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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
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Commission file number 000-23465
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CODDLE CREEK FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
North Carolina 56-2045998
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
347 North Main Street
Mooresville, North Carolina 28115
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(Address of principal executive office) (Zip Code)
(704) 664-4888
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(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: None
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Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, no par value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant (excluding five percent owners as non-affiliates). The aggregate
market value shall be computed by reference to the price at which the stock was
sold, or the average bid and asked prices of such stock, as of a specified date
within 60 days prior to the date of filing. $31,375,500 common stock, no par
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value, based on the closing price of such common stock on March 4, 1999.
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. 698,756 shares of common stock,
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no par value, outstanding at March 4, 1998.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report of Coddle Creek Financial Corp. for the year ended
December 31, 1998 (the "1998 Annual Report"), are incorporated by reference into
Part I, Part II and Part IV.
Portions of the Proxy Statement for the 1999 Annual Meeting of Shareholders of
Coddle Creek Financial Corp. to be held on April 21, 1998, are incorporated by
reference into Part III.
Portions of the Registration Statement of Coddle Creek Financial Corp. On Form
S-1, Registration No. 333-35497, dated September 12, 1997, as amended on
November 5 and 10, 1997, are incorporated by reference into Part IV.
Portions of the Form 10-K for the year ended December 31, 1997, are incorporated
by reference into Part IV.
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PART I
ITEM 1. BUSINESS
General
Prior to December 30, 1997, Mooresville Savings Bank, Inc., S.S.B. (the
"Bank") operated as a mutual North Carolina-chartered savings bank. On December
30, 1997, the Bank converted from a North Carolina-chartered mutual savings bank
to a North Carolina-chartered stock savings bank (the "Conversion"). In
connection with the Conversion, all of the issued and outstanding capital stock
of the Bank was acquired by Coddle Creek Financial Corp., a North Carolina
corporation (the "Company") which was organized to become the holding company
for the Bank. At that time, the Company had an initial public offering of its
common stock, no par value (the "Common Stock").
The Company is a bank holding company registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") under the Bank
Holding Company Act of 1956, as amended (the "BHCA") and the savings bank
holding company laws of North Carolina. The Company's office is located at 347
North Main Street, Mooresville, North Carolina. The Company's activities
consist of investing the proceeds of its initial public offering which were
retained at the holding company level, holding the indebtedness outstanding from
the Mooresville Savings Bank, Inc., SSB Employee Stock Ownership Plan (the
"ESOP") and owning the Bank. The Company's principal sources of income are
earnings on its investments and interest payments received from the ESOP with
respect to the ESOP loan. In addition, the Company will receive any dividends
which are declared and paid by the Bank on its capital stock.
At December 31, 1998, the Company and the Bank had total assets of $135.8
million, net loans of $110.6 million, deposits of $87.6 million and
stockholders' equity of $45.1 million.
The Bank was originally chartered in 1937. It has been a member of the
Federal Home Loan Bank ("FHLB") system, and its deposits have been federally
insured since 1947. The Bank's deposits are insured by the Savings Association
Insurance Fund (the "SAIF") of the Federal Deposit Insurance Corporation (the
"FDIC") to the maximum amount permitted by law. The Bank conducts business
through three (3) full service offices in Mooresville, Cornelius and
Huntersville, North Carolina.
The Bank is engaged primarily in the business of attracting retail deposits
from the general public and using such deposits to make mortgage loans secured
by real estate. The Bank makes one-to-four family residential real estate
loans, loans secured by multi-family residential and commercial property,
construction loans and equity line of credit loans. The Bank also makes loans
which are not secured by real property, such as loans secured by pledged deposit
accounts and various types of secured and unsecured consumer loans. The Bank's
primary source of revenue is interest income from its lending activities. The
Bank's other major sources of revenue are interest and dividend income from
investments, interest income from its interest-earning deposit balances in other
depository institutions, and transactions and fee income from its lending and
deposit activities. The major expenses of the Bank are interest on deposits and
general and administrative expenses such as employee compensation and benefits,
federal deposit insurance premiums, data processing expenses and occupancy
expenses.
