
The Bank has entered into an employment agreement with Mr. Hudson in
order to establish his duties and compensation and to provide for his continued
employment with the Bank. The agreement provided for an initial annual base
salary of $93,600 and for an initial term of employment of three years.
Commencing on the first anniversary date and continuing on each anniversary date
thereafter, following a performance evaluation of the employee, the agreement
may be extended for an additional year so that the remaining term shall be three
years unless written notice of non-renewal is given by the board of directors of
the Bank. The agreement also provides that base salary shall be reviewed by the
board of directors not less often than annually. In the event of a change in
control (as defined below), Mr. Hudson's base salary shall be increased by at
least 6% annually and the agreement will automatically be extended so that it
will have a three year term after the change in control. In addition, the
employment agreement provides for possible profitability and discretionary
bonuses and participation in all other pension, profit-sharing or retirement
plans maintained by the Bank or by the Company for employees of the Bank, as
well as fringe benefits normally associated with Mr. Hudson's office. It is now
expected that Mr. Hudson will continue to be eligible to receive bonuses under
the existing bonus compensation plan for executive officers, as such plan may be
amended in the future. See " -- Bonus Compensation." It is not now contemplated
that Mr. Hudson will receive additional discretionary bonuses, other than
holiday bonuses computed on the same basis as those paid to other employees. The
employment agreement provides that it may be terminated by the Bank for cause,
as defined in the agreement, and that it may otherwise be terminated by the Bank
(subject to vested rights) or by Mr. Hudson.
The employment agreement provides that the nature of Mr. Hudson's
compensation, duties or benefits cannot be diminished following a change in
control of the Bank or the Company. For purposes of the employment agreement, a
change in control generally will occur if (i) after the effective date of the
employment agreement, any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the Exchange Act) directly or indirectly,
6
<PAGE>
acquires beneficial ownership of voting stock, or acquires irrevocable proxies
or any combination of voting stock and irrevocable proxies, representing 25% or
more of any class of voting securities of either the Company or the Bank, or
acquires in any manner control of the election of a majority of the directors of
either the Company or the Bank, (ii) either the Company or the Bank consolidates
or merges with or into another corporation, association or entity, or is
otherwise reorganized, where neither the Company nor the Bank is the surviving
corporation in such transaction, or (iii) all or substantially all of the assets
of either the Company or the Bank are sold or otherwise transferred to, or are
acquired by, any other entity or group.
Special Termination Agreements
The Company has entered into special termination agreements with John
E. Todd, Vice President of the Bank, and Drema A. Michael, Secretary and
Assistant Treasurer of the Bank. Such agreements are intended to ensure that the
Bank maintains a stable and competent management base. The continued success of
the Bank depends, to a significant degree, on the skill and competence of its
officers.
The special termination agreements provide for payment to the covered
officer only in the event of a change in control of the Company or the Bank
followed by termination of the officer's employment by the Bank within 24 months
for other than "cause," as such term is defined in the agreements, or in the
event there are certain specified changes in the officer's employment
circumstances within 24 months following a change in control of the Bank or the
Company and the officer terminates his or her employment. In the event of such a
termination of employment, the officer is entitled to payment in an amount equal
to two times his or her salary and bonuses for income tax purposes for the most
recent calendar year, payable in a lump sum or in equal monthly payments. The
initial term of each of these agreements is for a period commencing upon the
effective date of the Conversion and ending three calendar years later. At the
end of each anniversary date of the agreements, they may be extended for another
year so that the remaining term shall be three years unless written notice of
non-renewal is given by the Company's Board of Directors. For purposes of the
special termination agreements, "change in control" has the same meaning as in
the employment agreement to be entered into with Mr. Hudson. See "-- Employment
Agreement." If a change in control and such a termination occurred during
calendar year 1997, Mr. Todd and Ms. Michael would be entitled to receive
$136,904 and $129,376, respectively, under their special termination agreements.
Employee Stock Ownership Plan
The Bank has established the ESOP for eligible employees of the Bank.
Employees with 1,000 hours of employment in a plan year and who have attained
age 21 are eligible to participate. The ESOP borrowed funds from the Company and
used the funds to purchase 32,586 of the shares of Common Stock issued in the
Bank's conversion from mutual to stock form (the "Conversion"). Collateral for
the loan is the Common Stock purchased by the ESOP. The loan will be repaid
principally from the Bank's discretionary contributions to the ESOP over a
period of 15 years or less. Dividends, if any, paid on shares held by the ESOP
may also be used to reduce the loan. The loan has not been guaranteed by the
Bank.
Shares purchased by the ESOP are held in a suspense account for
allocation among participants as the loan is repaid. Contributions to the ESOP
and shares released from the suspense account in an amount proportional to the
repayment of the ESOP loan are allocated among ESOP participants on the basis of
relative compensation in the year of allocation. Benefits vest in annual
increments with full vesting upon attaining five years of service (with credit
given for years of service prior to the Conversion). Prior to the completion of
five years of credited service, a participant who terminates employment for
reasons other than death, retirement (or early retirement), or disability will
receive only vested benefits under the ESOP. Forfeitures are reallocated among
remaining participating employees in the same proportion as contributions.
Benefits immediately vest and are payable upon death or disability. The Bank's
contributions to the ESOP are not fixed, so benefits payable under the ESOP
cannot be estimated.
7
<PAGE>
The Bank has established a committee of the board of directors to
administer the ESOP. Trustees for the ESOP were appointed prior to the
Conversion. The ESOP committee may instruct the trustees regarding investment of
funds contributed to the ESOP. Participating employees may instruct the trustees
as to the voting of all shares allocated to their respective ESOP accounts. The
unallocated shares held in the suspense account, and all allocated shares for
which voting instructions are not received, will be voted by the trustees in
their discretion subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
Certain Indebtedness and Transactions of Management
The Bank makes loans to its executive officers and directors in the
ordinary course of its business. These loans are currently made on substantially
the same terms, including interest rates, collateral and repayment terms, as
those then prevailing for comparable transactions with nonaffiliated persons,
and do not involve more than the normal risk of collectibility or present any
other unfavorable features. Applicable regulations prohibit the Bank from making
loans to its executive officers and directors at terms more favorable than could
be obtained by persons not affiliated with the Bank. The Bank's policy
concerning loans to executive officers and directors currently complies with
such regulations.
PROPOSAL 1
APPROVAL OF CENTURY BANCORP, INC. STOCK OPTION PLAN
General
The Board of Directors has adopted the Stock Option Plan which is
designed to attract and retain qualified personnel in key positions, provide
directors, officers and employees with a proprietary interest in the Company as
an incentive to contribute to the success of the Company and reward employees
for outstanding performance. The Stock Option Plan is also designed to retain
qualified directors for the Company. The Stock Option Plan provides for the
grant of incentive stock options intended to comply with the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
nonqualified or compensatory stock options. Officers and employees of the
Company, the Bank and any subsidiaries will be eligible to receive incentive
stock options; directors will be eligible to receive only nonqualified stock
options. If stockholder approval is obtained, options to acquire up to 40,733
shares of Common Stock will be awarded to officers and employees of the Company
and the Bank and directors of the Company with an exercise price equal to the
fair market value of the Common Stock on the date of grant. No cash
consideration will be paid for the award of the options.
Description of the Stock Option Plan
The Prospectus of the Company, dated November 12, 1996, (the
"Prospectus") delivered in connection with the Conversion and the Company's
initial public offering, contained a summary of a stock option plan and of
options which could be granted to directors and employees of the Company and the
Bank. Certain provisions of the stock option plan as described in the Prospectus
are required by the regulations of the Federal Deposit Insurance Company (the
"FDIC") in the event the stockholders had approved the plan less than 12 months
following the Conversion. The Company has decided to seek stockholder approval
of the Stock Option Plan more than 12 months after the Conversion. As a result,
the FDIC regulations are no longer applicable to the plan. Consequently, the
Board decided to adopt a plan which includes accelerated vesting of options upon
retirement or a "change in control" of the Company or the Bank, shorter vesting
schedules and the discretionary power to adjust the option exercise price to
reflect the effects of return of capital, as described below. The Company
anticipates awarding to its directors and executive officers the same percentage
of total options available for issuance under the Stock Option Plan as was
disclosed in the Prospectus.
8
<PAGE>
The following description of the Stock Option Plan is a summary of its
terms and is qualified in its entirety by reference to the Stock Option Plan, a
copy of which is attached hereto as Appendix A.
Administration. The Stock Option Plan will be administered and
interpreted by a committee of the Board of Directors (the "Committee") that is
composed solely of two or more "non-employee directors" as that term is defined
by the Exchange Act rules and regulations.
Stock Options. Under the Stock Option Plan, the Board of Directors or
the Committee determines which directors, officers and employees will be granted
options, whether such options will be incentive or nonqualified options, the
number of shares subject to each option, whether such options may be exercised
by delivering other shares of Common Stock and when such options become
exercisable. The Stock Option Plan provides that all options will have an option
exercise price of not less than the fair market value of a share of Common Stock
on the date of grant. The fair market value will be equal to the average high
and low selling prices of the Common Stock on the Nasdaq Small Cap Market
("Nasdaq"). Based upon the high and low selling prices on January __, 1998, if
options had been granted on that day, they would have an option price of
$______, the per share market value of the Common Stock underlying the options
on that date.
All options granted to participants under the Stock Option Plan shall
become vested and exercisable at the rate determined by the Committee when
making an award. Unvested options may not vest after a participant's employment
with the Company, the Bank or any subsidiary is terminated for any reason other
than the participant's death, disability or retirement. Unless the Committee
shall specifically state otherwise at the time an option is granted, all options
granted to participants shall become vested and exercisable in full on the date
an optionee terminates his employment with or service to the Company, the Bank
or any subsidiary because of his death, disability or retirement. In addition,
all stock options will become vested and exercisable in full in the event that
there is a change in control of the Company, as defined in the Stock Option
Plan. Options granted under the Stock Option Plan will have a term of ten years.