The operations of the Bank and depository institutions in general are
significantly influenced by general economic conditions and by related monetary
and fiscal policies of depository institution regulatory agencies, including the
Federal Reserve, the FDIC and the North Carolina Administrator, Savings
Institutions Division, North Carolina Department of Commerce (the
"Administrator"). Deposit flows and cost of funds are influenced by interest
rates on competing investments and general market rates of interest. Lending
activities are affected by the demand for financing of real estate and other
types of loans, which in turn are affected by the interest rates at which such
financing may be offered and other factors affecting local demand and
availability of funds.
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At December 31, 1998, the Company and the Bank had a total of 29 full-time
employees and 3 part-time employees.
The Company has no operations and conducts no business of its own other
than owning the Bank, investing its portion of the net proceeds received in the
Conversion and lending funds to the ESOP. Accordingly, the discussion of the
business which follows in the Form 10-K concerns the business conducted by the
Bank, unless otherwise indicated.
Lending Activities
General. The Bank is engaged primarily in the business of attracting
deposits from the general public and using such deposits to make mortgage loans
secured by real estate. The Bank's primary source of revenue is interest and
fee income from its lending activities, consisting primarily of mortgage loans
for the purchase or refinancing of one-to-four family residential real property
located in its primary market area. The Bank also makes loans secured by multi-
family and nonresidential properties, construction loans, equity line loans,
savings account loans and various types of secured and unsecured consumer loans.
Approximately 98% of the Bank's gross loan portfolio is secured by real estate.
As of December 31, 1998, all of the loans in the Bank's real estate loan
portfolio were secured by properties in North Carolina. On December 31, 1998,
the Bank's largest single outstanding loan had a balance of approximately
$500,000. This loan was performing in accordance with its original terms. In
addition to interest earned on loans, the Bank receives fees in connection with
loan originations, loan servicing, loan modifications, late payments, loan
assumptions and other miscellaneous services. The Bank generally does not sell
its loans; both fixed and adjustable rate loans are originated with the
intention that they will be held in the Bank's loan portfolio.
Loan Portfolio Composition. The Bank's net loan portfolio totaled
approximately $110.6 million at December 31, 1998 representing 81.4% of the
Bank's total assets at such date. At December 31, 1998, 80.8% of the Bank's
gross loan portfolio was composed of one-to-four family residential mortgage
loans. Multi-family residential and non-residential real estate loans
represented 4.2% on such date. Construction loans and equity line lines
represented 6.4% and 6.6%, respectively, of the Bank's loan portfolio, before
net items, on such date. As of December 31, 1998, 19% of the loans in the
Bank's loan portfolio, before net items, had adjustable interest rates.
One to Four Family Residential Real Estate Lending. The Bank's primary
lending activity, which it intends to continue to emphasize, is the origination
of fixed and adjustable rate mortgage loans to enable borrowers to purchase or
refinance one-to-four family residential real property. Consistent with the
Bank's emphasis on being a community-oriented financial institution, it is and
has been the Bank's strategy to focus its lending efforts in its primary market
area. On December 31, 1998, approximately 82.5% of the Bank's real estate loan
portfolio, before net items, consisted of one-to-four family residential real
estate loans. These include both loans secured by detached single-family
residences and condominiums and loans secured by housing containing not more
than four separate dwelling units. Of such loan amounts, 15.1% had adjustable
interest rates.
Adjustable rate loans are generally considered to involve a greater degree
of credit risk than fixed rate loans because borrowers may have difficulty
meeting their payment obligations if interest rates and required payment amounts
increase substantially. Substantially all of the fixed-rate loans in the Bank's
mortgage loan portfolio have due on sale provisions allowing the Bank to declare
the unpaid balance due and payable in full upon the sale or transfer of an
interest in the property securing the loan.
Historically, the Bank has not originated its one-to-four family
residential mortgage or other loans with the intention that they will be sold in
the secondary market. Accordingly, the Bank originates fixed rate one-to-four
family residential real estate loans which satisfy the Bank's underwriting
requirements and are tailored to its local community, but do not necessarily
satisfy various technical FHLMC and FNMA underwriting requirements and purchase
requirements not related to documentation.
Although the Bank believes that many of its one to four family residential
loans could be sold in the secondary market, some of such nonconforming loans
could be sold only after the Bank incurred certain costs and/or discounted
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the purchase price. As a result, the Bank's loan portfolio is less liquid than
would be the case if it was composed entirely of loans originated in conformity
with secondary market requirements.
As of December 31, 1998, the Bank had 70 loan relationships with individual
borrowers in excess of $200,000, totaling approximately $18.7 million or 16.9%
of the Bank's total loan portfolio. The majority of these loans are secured by
residential real estate located near or on Lake Norman, North Carolina, which is
located in parts of Catawba, Iredell, Lincoln and Mecklenburg counties. While
these loans are performing according to the terms of their loan documents, an
economic downturn in the Bank's primary market area, in which Lake Norman is
located, could have an adverse effect on the performance of these loans.
See also Note 3 of the "Notes to Consolidated Financial Statements" in the
1998 Annual Report.
Investment Securities
Interest and dividend income from investment securities generally provides
the second largest source of income to the Company and the Bank after interest
on loans. In addition, the Bank receives interest income from deposits in
other financial institutions.
At December 31, 1998, the Company's investment portfolio totaled
approximately $20.5 million and consisted of U.S. government and agency
securities, municipal bonds, interest-earning deposits in other financial
institutions, certificates of deposit and stock of the FHLB of Atlanta.
As a member of the FHLB of Atlanta, the Bank is required to maintain an
investment in stock of the FHLB of Atlanta equal to the greater of 1% of the
Bank's outstanding home loans or 5% of its outstanding advances from the FHLB of
Atlanta. No ready market exists for such stock, which is carried at cost. As
of December 31, 1998, the Bank's investment in stock of the FHLB of Atlanta was
$964,000.
North Carolina regulations require the Bank to maintain a minimum amount of
liquid assets which may be invested in specified short-term securities. The
Bank's current investment policy provides that investment decisions will be made
by George W. Brawley, Jr., President and Chief Executive Officer, or by Dale W.
Brawley, Executive President and Treasurer, in his absence, and reviewed monthly
by the Board of Directors. The investment policy provides that the objectives
of the investment portfolio are to: (i) establish an acceptable level of
interest rate and credit risk for all investments; (ii) generate an acceptable
rate of return on investments; (iii) provide for adequate levels of liquidity
for the Bank; and (iv) provide guidance to management by the Board of Directors
on the investments desired for the Bank.
Permitted investments include FHLB daily time deposits, insured
certificates of deposit, government securities and government agency securities.
The investment policy also permits investment in the general obligations of
municipalities primarily located within North Carolina. Such general
obligations are considered less risky since they are repaid with taxes collected
by the municipality, not with revenues from a particular project. At December
31, 1998, $2.3 million or 11.4% of the Company's investment portfolio consisted
of municipal bonds issued by municipalities located in North Carolina, all of
which had an A or above rating by Moodys Investment Service.
At December 31, 1998, the market value of the Company's investment
securities available for sale and held to maturity, excluding interest-earning
deposits, certificates of deposit and stock of the FHLB of Atlanta (all of which
had a total cost of $8.9 million) were $10.2 million and $1.4 million,
respectively.
See Note 2 of "Notes to Consolidated Financial Statements" in the 1998
Annual Report.
Deposits and Borrowings
Deposits. Deposits are the primary source of the Bank's funds for lending
and other investment purposes. In addition to deposits, the Bank derives funds
from loan principal repayments, interest payments, investment income and
principal repayments, interest from its own interest-earning deposits, interest
income and advances from the FHLB of
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Atlanta and otherwise from its operations. Loan repayments are a relatively
stable source of funds while deposit inflows and outflows may be significantly
influenced by general interest rates and money market conditions.
The Bank attracts both short-term and long-term deposits from the general
public by offering a variety of accounts and rates. The Bank offers passbook
savings accounts, statement savings accounts, negotiable order of withdrawal
accounts, money market demand accounts, non-interest-bearing accounts, and fixed
interest rate certificates with varying maturities. At December 31, 1998, 69.7%
of the Bank's deposits consisted of certificate accounts, 11.7% consisted of
passbook savings accounts, 15.8% consisted of interest-bearing transaction
accounts and 2.8% consisted of noninterest-bearing transaction accounts.
Deposit flows are greatly influenced by economic conditions, the general level
of interest rates, competition, and other factors, including the restructuring
of the thrift industry. The Bank's savings deposits traditionally have been
obtained primarily from its primary market area. The Bank utilizes traditional
marketing methods to attract new customers and savings deposits, including
print, television and radio media advertising and direct mailings. The Bank
does not advertise for deposits outside of its local market area or utilize the
services of deposit brokers.