Stock options are non-transferable except by will or the laws of descent and
distribution.
Payment for shares purchased upon the exercise of options may be made
either in cash, by check, bank draft of money order or, if permitted by the
Committee, by delivering shares of Common Stock (including shares acquired
pursuant to the exercise of an option) with a fair market value equal to the
total option price, or a combination of the foregoing. To the extent an optionee
already owns shares of Common Stock prior to the exercise of his or her option,
such shares could be used (if permitted by the Committee) as payment for the
exercise price of the option. If the fair market value of a share of Common
Stock at the time of exercise is greater than the exercise price per share, this
feature would enable the optionee to acquire a number of shares of Common Stock
upon exercise of the option which is greater than the number of shares delivered
as payment for the exercise price. Because options may be exercised in part from
time to time, the ability to deliver Common Stock as payment of the exercise
price could enable the optionee to turn a relatively small number of shares into
a large number of shares.
Optional Cash Payment. Upon the exercise of an option, at the written
request of the optionee, the Committee, in its sole and absolute discretion, may
make a cash payment to the optionee, in whole or in part, in lieu of the
delivery of shares of Common Stock. Such cash payment, made in exchange for
cancellation of the option, shall be equal to the difference between the market
value per share of Common Stock, determined in accordance with the Stock Option
Plan, on the date of the option exercise and the exercise price per share of the
option. However, cash payment will not be made in the event that the transaction
would result in liability to the optionee and the Company under Section 16(b) of
the Exchange Act.
Number of Shares Covered by the Stock Option Plan. A total of 40,733
shares of Common Stock has been reserved for issuance pursuant to the Stock
Option Plan, which is 10% of the Common Stock issued in connection with the
Conversion. In lieu of issuing reserved unissued shares upon the exercise of
options, the
9
<PAGE>
Company may elect to purchase shares in the open market to fund exercises of
options. To the extent that exercised options are funded by authorized but
unissued shares, the interests of existing shareholders will be diluted. In the
event of a stock split, reverse stock split or stock dividend, the number of
shares of Common Stock under the Stock Option Plan, the number of shares to
which any option relates and the exercise price per share under any option shall
be adjusted to reflect such increase or decrease in the total number of shares
of Common Stock outstanding. In addition, in the event the Company declares a
special cash dividend or return of capital, the per share exercise price of all
previously granted options which remain unexercised as of the date of such
declaration may be proportionately adjusted to give effect to such special cash
dividend or return of capital subject to certain limitations.
Amendment and Termination of the Stock Option Plan. Unless sooner
terminated, the Stock Option Plan shall continue in effect for a period of ten
years from the date the Stock Option Plan was approved by stockholders and
became effective by its terms. The Board may at any time alter, suspend,
terminate or discontinue the Stock Option Plan, subject to any applicable
regulatory requirements and any required stockholder approval or any stockholder
approval which the Board may deem advisable for any reason, such as for the
purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying applicable stock exchange or
quotation system listing requirements. The Board may not, without the consent of
the optionee, make any alteration which would deprive the optionee of his rights
with respect to any previously granted option. Termination of the Stock Option
Plan would not affect any previously granted options.
Federal Income Tax Consequences. Under current provisions of the Code,
the federal income tax treatment of incentive stock options and nonqualified
stock options is different. Options granted to employees under the Stock Option
Plan may be "incentive stock options" which are designed to result in beneficial
tax treatment to the employee but not a tax deduction to the Company or the
Bank.
The holder of an incentive stock option generally is not taxed for
federal income tax purposes on either the grant or the exercise of the option.
However, the optionee must include in his or her federal alternative minimum tax
income any excess (the "Bargain Element") of the acquired Common Stock's fair
market value at the time of exercise over the exercise price paid by the
optionee. Furthermore, if the optionee sells, exchanges, gives or otherwise
disposes of such Common Stock (other than in certain types of transactions)
either within two years after the option was granted or within one year after
the option was exercised (an "Early Disposition"), the optionee generally must
recognize the Bargain Element as compensation income for regular federal income
tax purposes. Any gain realized on the disposition in excess of the Bargain
Element is subject to recognition under the usual rules applying to dispositions
of property. If a taxable sale or exchange is made after such holding periods
are satisfied, the difference between the exercise price and the amount realized
upon the disposition of the Common Stock generally will constitute a capital
gain or loss for tax purposes. If an optionee exercises an incentive stock
option and delivers shares of Common Stock as payment for part or all of the
exercise price of the stock purchased (the "Payment Stock"), no gain or loss
generally will be recognized with respect to the Payment Stock; provided,
however, if the Payment Stock was acquired pursuant to the exercise of an
incentive stock option, the optionee will be subject to recognizing as
compensation income the Bargain Element on the Payment Stock as an Early
Disposition if the exchange for the new shares occurs prior to the expiration of
the holding periods for the Payment Stock. The Company generally would not
recognize gain or loss or be entitled to a deduction upon either the grant of an
incentive stock option or the optionee's exercise of an incentive stock option.
However, if there is an Early Disposition, the Company generally would be
entitled to deduct the Bargain Element as compensation paid to the optionee.
Options granted to directors under the Stock Option Plan would be
"nonqualified stock options." In general, the holder of a nonqualified stock
option will recognize compensation income equal to the amount by which the fair
market value of the Common Stock received on the date of exercise exceeds the
sum of the exercise price and any amount paid for the nonqualified stock option.
If the optionee elects to pay the exercise price in whole or in part with Common
Stock, the optionee generally will not recognize any gain or loss on the Common
10
<PAGE>
Stock surrendered in payment of the exercise price. The Company would not
recognize any income or be entitled to claim any deduction upon the grant of a
nonqualified stock option. At the time the optionee is required to recognize
compensation income upon the exercise of the nonqualified stock option, the
Company would recognize a compensation expense and be entitled to claim a
deduction in the amount equal to such compensation income.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting Treatment. Neither the grant nor the exercise of an
incentive stock option or a nonqualified stock option under the Stock Option
Plan currently requires any charge against earnings under generally accepted
accounting principles. In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," which is effective for transactions
entered into after December 15, 1995. SFAS No. 123 (i) establishes financial
accounting and reporting standards for stock-based employee compensation plans,
(ii) defines a fair value method of accounting for an employee stock option or
similar equity instrument, and (iii) encourages all entities to adopt that
method of accounting for all of their employee stock compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees." Under the fair value
method, compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value method, compensation cost is the
excess, if any, of the quoted market price of the stock at grant date or other
measurement date over the amount an employee must pay to acquire the stock. The
Company anticipates that it will use the intrinsic value method, in which event
pro forma disclosure will be included in the footnotes to the Company's
financial statements to show what net income and earnings per share would have
been if the fair value method had been utilized. If the Company elects to
utilize the fair value method, its net income and earnings per share may be
adversely affected.
Stockholder Approval. No options will be granted under the Stock Option
Plan unless the Stock Option Plan is approved by the stockholders.
Options to be Granted. The Committee intends to grant options to
directors, officers and employees of the Company and the Bank promptly after the
date of stockholder approval of the Stock Option Plan. Not all of the options
authorized under the Stock Option Plan will be allocated at this time. Any
unallocated options, in addition to forfeited options, will be subject to
allocation later. At this time, 15 directors, executive officers and employees
of the Company and the Bank would be eligible to participate under the Stock
Option Plan. No options will be granted to any associates of any of the
directors or executive officers of the Company or the Bank. The table on page 15
sets forth in column two information with respect to the number of options that
the Company anticipates would be granted to directors, executive officers and
other employees as a group upon stockholder approval of the Stock Option Plan.
As discussed in the Prospectus, it was originally anticipated that 20%
of the options granted pursuant to the Stock Option Plan would vest and become
nonforfeitable on the first anniversary date of the option grant and 20% would
vest and become nonforfeitable on each subsequent anniversary date thereafter,
resulting in all options being vested in five years from the date of grant. It
is currently anticipated that 25% of the aggregate number of options granted to
officers and employees will be vested and exercisable on the date of grant and
25% of the aggregate number of options granted will vest and become exercisable
on each of the next three annual anniversary dates thereafter. It is expected
that nonqualified stock options granted to non-employee directors of the Company
and the Bank will be immediately vested and nonforfeitable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE CENTURY
---
BANCORP, INC. STOCK OPTION PLAN.
11
<PAGE>
PROPOSAL 2
APPROVAL OF THE HOME SAVINGS, INC., SSB
MANAGEMENT RECOGNITION PLAN
General
The Boards of Directors of the Company and the Bank have adopted and
desire to establish the Management Recognition Plan, the objective of which is
to encourage the continued service of directors, officers and employees of the
Bank. The MRP will provide directors, officers and employees with an ownership
interest in the Company in a manner designed to serve as an incentive to
contribute to the success of the Bank and the Company and to reward employees
for outstanding performance. All directors, officers and employees of the Bank
are eligible for participation in the MRP.
Description of the MRP
As with the Stock Option Plan and as discussed under Proposal 1, the
management recognition plan as described in the Prospectus contained certain
provisions that were required by the FDIC if stockholder approval of the plan
was obtained less than 12 months after the Conversion. Several provisions of the
proposed MRP described below differ from those disclosed in the Prospectus,
including a shorter vesting period and accelerated vesting upon a "change in
control" of the Company or the Bank. As with the Stock Option Plan, the Bank
anticipates awarding its directors and executive officers the same percentage of
total restricted shares under the MRP as was disclosed in the Prospectus. The
Bank anticipates that the restricted shares will vest over a five year period
rather than the six year period discussed in the Prospectus. The following
description of the MRP is a summary of its terms and is qualified in its
entirety by reference to the MRP, a copy of which is attached hereto as Appendix
B.
Administration. The MRP will be administered and interpreted by a
committee of the board of directors of the Bank (the "Committee") that is
composed solely of two or more "non-employee directors", as defined by Exchange
Act. The board of directors of the Bank will appoint the trustees of the trust
established pursuant to the MRP (the "Trust"). The trustees will have the
responsibility to invest all funds contributed by the Bank to the Trust.