At December 31, 1998, 1997 and 1996, the Bank's deposits totaled $87.6
million, $99.4 million, and $93.8 million, respectively.
See Note 5 to the "Notes to Consolidated Financial Statements" in the 1998
Annual Report.
Borrowings. Borrowings may be used on a short-term basis to compensate
for reductions in the availability of funds from other sources. They may also
be used on a longer term basis for general business purposes. The Bank's
principal source of long-term borrowings are advances from the FHLB of Atlanta.
The FHLB system functions in a reserve credit capacity for savings institutions.
As a member, the Bank is required to own capital stock in the FHLB of Atlanta
and is authorized to apply for advances from the FHLB of Atlanta on the security
of that stock and a floating lien on certain of its real estate secured loans
and other assets. Each credit program has its own interest rate and range of
maturities. Depending on the program, limitations on the amount of advances are
based either on a fixed percentage of an institution's net worth or on the FHLB
of Atlanta's assessment of the institution's creditworthiness. The Bank had no
outstanding borrowings from the FHLB of Atlanta at December 31, 1998.
Subsidiaries
The Company has no subsidiaries other than the Bank. The Bank has no
subsidiaries.
Results of Operations
The Bank's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its interest-
earning assets, such as loans and investments, and the cost of its interest-
bearing liabilities, consisting of deposits and FHLB advances. The Bank's
operations are affected to a much lesser degree by non-interest income, such as
transaction and other service fee income, and other sources of income. The
Bank's net income is also affected by, among other things, provisions for loan
losses and operating expenses. The Bank's principal operating expenses, aside
from interest expense, consist of compensation and employee benefits, office
occupancy costs, data processing expenses and federal deposit insurance
premiums. The Bank's results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in market
interest rates, government legislation and policies concerning monetary and
fiscal affairs, housing and financial institutions and the attendant actions of
regulatory authorities.
Market Area
The Bank's primary market area consists of the communities in an
approximately fifteen (15) mile radius around its headquarters office in
Mooresville, North Carolina. This area includes portions of Iredell,
Mecklenburg, Lincoln, Catawba, Rowan and Cabarrus counties in North Carolina.
Mooresville is located only thirty (30) miles north
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of Charlotte, North Carolina and the Bank's primary market area is and will
continue to be significantly affected by its close proximity to this major
metropolitan area.
Employment in the Bank's primary market area is diversified among
manufacturing, agricultural, retail and wholesale trade, government, services
and utilities. Major employers include Lake Norman Regional Medical Center,
Panasonic, and Mashushita Compressor Corporation.
Competition
The Bank has operated in the Mooresville community for more than 60 years
and is the only financial institution headquartered in Mooresville. However,
the Bank faces strong competition both in attracting deposits and making real
estate and other loans. Its most direct competition for deposits has
historically come from other savings institutions, credit unions, brokerage
firms and commercial banks located in its primary market area, including large
financial institutions which have greater financial and marketing resources
available to them. Two national money center commercial banks are currently
headquartered in Charlotte, North Carolina, which is only 30 miles from the
Bank's primary market area. As of December 31, 1998, there were 9, 8 and 8
depository institutions with 15, 10 and 9 offices in Mooresville, Cornelius and
Huntersville, North Carolina, respectively. Based upon June 30, 1998
comparative data, the Bank had 19.3% and 6.6% of the deposits in Mooresville and
Iredell County, respectively. As a result of this intense competition, the
Bank's branch offices, excluding the Mooresville office, have lower levels of
deposits than the industry average.
The Bank has also faced additional significant competition for investors'
funds from short-term money market securities and other corporate and government
securities. While the Bank's market share of deposits has decreased in recent
years, its deposit base has grown principally due to economic growth in the
Bank's market area. The ability of the Bank to attract and retain savings
deposits depends on its ability to generally provide a rate of return, liquidity
and risk comparable to that offered by competing investment opportunities.
The Bank experiences strong competition for real estate loans from other
savings institutions, commercial banks, and mortgage banking companies. The
Bank competes for loans primarily through the interest rates and loan fees it
charges, the efficiency and quality of services it provides borrowers, and its
more flexible underwriting standards. Competition may increase as a result of
the continuing reduction of restrictions on the interstate operations of
financial institutions.