Awards of Restricted Stock. Upon stockholder approval, the MRP will
acquire 16,293 shares of Common Stock, which is equal to 4% of the Common Stock
issued in the Conversion. It is anticipated that these shares either will be
purchased on the open market or issued from authorized but unissued shares of
Common Stock. To the extent that the MRP acquires authorized but unissued
shares, the interests of existing shareholders will be diluted.
Shares of Common Stock granted pursuant to the MRP will be in the form
of restricted stock which will vest over a period of time determined by the
Committee. Shares issued under the MRP will be issued at no cost to recipients.
A recipient will be entitled to all voting and other stockholder rights with
respect to shares which have been awarded under the MRP. However, until such
shares have vested, they will be held in the MRP Trust. Such unvested shares may
not be sold, pledged or otherwise disposed of. In addition, any cash dividends
or stock dividends declared with respect to unvested share awards will be held
by the MRP Trust for the benefit of the recipients and such dividends, including
any interest thereon, will be paid out proportionately by the MRP Trust to the
recipients thereof as soon as practicable after the share awards become vested.
The MRP provides that cash held by the Trust pursuant to receipt of dividends,
including a special dividend or return of capital, on the Common Stock held by
the Trust and unallocated to participants may be used to purchase additional
shares of Common Stock.
If a recipient terminates employment for reasons other than death or
disability, the recipient will forfeit all rights to the allocated shares which
have not yet vested. All shares subject to an award held by a recipient whose
employment with or service to the Company, the Bank or any subsidiary terminates
due to death or disability, as
12
<PAGE>
defined in the MRP, shall be vested as of the recipient's last day of employment
with or service to the Company, the Bank or any subsidiary and shall be
distributed as soon as practicable thereafter. All shares subject to an award
held by a recipient also shall be vested in the event of a change in control of
the Company, as defined in the MRP.
Amendment and Modification of the MRP. The board of directors of the
Bank may at any time amend or modify the MRP in any respect, subject to
applicable regulatory requirements and required stockholder approvals. However,
any amendment or modification of the MRP shall not in any manner affect any
award of shares made previously to a recipient under the Plan without the
consent of such recipient.
Federal Income Tax Consequences. Pursuant to Section 83 of the Code,
recipients of MRP awards will recognize ordinary income in an amount equal to
the fair market value of the shares of Common Stock granted to them at the time
that the shares vest and become transferable. A recipient of a MRP award may
also elect, however, to accelerate the recognition of income with respect to his
or her grant to the time when shares of Common Stock are first transferred to
him or her, notwithstanding the vesting schedule of such awards. The Company
will be entitled to deduct as a compensation expense for tax purposes the same
amounts recognized as income by recipients of MRP awards in the year in which
such amounts are included in income.
Accounting Treatment. For a discussion of SFAS No. 123, see "Proposal 1
Approval of Century Bancorp, Inc. Stock Option Plan - Accounting Treatment."
Under the intrinsic value method, the Company will also recognize a compensation
expense as shares of Common Stock granted pursuant to the MRP vest. The amount
of compensation expense recognized for accounting purposes is based upon the
fair market value of the Common Stock at the date of grant to recipients, rather
than the fair market value at the time of vesting for tax purposes.
Stockholder Approval. No shares will be granted under the MRP unless it
is approved by the stockholders.
Shares to be Granted. The Committee intends to grant awards of
restricted stock to directors, officers and employees of the Bank promptly after
the date of stockholder approval of the MRP. Not all of the restricted shares
authorized under the MRP will be allocated at this time. Any unallocated
restricted shares, in addition to forfeited restricted shares, will be subject
to allocation later. At this time 15 directors, executive officers and employees
of the Company and the Bank would be eligible to participate under the MRP. The
following table sets forth certain information with respect to awards the
Company and the Bank anticipate would be made upon stockholder approval of the
Stock Option Plan and the MRP. Column two lists the options that the Company
anticipates would be granted to directors, executive officers and other
employees as a group under the Stock Option Plan; column three lists the number
of shares of Common Stock the Bank anticipates would be awarded to directors,
executive officers and other employees as a group under the MRP. Column four
sets forth the dollar value of the stock awards assuming a value per share of
Common Stock equal to $______, which was the closing market price of the Common
Stock on _________ on ___________, 1998. This valuation is without regard to the
restrictions on the shares of Common Stock awarded under the Management
Recognition Plan.
13
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<TABLE>
<CAPTION>
Name and Position/1/ Stock Option Plan Management Recognition Plan
-------------------- ----------------- ---------------------------
Number of Shares Subject
------------------------
Non-Employee Directors to Stock Options Number of Shares Dollar Value
---------------------- ---------------- ---------------- ------------
<S> <C> <C> <C>
Henry H. Darr 2,037 815
John R. Hunnicutt 2,037 815
F. Stuart Kennedy 2,037 815
Milton T. Riley, Jr. 2,037 815
----- -----
Total (4 persons) 8,148 3,260 $
===== ===== =====
Executive Officers
------------------
James G. Hudson, Jr., President, CEO and 10,183 4,073
Treasurer
John E. Todd, Vice President 6,110 2,444
Drema A. Michael, Secretary and 6,110 2,444
----- -----
Assistant Treasurer
Total (3 persons) 22,403 8,961 $
====== ===== =====
Non-Executive Officer Employees Group
(8 persons) 6,110 2,444 $
</TABLE>
- ------------------------
/1/ Position with Company, unless otherwise indicated.
It is currently anticipated that 25% of the aggregate number of shares
granted to directors, officers and employees will be vested on the date of grant
promptly after shareholder approval of the MRP and that 25% of the aggregate
number of shares granted will vest on each of the next three annual anniversary
dates thereafter. The Committee, in its sole and absolute discretion, may
provide for an accelerated vesting schedule for directors, officers and
employees who are eligible for retirement before the expiration of the
anticipated five-year vesting schedule.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE HOME
SAVINGS, INC., SSB MANAGEMENT RECOGNITION PLAN.
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
It is presently anticipated that the 1998 Special Meeting of
Stockholders will be held in October of 1998. In order for stockholder proposals
to be included in the proxy material for that meeting, such proposals must be
received by the Secretary of the Company at the Company's principal executive
office not later than May 26, 1998, and meet all other applicable requirements
for inclusion therein.
The Company's Bylaws provide that, in order to be eligible for
consideration at an special meeting of stockholders, all nominations of
directors, other than those made by the Company's Board of Directors, must be
made in writing and must be delivered to the Secretary of the Company not less
than 50 days nor more than 90 days prior to the meeting at which such
nominations will be made; provided, however, if less than 21 days notice of the
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<PAGE>
meeting is given to stockholders, such nominations must be delivered to the
Secretary of the Company not later than the close of business on the seventh day
following the day on which the notice of meeting was mailed.
OTHER MATTERS
Management knows of no other matters to be presented for consideration
at the Special Meeting or any adjournments thereof. If any other matters shall
properly come before the Special Meeting, it is intended that the proxyholders
named in the enclosed form of proxy will vote the shares represented thereby in
accordance with their judgment, pursuant to the discretionary authority granted
therein.
MISCELLANEOUS
The Annual Report of the Company for the year ended June 30, 1997,
which includes consolidated financial statements audited and reported upon by
the Company's independent auditor, is being mailed along with this Proxy
Statement; however, it is not intended that the Annual Report be deemed a part
of this Proxy Statement or a solicitation of proxies.
THE FORM 10-KSB FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, WILL BE
PROVIDED FREE OF CHARGE TO THE COMPANY'S STOCKHOLDERS UPON WRITTEN REQUEST
DIRECTED TO: CENTURY BANCORP, INC., POST OFFICE BOX 989, 22 WINSTON STREET,
THOMASVILLE, NORTH CAROLINA 27361-0989, ATTENTION: JAMES G. HUDSON, JR.
By Order of the Board of Directors,
/s/ Drema A. Michael
Drema A. Michael
Secretary
Thomasville, North Carolina
September 23, 1997
15
<PAGE>
APPENDIX A
CENTURY BANCORP, INC.
STOCK OPTION PLAN
THIS IS THE STOCK OPTION PLAN ("Plan") of Century Bancorp, Inc. (the
"Corporation"), a North Carolina corporation, with its principal office in
Thomasville, Davidson County, North Carolina, adopted by the Board of Directors
of the Corporation and effective upon the approval of the Plan by the
shareholders of the Corporation, under which options may be granted from time to
time to eligible directors and employees of the Corporation, Home Savings, Inc.,
SSB (the "Bank") and of any corporation or other entity of which either the
Corporation or the Bank owns, directly or indirectly, not less than 50% of any
class of equity securities (a "Subsidiary"), to purchase shares of common stock
of the Corporation ("Common Stock"), subject to the provisions set forth below:
1. PURPOSE OF THE PLAN. The purpose of the Plan is to aid the
-------------------
Corporation, the Bank and any Subsidiary in attracting and retaining capable
directors and employees and to provide a long range incentive for directors and
employees to remain in the management of the Corporation, the Bank or any
Subsidiary, to perform at increasing levels of effectiveness and to acquire a
permanent stake in the Corporation with the interest and outlook of an owner.
These objectives will be promoted through the granting of options to acquire
shares of Common Stock pursuant to the terms of this Plan.
2. ADMINISTRATION. The Plan shall be administered by a committee (the
--------------
"Committee"), which shall consist of not less than two members of the Board of
Directors of the Corporation (the "Board") who are "Non-Employee Directors" as
defined in Rule 16b-3(b)(3) of the Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Members of the Committee
shall serve at the pleasure of the Board. In the absence at any time of a duly
appointed Committee, this Plan shall be administered by the Board. The Committee
may designate any officers or employees of the Corporation, the Bank or any
Subsidiary to assist in the administration of the Plan and to execute documents
on behalf of the Committee and perform such other ministerial duties as may be
delegated to them by the Committee.
Subject to the provisions of the Plan, the determinations or the
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive upon all persons affected thereby. By way of
illustration and not of limitation, the Committee shall have the discretion (a)
to construe and interpret the Plan and all options granted hereunder and to
determine the terms and provisions (and amendments thereof) of the options
granted under the Plan (which need not be identical); (b) to define the terms
used in the Plan and in the options granted hereunder; (c) to prescribe, amend
and rescind the rules and regulations relating to the Plan; (d) to determine the
individuals to whom and the time or times at which such options shall be
granted, the number of shares to be subject to each option, the option price,
and the determination of leaves of absence which may be granted to participants
without constituting a termination of their employment for the purposes of the
Plan; and (e) to make all other determinations necessary or advisable for the
administration of the Plan.
It shall be in the discretion of the Committee to grant options which
qualify as "incentive stock options," as that term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") ("Incentive Stock
Options") or which do not qualify as Incentive Stock Options ("Nonqualified
Stock Options") (herein referred to collectively as "Options;" however, whenever
reference is specifically made only to "Incentive Stock Options" or
"Nonqualified Stock Options," such reference
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<PAGE>
shall be deemed to be made to the exclusion of the other). Any options granted
which fail to satisfy the requirements for Incentive Stock Options shall become
Nonqualified Stock Options.
3. STOCK AVAILABLE FOR OPTIONS. In the discretion of the Committee,
---------------------------
the stock to be subject to Options under the Plan shall be authorized but
unissued shares of Common Stock which are issued directly to optionees upon
exercise of options and/or shares of Common Stock which are acquired by the Plan
or the Corporation in the open market. The total number of shares of Common
Stock for which Options may be granted under the Plan is 40,733 shares, which is
10% of the total number of shares of Common Stock issued by the Corporation in
connection with the conversion of the Bank from a North Carolina mutual savings
bank to a North Carolina stock savings bank on December 20, 1996 (the
"Conversion"). Such number of shares is subject to any capital adjustments as
provided in Section 16. In the event that an Option granted under the Plan is
forfeited, released, expires or is terminated unexercised as to any shares
covered thereby, such shares thereafter shall be available for the granting of
Options under the Plan; however, if the forfeiture, expiration, release or
termination date of an Option is beyond the term of existence of the Plan as
described in Section 21, then any shares covered by forfeited, unexercised,
released or terminated options shall not reactivate the existence of the Plan
and therefore may not be available for additional grants under the Plan. The
Corporation, during the term of the Plan, will reserve and keep available a
number of shares of Common Stock sufficient to satisfy the requirements of the
Plan.
4. ELIGIBILITY. Options shall be granted only to individuals who meet
-----------
all of the following eligibility requirements:
(a) Such individual must be an employee or a member of the
Board of Directors of the Corporation, the Bank or a Subsidiary. For
this purpose, an individual shall be considered to be an "employee"
only if there exists between the Corporation, the Bank or a Subsidiary
and the individual the legal and bona fide relationship of employer and
employee. In determining whether such relationship exists, the
regulations of the United States Treasury Department relating to the
determination of such relationship for the purpose of collection of
income tax at the source on wages shall be applied.
(b) Such individual must have such knowledge and experience in
financial and business matters that he or she is capable of evaluating
the merits and risks of the investment involved in the exercise of the
Options.
(c) Such individual, being otherwise eligible under this
Section 4, shall have been selected by the Committee as a person to
whom an Option shall be granted under the Plan.
In determining the directors and employees to whom Options shall be
granted and the number of shares to be covered by each Option, the Committee
shall take into account the nature of the services rendered by respective
directors and employees, their present and potential contributions to the
success of the Corporation, the Bank and any Subsidiary and such other factors
as the Committee shall deem relevant. A director or employee who has been
granted an Option under the Plan may be granted an additional Option or Options
under the Plan if the Committee shall so determine.
If, pursuant to the terms of the Plan, it is necessary that the
percentage of stock ownership of any individual be determined, stock ownership
in the Corporation or of a related corporation which is owned (directly or
indirectly) by or for such individual's brothers and sisters (whether by the
whole or half blood), spouse, ancestors, and lineal descendants or by or for any
corporation, partnership, estate or trust
17
<PAGE>
of which such employee is a shareholder, partner or beneficiary shall be
considered as owned by such director or employee.
5. OPTION GRANTS. Subject to the provisions of this Plan, Options
-------------
shall be awarded to the directors and employees in such amounts as are
determined by the Committee. The proper officers on behalf of the Corporation
and each Optionee shall execute a Stock Option Grant and Agreement (the "Option
Agreement") which shall set forth the total number of shares of Common Stock to
which it pertains, the exercise price, whether it is a Nonqualified Stock Option
or an Incentive Stock Option, and such other terms, conditions, restrictions and
privileges as the Committee in each instance shall deem appropriate, provided
they are not inconsistent with the terms, conditions and provisions of this
Plan. Each Optionee shall receive a copy of his executed Option Agreement. Any
Option granted with the intention that it will be an Incentive Stock Option but
which fails to satisfy a requirement for Incentive Stock Options shall continue
to be valid and shall be treated as a Nonqualified Stock Option.
6. OPTION PRICE.
------------
(a) The option price of each Option granted under the Plan
shall be not less than 100% of the market value of the stock on the
date of grant of the Option. In the case of incentive stock options
granted to a shareholder who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation,
the Bank or a Subsidiary (a "ten percent shareholder"), the option
price of each Option granted under the Plan shall not be less than 110%
of the market value of the stock on the date of grant of the Option. If
the Common Stock is listed on a national securities exchange (including
for this purpose the Nasdaq Stock Market, Inc. National Market) on the
date in question, then the market value per share shall be not less
than the average of the highest and lowest selling price on such
exchange on such date, or if there were no sales on such date, then the
market price per share shall be equal to the average between the bid
and asked price on such date. If the Common Stock is traded otherwise
than on a national securities exchange (including for this purpose the
Nasdaq Stock Market, Inc. National Market) on the date in question,
then the market price per share shall be equal to the average between
the bid and asked price on such date, or, if there is no bid and asked
price on such date, then on the next prior business day on which there
was a bid and asked price. If no such bid and asked price is available,
then the market value per share shall be its fair market value as
determined by the Committee, in its sole and absolute discretion.
The Committee shall maintain a written record of its method of
determining such value.
(b) The option price shall be payable to the Corporation
either (i) in cash or by check, bank draft or money order payable to
the order of the Corporation, or (ii) at the discretion of the
Committee, through the delivery of shares of the common stock of the
Corporation owned by the optionee with a market value (determined in a
manner consistent with (i) above) equal to the option price, or (iii)
at the discretion of the Committee by a combination of (i) and (ii)
above. No shares shall be delivered until full payment has been made.
7. EXPIRATION OF OPTIONS. The Committee shall determine the expiration
---------------------
date or dates of each Option, but such expiration date shall be not later than
10 years after the date such Option is granted. In the event an Incentive Stock
Option is granted to a ten percent shareholder, the expiration date or dates of
each Option shall be not later than 5 years after the date such Option is
granted. The Committee, in its discretion, may extend the expiration date or
dates of an Option after such date was originally set; however, such expiration
date may not exceed the maximum expiration date described in this Section 7.
18
<PAGE>
8. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) All Options must be granted within 10 years of the
Effective Date of this Plan as defined in Section 20.
(b) The Committee may grant Options which are intended to be
Incentive Stock Options and Nonqualified Stock Options, either
separately or jointly, to an eligible employee.
(c) The grant of Options shall be evidenced by a written
instrument (an Option Agreement) containing terms and conditions
established by the Committee consistent with the provisions of this
Plan.
(d) Not less than 100 shares may be purchased at any one time
unless the number purchased is the total number at that time
purchasable under the Plan.
(e) The recipient of an Option shall have no rights as a
shareholder with respect to any shares covered by his Option until
payment in full by him for the shares being purchased. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock is fully paid
for, except as provided in Section 16.
(f) The aggregate fair market value of the stock (determined
as of the time the Option is granted) with respect to which Incentive
Stock Options are exercisable for the first time by any participant
during any calendar year (under all benefit plans of the Corporation,
the Bank or any Subsidiary, if applicable) shall not exceed $100,000;
provided, however, that such $100,000 limit of this subsection (f)
shall not apply to the grant of Nonqualified Stock Options. The
Committee may grant Options which are exercisable in excess of the
foregoing limitations, in which case Options granted which are
exercisable in excess of such limitation shall be Nonqualified Stock
Options.
(g) All stock obtained pursuant to an option which qualifies
as an Incentive Stock Option shall be held in escrow for a period which
ends on the later of (i) two (2) years from the date of the granting of
the Option or (ii) one (1) year after the transfer of the stock
pursuant to the exercise of the Option. The stock shall be held by the
Corporation or its designee. The employee who has exercised the Option
shall during such holding period have all rights of a shareholder,
including but not limited to the rights to vote, receive dividends and
sell the stock. The sole purpose of the escrow is to inform the
Corporation of a disqualifying disposition of the stock within the
meaning of Section 422 of the Code, as amended, and it shall be
administered solely for that purpose.
9. EXERCISE OF OPTIONS.
-------------------
(a) Options granted to an optionee by virtue of his position
as a nonemployee director of the Corporation or the Bank (as stated in
the Option Agreement) or to an employee by virtue of his position as an
employee (as stated in the Option Agreement) shall become vested and
exercisable at the times, at the rate and subject to such limitations
as may be set forth in the Option Agreement executed in connection
therewith; provided, however, that all outstanding and nonforfeited
options shall be exercisable, if not sooner, on the day prior to the
expiration date
19
<PAGE>
thereof.
(b) Unless the Committee shall specifically state otherwise at
the time an Option is granted, all Options granted hereunder shall
become vested and exercisable upon the optionee's death, retirement or
disability within the meaning of Section 22(e)(3) of the Code, and in
the event of a change in control as set forth in Section 13 of this
Plan.
(c) The exercise of any Option must be evidenced by written
notice to the Corporation that the optionee intends to exercise his
Option. In no event shall an Option be deemed granted by the
Corporation or exercisable by a recipient prior to the mutual execution
by the Corporation and the recipient of an Option Agreement which
comports with the requirements of Section 5 and Section 8(c).
(d) Any right to exercise Options in annual installments shall
be cumulative and any vested installments may be exercised, in whole or
in part, at the election of the optionee.
(e) The inability of the Corporation or Bank to obtain
approval from any regulatory body or authority deemed by counsel to be
necessary to the lawful issuance and sale of any shares of Common Stock
hereunder shall relieve the Corporation and the Bank of any liability
in respect of the non-issuance or sale of such shares. As a condition
to the exercise of an option, the Corporation may require the person
exercising the Option to make such representations and warranties as
may be necessary to assure the availability of an exemption from the
registration requirements of federal or state securities laws.
(f) The Committee shall have the discretionary authority to
impose in the Option Agreements such restrictions on shares of Common
Stock as it may deem appropriate or desirable, including but not
limited to the authority to impose a right of first refusal or to
establish repurchase rights or both of these restrictions.
20
<PAGE>
(g) Notwithstanding anything to the contrary herein, an
optionee receiving the grant of an Option by virtue of his or her
position as a director or as an employee of the Corporation, the Bank
or a Subsidiary (as stated in the Option Agreement), shall be required
to exercise his or her Options within the periods set forth in Sections
10, 11 and 12 below.
10. TERMINATION OF EMPLOYMENT - EXCEPT BY DISABILITY, RETIREMENT OR
---------------------------------------------------------------
DEATH. If any optionee receiving the grant of an Option by virtue of his
- -----
position as a director (as stated in the Option Agreement) ceases to be a
director of the Corporation, the Bank or any Subsidiary for any reason other
than death, retirement (as defined in Section 11) or disability (as defined in
Section 11) or if any optionee receiving the grant of an Option by virtue of his
position as an employee (as stated in the Option Agreement) ceases to be an
employee of the Corporation, the Bank or any Subsidiary for any reason other
than death, retirement (as defined in Section 11) or disability (as defined in
Section 11), he may, (i) at any time within three (3) months after his date of
termination, but not later than the date of expiration of the Option, exercise
any Option designated in the Option Agreement as an Incentive Stock Option and
(ii) at any time prior to the date of expiration of the Option, exercise any
option designated in the Option Agreement as a Nonqualified Stock Option.
However, in either such event the optionee may exercise any Option only to the
extent it was vested and he or she was entitled to exercise the Option on the
date of termination. Any Options or portions of Options of terminated optionees
not so exercised shall terminate and be forfeited.
11. TERMINATION OF EMPLOYMENT - DISABILITY OR RETIREMENT. If any
----------------------------------------------------
optionee receiving the grant of an Option by virtue of his position as a
director (as stated in the Option Agreement) ceases to be a director of the
Corporation, the Bank or any Subsidiary due to his becoming disabled within the
meaning of Section 22(e)(3) of the Code, or if any employee receiving the grant
of an Option by virtue of his position as an employee (as stated in the Option
Agreement) ceases to be employed by the Corporation, the Bank or any Subsidiary
due to his becoming disabled within the meaning of Section 22(e)(3) of the Code,
all unvested and forfeitable Options of such optionee shall immediately become
vested and nonforfeitable and he may, (i) at any time within 12 months after his
date of termination, but not later than the date of expiration of the Option,
exercise any option designated in the Option Agreement as an Incentive Stock
Option with respect to all shares subject thereto and (ii) at any time prior to
the date of expiration of the Option, exercise any Option designated in the
Option Agreement as a Nonqualified Stock Option with respect to all shares
subject thereto. Any Options or portions of Options of optionees who are
terminated because they become disabled which are not so exercised shall
terminate.
If any optionee receiving the grant of an Option by virtue of his
position as a director (as stated in the Option Agreement) ceases to be a
director of the Corporation, the Bank or any Subsidiary due to his retirement,
or if any employee receiving the grant of an Option by virtue of his position as
an employee (as stated in the Option Agreement) ceases to be employed by the
Corporation, the Bank or any Subsidiary due to his retirement, all unvested and
forfeitable Options of such optionee shall immediately become vested and
nonforfeitable and he may at any time prior to the date of expiration of the
Option, exercise such Option, provided, however, that if the Option is exercised
more than three (3) months after such retirement, the Option may be treated as a
Nonqualified Stock Option. Any Options or portions of Options of retired
directors or employees not so exercised shall terminate. For purposes of this
Plan, the term "retirement," as it relates to any optionee receiving a grant of
an Option as a result of his or her position as an employee of the Corporation,
the Bank or any Subsidiary, shall mean (i) the termination of the optionee's
employment under conditions which would constitute retirement under any tax
qualified retirement plan maintained by the Corporation, the Bank or a
Subsidiary, or (ii) termination of employment after attaining age 65. The term
"retirement," as it relates to any optionee receiving a
21
<PAGE>
grant of an Option as a result of his or her position as a director of the
Corporation, the Bank or any Subsidiary, shall mean the cessation of membership
on such board of directors at the election of the optionee at any time after not
less than 20 years of service as a member of such board of directors.
12. TERMINATION OF EMPLOYMENT - DEATH. If an optionee receiving the
---------------------------------
grant of an Option by virtue of his position as a director (as stated in the
Option Agreement) dies while a director of the Corporation, the Bank or any
Subsidiary or if any employee receiving the grant of an option by virtue of his
position as an employee (as stated in the Option Agreement) dies while in the
employment of the Corporation, the Bank or a Subsidiary, all unvested and
forfeitable Options of such optionee shall immediately become vested and
nonforfeitable and the person or persons to whom the Option is transferred by
will or by the laws of descent and distribution may exercise the Option at any
time until the term of the Option has expired, with respect to all shares
subject thereto, to the same extent and upon the same terms and conditions the
optionee would have been entitled to do so had he lived. Any Options or portions
of Options of deceased directors or employees not so exercised shall terminate.
13. CHANGE IN CONTROL. In the event that an optionee ceases to be an
-----------------
employee or a director of the Corporation, the Bank or a Subsidiary (which
position resulted in his or her receipt of an Option pursuant to this Plan) for
any reason after the occurrence of a "change in control" and prior to the time
that all shares allocated to him or her would be 100% vested, nonforfeitable and
exercisable in accordance with Sections 9 and 10 above, then, notwithstanding
Sections 9 and 10 above, all Options granted to such optionee shall immediately
become fully vested and nonforfeitable. For purposes of this Plan, a "change in
control" shall mean (i) a change in control of a nature that would be required
to be reported by the Corporation in response to Item 1 of the Current Report on
Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Exchange Act; (ii) such time as any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) (other than the Corporation or an
affiliate of the Corporation) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation or Bank representing 25% or more of the combined voting power of
the outstanding Common Stock of the Corporation or outstanding common stock of
the Bank, as applicable; or (iii) individuals who constitute the Board or the
board of directors of the Bank on the date hereof (the "Incumbent Board" and
"Incumbent Bank Board," respectively) cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board or Incumbent Bank
Board, as applicable, or whose nomination for election by the Corporation's or
Bank's shareholders was approved by the Corporation's or Bank's Board of
Directors or Nominating Committee, shall be considered as though he or she were
a member of the Incumbent Board or Incumbent Bank Board, as applicable; or (iv)
either the Corporation or the Bank consolidates or merges with or into another
corporation, association or entity or is otherwise reorganized, where neither
the Corporation nor the Bank, respectively, is the surviving corporation in such
transaction; or (v) all or substantially all of the assets of either the
Corporation or the Bank are sold or otherwise transferred to or are acquired by
any other entity or group.
As set forth in Section 10, in the event of such a termination after a
change in control, the Optionee must exercise any Incentive Stock Options within
three (3) months after his date of termination, but in no event later than the
date of expiration of the Option and may exercise any Nonqualified Stock Options
at any time prior to the date of expiration of the Option.
14. OPTIONAL CASH PAYMENT. Upon the exercise of an Option, at the
---------------------
written request of the optionee, the Committee, in its sole and absolute
discretion, may make a cash
22
<PAGE>
payment to the optionee, in whole or in part, in lieu of the delivery of shares
of Common Stock. Such cash payment to be paid in lieu of delivery of Common
Stock shall be equal to the difference between the market value per share
(determined as set forth in Section 6 above) of Common Stock on the date of the
Option exercise and the exercise price per share of the Option. Such cash
payment shall be in exchange for the cancellation of such Option.
Notwithstanding the above, such cash payment shall not be made in the event that
such transaction would result in liability to the optionee and the Company under
Section 16(b) of the Exchange Act, and the regulations promulgated thereunder.
15. RESTRICTIONS ON TRANSFER. An Option granted under this Plan may not
------------------------
be transferred except by will or the laws of descent and distribution and,
during the lifetime of the optionee to whom it was granted, may be exercised
only by such optionee.
16. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK.
------------------------------------------
(a) If the outstanding shares of Common Stock of the
Corporation are increased, decreased, changed into or exchanged for a
different number or kind of shares or other securities of the
Corporation or another entity as a result of a recapitalization,
reclassification, stock dividend, stock split, amendment to the
Corporation's Certificate of Incorporation, reverse stock split, merger
or consolidation, an appropriate adjustment shall be made in the number
and/or kind of securities allocated to the Options previously and
subsequently granted under the Plan, without change in the aggregate
purchase price applicable to the unexercised portion of the outstanding
Options but with a corresponding adjustment in the price for each share
or other unit of any security covered by the Options.
(b) In the event that the Corporation shall declare and pay
any dividend with respect to the Common Stock (other than a dividend
payable in shares of the Corporation's Common Stock or a regular
quarterly cash dividend), including a dividend which results in a
nontaxable return of capital to the holders of shares of Common Stock
for federal income tax purposes, or otherwise than by dividend makes
distribution of property to the holders of its shares of Common Stock,
the Committee, in its discretion applied uniformly to all outstanding
Options, may adjust the exercise price per share of outstanding Options
in such a manner as the Committee may determine to be necessary to
reflect the effect of the dividend or other distribution on the fair
market value of a share of Common Stock. In adjusting the exercise
price per share of outstanding Options, the Committee may, in its
discretion, (i) require all holders of outstanding Options to return
such Options and reissue new Options with a new exercise price or (ii)
adjust the Option Price without any such return and reissuance.
(c) To the extent that the foregoing adjustments described in
Sections 16(a) and (b) above relate to particular Options or to
particular stock or securities of the Corporation subject to Option
under this Plan, such adjustments shall be made by the Committee, whose
determination in that respect shall be final and conclusive.
(d) The grant of an Option pursuant to this Plan shall not
affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
(e) No fractional shares of stock shall be issued under the
Plan for any such adjustment.
23
<PAGE>
(f) Any adjustment made pursuant to this Section 16, shall be
made, to the extent practicable, in such manner as not to constitute a
modification of any outstanding Incentive Stock Options within the
meaning of Section 424(h) of the Code.
17. INVESTMENT PURPOSE. At the discretion of the Committee, any Option
------------------
Agreement may provide that the optionee shall, by accepting the Option,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon the exercise
of the Option will be acquired for investment and not for resale or
distribution, and that upon each exercise of any portion of an Option, the
person entitled to exercise the same shall furnish evidence of such facts which
is satisfactory to the Corporation. Certificates for shares of stock acquired
under the Plan may be issued bearing such restrictive legends as the Corporation
and its counsel may deem necessary to ensure that the optionee is not an
"underwriter" within the meaning of the regulations of the Securities and
Exchange Commission.
18. APPLICATION OF FUNDS. The proceeds received by the Corporation from
--------------------
the sale of Common Stock pursuant to Options will be used for general corporate
purposes.
19. NO OBLIGATION TO EXERCISE. The granting of an Option shall impose
-------------------------
no obligation upon the optionee to exercise such Option.
20. EFFECTIVE DATE OF PLAN. The Plan will become effective upon the
----------------------
approval of the Plan by the shareholders of the Corporation and receipt of any
necessary regulatory approvals.
21. TERM OF PLAN. Options and may be granted pursuant to this Plan from
------------
time to time within ten (10) years from the effective date of the Plan.
22. TIME OF GRANTING OF OPTIONS. Nothing contained in the Plan or in
---------------------------
any resolution adopted or to be adopted by the Committee or the shareholders of
the Corporation and no action taken by the Committee shall constitute the
granting of any Option hereunder. The granting of an Option pursuant to the Plan
shall take place only when an Option Agreement shall have been duly executed and
delivered by and on behalf of the Corporation at the direction of the Committee.
23. WITHHOLDING TAXES. Whenever the Corporation proposes or is required
-----------------
to cause to be issued or transferred shares of stock, cash or other assets
pursuant to this Plan, the Corporation shall have the right to require the
optionee to remit to the Corporation an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the issuance
of any certificate or certificates for such shares or delivery of such cash or
other assets. Alternatively, the Corporation may issue or transfer such shares
of stock or make other distributions of cash or other assets net of the number
of shares or other amounts sufficient to satisfy the withholding tax
requirements. For withholding tax purposes, the shares of stock, cash and other
assets to be distributed shall be valued on the date the withholding obligation
is incurred.
24. TERMINATION AND AMENDMENT. The Board may at any time alter,
-------------------------
suspend, terminate or discontinue the Plan, subject to any applicable regulatory
requirements and any required stockholder approval or any stockholder approval
which the Board may deem advisable for any reason, such as for the purpose of
obtaining or retaining any statutory or regulatory benefits under tax,
securities or other laws or satisfying applicable stock exchange or quotation
system listing requirements. The Board may not, without the consent of the
holder of an Option previously granted, make any
24
<PAGE>
alteration which would deprive the optionee of his rights with respect thereto.
25. CAPTIONS AND HEADINGS; GENDER AND NUMBER. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part, and shall not serve as a basis
for interpretation or construction of, this Plan. As used herein, the masculine
gender shall include the feminine and neuter, and the singular number shall
include the plural, and vice versa, whenever such meanings are appropriate.
26. COST OF PLAN; EXCULPATION AND INDEMNIFICATION. All costs and
---------------------------------------------
expenses incurred in the operation and administration of the Plan shall be borne
by the Corporation, the Bank and the Subsidiaries. In connection with this Plan,
no member of the Board, no member of the board of directors of the Bank, and no
member of the board of directors of any Subsidiary, and no member of the
Committee shall be personally liable for any act or omission to act, nor for any
mistake in judgment made in good faith, unless arising out of, or resulting
from, such person's own bad faith, willful misconduct or criminal acts. To the
extent permitted by applicable law and regulation, the Corporation shall
indemnify, defend and hold harmless the members of the Board, the members of the
board of directors of the Bank and the members of the board of directors of any
Subsidiary, and members of the Committee, and each other officer or employee of
the Bank, the Corporation or of any Subsidiary to whom any power or duty
relating to the administration or interpretation of this Plan may be assigned or
delegated, from and against any and all liabilities (including any amount paid
in settlement of a claim with the approval of the Board), and any costs or
expenses (including counsel fees) incurred by such persons arising out of or as
a result of, any act or omission to act, in connection with the performance of
such person's duties, responsibilities and obligations under this Plan, other
than such liabilities, costs, and expenses as may arise out of, or result from
the bad faith, willful misconduct or criminal acts of such persons.
27. GOVERNING LAW. Without regard to the principles of conflicts of
-------------
laws, the laws of the State of North Carolina shall govern and control the
validity, interpretation, performance, and enforcement of this Plan.
28. INSPECTION OF PLAN. A copy of this Plan, and any amendments
------------------
thereto, shall be maintained by the Secretary of the Corporation and shall be
shown to any proper person making inquiry about it.
29. OTHER PROVISIONS. The Option Agreements authorized under this Plan
----------------
shall contain such other provisions not inconsistent with the foregoing,
including, without limitation, increased restrictions upon the exercise of
Options, as the Committee may deem advisable.
25
<PAGE>
APPENDIX B
HOME SAVINGS, INC., SSB
MANAGEMENT RECOGNITION PLAN AND TRUST AGREEMENT
Home Savings, Inc., SSB, a North Carolina chartered savings bank (the
"Bank"), does herein set forth the terms of its Management Recognition Plan (the
"Plan") and Trust (the "Trust") and the Trustees hereby accept this Trust and
agree to hold the Trust assets existing on the date of the Agreement and all
additions and accretions thereto upon the terms and conditions hereinafter
stated.
Section 1. Purpose of this Plan. The purpose of this Plan is to provide
--------- --------------------
to the directors, officers and employees (the "Participants") of the Bank and of
any corporation or other entity of which the Bank owns, directly or indirectly,
not less than fifty percent (50%) of any class of the equity securities thereof
(a "Subsidiary"), an ownership interest in the Bank's parent holding company,
Century Bancorp, Inc. (the "Corporation") by making awards (hereinafter referred
to as "Awards" or singularly, "Award") of shares of common stock of the
Corporation (the "Common Stock"). The Board of Directors of the Bank (the
"Board") and the Board of Directors of the Corporation believe that
participation in the ownership of the Corporation will induce Participants to
continue to serve the Bank or any Subsidiary as directors, officers and/or
employees and encourage them to contribute to the future growth and profits of
the Bank and the Corporation. In addition, the existence of this Plan will make
it possible for the Bank and its Subsidiaries to attract capable individuals to
serve as directors or officers of the Bank and its Subsidiaries. The Board
believes that the existence of this Plan will provide incentives to the
directors, officers and employees of the Bank and any Subsidiaries which will
contribute materially to the success of such companies.
Section 2. Administration of this Plan.
--------- ---------------------------
(a) This Plan shall be administered by a committee of the
Board (the "Committee") which shall consist of not less than two members of the
Board who are "Non-Employee Directors" as defined in Rule 16 b-3(b)(3) of the
Rules and Regulations under the Securities Exchange Act of 1934 (the "Exchange
Act"). In the absence of a duly appointed Committee, the Plan shall be
administered by the Board. The Committee shall have full power and authority to
construe, interpret and administer this Plan. All actions, decisions,
determinations, or interpretations of the Committee shall be final, conclusive,
and binding upon all parties. Members of the Committee shall serve at the
pleasure of the Board.
(b) The Committee shall decide (i) to whom Awards shall be
made under this Plan, (ii) the number of shares of Common Stock subject to each
award, (iii) the number of additional shares, if any, to be purchased or
allocated for the purposes of this Plan, (iv) the determination of leaves of
absence which may be granted to Participants without constituting a termination
of their employment for purposes of the Plan and (v) such additional terms and
conditions for Awards as the Committee shall deem appropriate, including,
without limitation, any determinations as to the restrictions or conditions on
transfer of shares of Common Stock that are necessary or appropriate to satisfy
all applicable securities laws, rules, regulations, and listing requirements.
(c) The Committee may designate any officers or employees of
the Bank or of any Subsidiary to assist in the administration of this Plan. The
Committee may authorize such individuals to execute documents on its behalf and
may delegate to them such other ministerial and limited
26
<PAGE>
discretionary duties as the Committee may see fit.
(d) Any shares of Common Stock held under this Plan, including
without limitation unallocated, undistributed and forfeited shares, shall be
held by the Trust.
(e) The Trustees shall be appointed by the Board.
Section 3. Contributions to Trust.
--------- ----------------------
(a) The Board shall determine the amount (or the method of
computing the amount) and timing of any contributions by the Bank and any
Subsidiaries to the Trust established under this Plan. Such amounts may be paid
in cash or in shares of Common Stock and shall be paid to the Trust at the
designated time of contribution. No contributions by Participants shall be
permitted.
(b) Subject to Section 9 hereof, the Trustees shall invest all
of the Trust's assets primarily in Common Stock. The Trust shall acquire, in the
aggregate, 16,293 shares of Common Stock, which is equal to four percent (4%) of
the shares of Common Stock issued in connection with the conversion of the Bank
from a North Carolina chartered mutual savings bank to a North Carolina
chartered stock savings bank on December 20, 1996 (the "Conversion"). Such
shares of Common Stock may be purchased by the Trust in the open market, or,
subject to approval of the Board of Directors of the Corporation, may be
acquired through the issuance by the Corporation to the Trust of authorized but
unissued shares of Common Stock on such terms as may be approved by the
Committee and the Board of Directors of the Corporation. Such shares (the "Plan
Shares") shall be held by the Trust until they have been awarded and distributed
pursuant to the terms of this Plan. In the event that the Trust receives cash
pursuant to receipt of dividends on Common Stock held by the Trust which has not
been awarded to participants, including the receipt of a special cash dividend
or return of capital with respect to such shares, then such funds may be used by
the Trustees to purchase additional shares of Common Stock available for future
award under this Plan or the Trustees may distribute such cash received by the
Trust along with the Common Stock upon which it was earned upon the award of
such previously unallocated shares.
(c) The principal of the Trust, and any earnings thereon, shall
be held separate and apart from other funds of the Bank and shall be used
exclusively for the uses and purposes of Participants and general creditors as
herein set forth. Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Plan and the Trust shall be mere unsecured contractual
rights of Participants and their beneficiaries against the Bank. Any assets held
by the Trust will be subject to the claims of the Bank's general creditors under
federal and state law in the event of insolvency or bankruptcy, as defined in
Section 9(e) herein.
27
<PAGE>
Section 4. Eligibility and Award of Plan Shares.
--------- ------------------------------------
(a) The Participants in this Plan to whom Awards may be made
shall be the following: members of the Board, members of the Board of Directors
of any Subsidiary, and such officers and employees of the Bank and/or of any
Subsidiary as may be designated by the Committee. Notwithstanding the foregoing,
no member of the Committee is eligible to receive any grants or any Awards under
this Plan during the one-year period prior to serving on the Committee or during
such service, except for the initial Awards of Plan Shares which will be
distributed after the Plan is approved by a majority of the shareholders of the
Corporation. Such initial Awards shall be made pursuant to the provisions of
Section 4(b).
(b) As promptly as practicable after a determination is made
that an Award of Plan Shares is to be made, the Committee shall notify the
Participant in writing of the grant of the Award, the number of Plan Shares
covered by the Award, and the terms upon which the Plan Shares subject to the
Award shall vest and be distributed to the Participant. Awards of Plan Shares
under this Plan shall be effective upon execution and delivery of the Stock
Grant Agreement which sets forth the terms and conditions of the Award of Plan
Shares (the "Stock Grant Agreement").
(c) Notwithstanding anything to the contrary contained in
Sections 4(a) and 4(b) above, no Participant shall have any right or entitlement
to receive a Plan Share Award hereunder, such awards being at the total
discretion of the Committee.
Section 5. Vesting and Distribution of Plan Shares.
--------- ---------------------------------------
(a) Shares granted under this Plan shall vest and the right of
a Participant to the Plan Shares shall be nonforfeitable as determined by the
Committee and as set forth in the Stock Grant Agreement.
(b) In determining the number of shares vested under any
applicable vesting schedule, a Participant shall not receive fractional shares.
If the product resulting from multiplying the vested percentage times the
allocated shares results in a fractional share, then a Participant's vested
right shall be rounded down to the nearest whole number of shares.
(c) In the event any Participant shall no longer be either a
director or an employee of the Bank or any Subsidiary for any reason (whichever
position resulted in the award, as set forth in the Stock Grant Agreement),
other than as provided in Sections 5(d) and 5(e) below, and such Participant
does not have a 100% vested interest in his or her shares under the Plan, then
any shares which are not vested based upon the applicable schedule set forth in
the Stock Grant Agreement shall be forfeited and, provided this Plan has not
terminated pursuant to Section 16 below, shall be available again for Awards to
Participants as may be determined by the Committee.
(d) In the event that a Participant shall no longer be an
employee or a director of the Bank or any Subsidiary (whichever position
resulted in the award, as set forth in the Stock Grant Agreement), because of
such Participant's disability or death, prior to the date when all shares
allocated to him or her would be 100% vested in accordance with the schedule set
forth in the Stock Grant Agreement, then, notwithstanding such vesting schedule,
all shares allocated to such Participant shall immediately become fully vested
and nonforfeitable. For purposes of this Plan, the term "disability" shall be
defined in the same manner as such term is defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code").
28
<PAGE>
(e) In the event that a Participant ceases to be an employee
or a director of the Bank or a Subsidiary (whichever position resulted in the
award, as set forth in the Stock Grant Agreement), for any reason after the
occurrence of a "change in control" and prior to the time that all shares
allocated to him or her would be 100% vested in accordance with the schedule set
forth in the Stock Grant Agreement, then, notwithstanding such vesting schedule,
all shares allocated to such Participant shall immediately become fully vested
and nonforfeitable. For purposes of this Plan, a "change in control" shall mean
(i) a change in control of a nature that would be required to be reported by the
Corporation in response to Item 1 of the Current Report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) such time as any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) other than the Corporation is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation or Bank representing 25 percent or
more of the combined voting power of the outstanding Common Stock of the
Corporation or outstanding common stock of the Bank, as applicable; or (iii)
individuals who constitute the board of directors of the Corporation or the
Board on the date hereof (the "Incumbent Board" and "Incumbent Bank Board,"
respectively) cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board or Incumbent Bank Board, as applicable, or whose
nomination for election by the Corporation's or Bank's shareholders was approved
by the Corporation's or Bank's Board of Directors or Nominating Committee, shall
be considered as though he or she were a member of the Incumbent Board or
Incumbent Bank Board, as applicable; or (iv) either the Corporation or the Bank
consolidates or merges with or into another corporation, association or entity
or is otherwise reorganized, where neither the Corporation nor the Bank,
respectively, is the surviving corporation in such transaction; or (v) all or
substantially all of the assets of either the Corporation or the Bank are sold
or otherwise transferred to or are acquired by any other entity or group.
(f) Plan Shares which have vested shall be distributed to the
Participant or any transferee permitted by Section 11 (a "Permitted
Transferee"), as the case may be, as soon as practicable after such Plan Shares
have vested in accordance with the schedule contained in the Stock Grant
Agreement.
(g) The Trustees, the Corporation, the Bank and any Subsidiary
shall have the right to require any Participant or Permitted Transferee to remit
to the Corporation, the Bank or any Subsidiary an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery or release of any certificate or certificates for Plan Shares or
delivery of any cash or other assets with respect to Plan Shares or otherwise
pursuant to this Plan. Alternatively, the Trustees, Corporation, Bank and any
Subsidiary may deliver or release Shares or make other distributions of cash or
other assets net of the number of shares or cash sufficient to satisfy the
withholding tax requirements. For withholding tax purposes, the shares of stock,
cash and other assets to be distributed shall be valued on the date the
withholding obligation is incurred.
(h) Each Participant receiving an Award of Plan Shares under
this Plan shall deliver to the Bank a Stock Grant Agreement, which shall be
signed by such Participant.
Section 6. Restrictions on Selling of Plan Shares. Plan Share Awards
--------- --------------------------------------
may not be sold, assigned, pledged or otherwise disposed of prior to the time
that they are vested and distributed pursuant to the terms of this Plan. The
Board of Directors or the Committee may require the Participant or his Permitted
Transferee, as the case may be, to agree not to sell or otherwise dispose of his
distributed Plan
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Shares except in accordance with all then applicable federal and state
securities laws, and the Board of Directors or the Committee may cause a legend
to be placed on the stock certificate(s) representing the distributed Plan
Shares in order to restrict the transfer of the distributed Plan Shares for such
period of time or under such circumstances as the Board of Directors or the
Committee, upon the advice of counsel, may deem appropriate.
Section 7. Effect of Award on Status of Participant. The fact that an
--------- ----------------------------------------
Award is made to a Participant under this Plan shall not confer on such
Participant any right to continued service on the Board or on the Board of
Directors of any Subsidiary, nor any right to continued employment with the Bank
or any Subsidiary; nor shall it limit the right of the Bank, the Corporation, or
any Subsidiary to remove such Participant from any such boards, or to terminate
his or her employment at any time.
Section 8. Voting Rights; Dividends; Other Distributions. After an
--------- ---------------------------------------------
Award of Plan Shares has been made, the Participant or Permitted Transferee
shall be entitled to direct the Trustees as to the voting of the Plan Shares
which are covered by the Award and which are not yet vested and distributed to
him, subject to rules and procedures adopted by the Committee for this purpose.
All shares of Common Stock held by the Trust which have not been awarded under
an Award of Plan Shares and shares which have been awarded as to which
Participants or Permitted Transferees have not directed the voting shall be
voted by the Trustees in the same proportion as the trustees of the Bank's
Employee Stock Ownership Plan votes Common Stock held in trust associated
therewith, and in the absence of any such voting, shall be voted in the manner
directed by the Board of Directors.
Any cash dividends or other cash or noncash distributions
(including special large and nonrecurring dividends and including one that has
the effect of a return of capital to the Corporation's stockholders) or stock
dividends declared in respect of each unvested Plan Share will be held by the
Trustees for the benefit of the Participant or Permitted Transferee on whose
behalf such Award is then held by the Trust and such dividends, including any
interest thereon, will be paid out proportionately by the Trust to the
Participant or Permitted Transferee thereof as soon as practicable after the
Plan Shares become vested in accordance with the Stock Grant Agreement, or
otherwise. Any cash dividends, cash or noncash distributions or stock dividends
declared in respect of each vested Plan Share held by the Trust will be paid by
the Trust, as soon as practicable after the Trust's receipt thereof, to the
Participant or Permitted Transferee on whose behalf such Plan Share is then held
by the Trust. In the event that the Trust receives cash pursuant to receipt of
dividends or other distributions on Common Stock held by the Trust and
unallocated to participants (including the receipt of a special cash dividend or
return of capital) then such funds may be used by the Trust to purchase
additional shares of Common Stock available for future award under this Plan, or
the Committee or Board may distribute such cash received by the Trust along with
the Common Stock upon which it was earned upon the award of such previously
unallocated shares.
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Section 9. Trust.
--------- -----
(a) The Trustees shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of this Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Board of Directors or
the Committee pursuant to the Plan.
(b) It is the intent of this Plan and Trust that the Trustees
shall have complete authority and discretion with respect to the arrangement,
control and investment of the Trust, and that the Trustees shall invest all
assets of the Trust in Common Stock to the fullest extent practicable, except to
the extent that the Trustees determine that the holding of monies in cash or
cash equivalents is necessary to meet the obligations of the Trust. In
performing their duties, the Trustees shall have the power to do all things and
execute such instruments as may be deemed necessary or proper, including the
following powers;
(i) To invest up to one hundred percent (100%) of all
Trust assets in Common Stock without regard to any law now or hereafter
in force limiting investments for trustees or other fiduciaries. The
investment authorized herein may constitute the only investment of the
Trust, and in making such investment, the Trustees are authorized to
purchase Common Stock from the Corporation or from any other source,
and such Common Stock so purchased may be outstanding, newly issued, or
treasury shares.
(ii) To invest any Trust assets not otherwise invested in
accordance with (a) above, in deposit accounts and certificates of
deposit at the Bank or in obligations of the United States Government
or its agencies or such other investments as shall be considered the
equivalent of cash.
(iii) To sell, exchange or otherwise dispose of any
property at any time held or acquired by the Trust.
(iv) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of words
indicating that such security is an asset of the Trust (but accurate
records shall be maintained showing that such security is an assets of
the Trust).
(v) To hold cash without interest in such amounts as may
in the opinion of the Trustees be reasonable for the proper operation
of the Plan and Trust.
(vi) To employ brokers, agents, custodians, consultants
and accountants.
(vii) To hire counsel to render advice with respect to
their rights, duties and obligations hereunder, and such other legal
services or representation as the Trustees deem desirable.
(viii) To hold funds and securities representing the
amounts to be distributed to a Recipient or his Beneficiary as a
consequence of a dispute as to the disposition thereof, whether in a
segregated account or held in common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustees
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the
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exercise of any power herein contained, or give bond.
(c) The Trustees shall maintain accurate and detailed records
and accounts of all transactions of the Trust, which shall be available at all
reasonable times for inspection by any legally entitled person or entity to the
extent required by applicable law, or by any other person determined by the
Board of Directors or the Committee.
(d) Notwithstanding anything to the contrary in this Plan or
Trust, the assets of the Plan and Trust are subject to the payment of the claims
of creditors of the Bank in the event of its insolvency or bankruptcy. The Bank
is insolvent or bankrupt if it is the subject of a proceeding under the
Bankruptcy Code, 11 U.S.C. Section 101 et seq. or is unable to pay its debts.
The Board of Directors or the chief executive officer of the Bank must give
written notice to the Trustees of the Corporation's bankruptcy or insolvency as
soon as practicable following the occurrence of such event. Upon receipt of such
notice or other written allegations of the Bank's bankruptcy or insolvency, or
in the case of the Trustees' actual knowledge of or determination of the Bank's
bankruptcy or insolvency, the Trustees shall discontinue delivery of Trust
assets to the Participants or the Bank and shall hold the assets of the Trust
for the benefit of the Bank's general creditors and, upon a determination that
the Bank is bankrupt or insolvent, shall distribute such assets to or for the
benefit of the general creditors. The Trustees shall resume delivery of Trust
assets to the Participants or the Bank only after it is determined that the Bank
is no longer bankrupt or insolvent. Determination of the bankruptcy or
insolvency shall be determined by a court of competent jurisdiction or by an
arbitrator selected by and pursuant to rules of the American Arbitration
Association upon petition by an interested party.
Section 10. Adjustment Upon Changes in Capitalization; Dissolution or
---------- ---------------------------------------------------------
Liquidation. In the event of a change in the number or type of shares of Common
- -----------
Stock outstanding, or in the event shares of Common Stock are decreased, changed
into or exchanged for securities of a different entity, by reason of a
reclassification, recapitalization, reorganization, other similar capital
adjustment; by reason of a merger or consolidation of the Corporation; by reason
of the sale by the Corporation of all or a substantial portion of its assets; or
by reason of the occurrence of any other event which could affect the
implementation of this Plan and the realization of its objectives, the number or
kind of shares subject to Awards which have occurred, or could occur, under this
Plan shall be proportionately and equitably adjusted by the Committee.
Section 11. Non-Transferability.
---------- -------------------
Prior to the time Plan Share Awards become vested and are
distributed by the Trustees, Plan Share Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such awards to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
awards pursuant to this Section 11. Plan Share Awards which are transferred
pursuant to this Section 11 shall be subject to the same terms and conditions as
applied to the Participant. In addition, such shares may be tendered in response
to a tender offer for or a request or invitation to tenders of greater than
fifty percent (50%) of the outstanding Common Stock and may be surrendered in a
merger, consolidation or share exchange involving the Corporation; provided,
however, in each case, that except as otherwise provided herein, the securities
or other consideration received in exchange therefor shall thereafter be subject
to the restrictions and conditions set forth in this Plan.
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Section 12. Impact of Award on Other Benefits of Participant. The value
---------- ------------------------------------------------
of any Award, either on the date of the Award or at the time such shares become
vested, shall not be includable as compensation or earnings for purposes of any
other benefit plan offered by the Bank, the Corporation or any Subsidiary other
than any qualified employee benefit plan which provides that such value shall be
included as compensation or earnings for purposes of such plan.
Section 13. Corporate Action. The making of an Award under this Plan
---------- ----------------
shall not affect in any way the right or power of the Corporation or its
shareholders or the Bank or its shareholders or any Subsidiary or its
shareholders to make or authorize any adjustment, recapitalization,
reorganization, or other change in the Corporation's, the Bank's or any
Subsidiary's capital structure or its business, or any merger or consolidation
of the Corporation, the Bank or any Subsidiary, or the issuance of any bonds,
debentures, preferred or other capital stock or rights with respect thereto, or
the dissolution or liquidation of the Corporation, the Bank or any Subsidiary,
or any sale or transfer of all or any part of the Corporation's, the Bank's or
any Subsidiary's assets or business.
Section 14. Exculpation and Indemnification. In connection with this
---------- -------------------------------
Plan, no member of the Board, no member of the Board of Directors of the
Corporation, no member of the Committee and no Trustee shall be personally
liable for any act or omission to act in his capacity as a member of the Board,
the Board of Directors of the Corporation or the Committee or as Trustees, nor
for any mistake in judgment made in good faith, unless arising out of, or
resulting from, such person's own bad faith, willful misconduct, or criminal
acts. To the extent permitted by applicable law and regulation, the Bank shall
indemnify, defend and hold harmless the members of the Board, the members of the
Board of Directors of the Corporation, the members of the Board of Directors of
any Subsidiary, the Committee and each Trustee and each other officer or
employee of the Bank, the Corporation or of any Subsidiary to whom any duty or
power relating to the administration or interpretation of this Plan may be
assigned or delegated, from and against any and all liabilities (including any
amount paid in settlement of a claim with the approval of the Board) and any
costs or expenses (including counsel fees) incurred by such persons arising out
of, or as a result of, any act or omission to act in connection with the
performance of such person's duties, responsibilities, and obligations under
this Plan, other than such liabilities, costs, and expenses as may arise out of,
or result from, the bad faith, willful misconduct, or criminal acts of such
persons.
Section 15. Amendment and Modification of this Plan. The Board may at
---------- ---------------------------------------
any time, and from time to time, amend or modify this Plan (including the form
of Stock Grant Agreement) in any respect, subject to any applicable regulatory
requirements and any required stockholder approval or any stockholder approval
which the Board may deem advisable for any reason, such as for the purpose of
obtaining or retaining any statutory or regulatory benefits under tax,
securities or other laws or satisfying applicable stock exchange or quotation
system listing requirements. However, any amendment or modification of this Plan
shall not in any manner affect any Award of shares theretofore made to a
Participant under this Plan without the consent of such Participant or any
Permitted Transferee of such Participant.
Section 16. Termination and Expiration of this Plan. This Plan may be
---------- ---------------------------------------
abandoned, suspended, or terminated, in whole or in part, at any time by the
Board; provided, however, that abandonment, suspension, or termination of this
Plan shall not affect any Award theretofore made under this Plan. Unless sooner
terminated, this Plan shall terminate at the close of business on the day that
is the tenth (10th) anniversary of the date of approval of the Plan by the
shareholders of the Corporation; and no Award of shares may be made under this
Plan thereafter. Such termination shall not effect any
33
<PAGE>
Award of shares theretofore made. In the event that the Board terminates this
Plan in whole, any shares held by the Trust which have not been allocated to
eligible Participants, together with any other assets held by the Trust, shall
revert to the Bank.
17. Tax Status of Trust. It is intended that the trust established
-------------------
hereby be treated as a Grantor Trust of the Corporation under the provisions of
Section 671 et seq. of the Code, as the same may be amended from time to time.
18. Miscellaneous.
-------------
(a) This Plan has been adopted by the Board to be effective as of the
date of approval of the Plan by the shareholders of the Corporation.
(b) Captions and paragraph headings used herein are for convenience
only, do not modify or affect the meaning of any provision herein, are not a
part hereof, and shall not serve as a basis for interpretation or construction
of this Plan or Trust. As used herein, the masculine gender shall include the
feminine and neuter, and the singular number shall include the plural, and vice
versa, whenever such meanings are appropriate.
(c) All costs and expenses incurred in the operation and administration
of this Plan shall be borne by the Bank or by a Subsidiary, or in the discretion
of the Bank, the Trust.
(d) Without regard to the principles of conflicts of laws, the laws of
the State of North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Plan and Trust.
(e) A copy of this Plan, and any amendments thereto, shall be
maintained by the Secretary of the Bank and shall be shown to any proper person
making inquiry about it.
34