Supervision and Regulation
Bank holding companies and state savings banks are extensively regulated
under both federal and state law. The following is a brief summary of certain
statutes and rules and regulations that affect or will affect the Company and
the Bank. This summary is qualified in its entirety by reference to the
particular statute and regulatory provisions referred to below and is not
intended to be an exhaustive description of the statutes or regulations
applicable to the business of the Company and the Bank. Supervision, regulation
and examination of the Company and the Bank by the regulatory agencies are
intended primarily for the protection of depositors rather than shareholders of
the Company.
General. The Company was organized for the purpose of acquiring and
holding all of the capital stock of the Bank to be issued in the Conversion. As
a savings bank holding company subject to the Bank Holding Company Act of 1956,
as amended ("BHCA"), the Company is subject to certain regulations of the
Federal Reserve. Under the BHCA, the Company's activities and those of its
subsidiaries are limited to banking, managing or controlling banks, furnishing
services to or performing services for its subsidiaries or engaging in any other
activity which the Federal Reserve determines to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
The BHCA prohibits the Company from acquiring direct or indirect control of more
than 5% of the outstanding voting stock or substantially all of the assets of
any bank or savings bank or merging or consolidating with another bank holding
company or savings bank holding company without prior approval of the Federal
Reserve.
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Additionally, the BHCA prohibits the Company from engaging in, or acquiring
ownership or control of, more than 5% of the outstanding voting stock of any
company engaged in a nonbanking business unless such business is determined by
the Federal Reserve to be so closely related to banking as to be properly
incident thereto.
Similarly, Federal Reserve approval (or, in certain cases, non-disapproval)
must be obtained prior to any person acquiring control of the Company. Control
is conclusively presumed to exist if, among other things, a person acquires more
than 25% of any class of voting stock of the holding company or controls in any
manner the election of a majority of the directors of the holding company.
Control is presumed to exist if a person acquires more than 10% of any class of
voting stock and the stock is registered under Section 12 of the Exchange Act or
the acquiror will be the largest shareholder after the acquisition.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss to the depositors of such
depository institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default or in default. For example, to avoid
receivership of an insured depository institution subsidiary, a bank holding
company is required to guarantee the compliance of any insured depository
institution subsidiary that may become "undercapitalized" with the terms of any
capital restoration plan filed by such subsidiary with its appropriate federal
banking agency up to the lesser of (i) an amount equal to 5% of the
institution's total assets at the time the institution became undercapitalized
or (ii) the amount which is necessary (or would have been necessary) to bring
the institution into compliance with all capital standards as of the time the
institution fails to comply with such capital restoration plan. Under a policy
of the Federal Reserve with respect to bank holding company operations, a bank
holding company is required to serve as a source of financial strength to its
subsidiary depository institutions and to commit resources to support such
institutions in circumstances where it might not do so absent such policy. The
Federal Reserve under the BHCA also has the authority to require a bank holding
company to terminate any activity or to relinquish control of a nonbank
subsidiary (other than a nonbank subsidiary of a bank) upon the Federal
Reserve's determination that such activity or control constitutes a serious risk
to the financial soundness and stability of any bank subsidiary of the bank
holding company.
In addition, insured depository institutions under common control are
required to reimburse the FDIC for any loss suffered by either the Savings
Association Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF") as a
result of the default of a commonly controlled insured depository institution or
for any assistance provided by the FDIC to a commonly controlled insured
depository institution in danger of default. The FDIC may decline to enforce
the cross-guarantee provisions if it determines that a waiver is in the best
interest of the SAIF or the BIF or both. The FDIC's claim for damages is
superior to claims of stockholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institutions.
Federal regulations require that the Company must notify the Federal
Reserve Bank of Richmond prior to repurchasing Common Stock in excess of ten
percent of its net worth during a rolling twelve month period.
As a result of the Company's ownership of the Bank, the Company is
registered under the savings bank holding company laws of North Carolina.
Accordingly, the Company is also subject to regulation and supervision by the
Administrator.
Capital Adequacy Guidelines for Holding Companies. The Federal Reserve has
adopted capital adequacy guidelines for bank holding companies and banks that
are members of the Federal Reserve system and have consolidated assets of $150
million or more. For bank holding companies with less than $150 million in
consolidated assets, the guidelines are applied on a bank-only basis unless the
parent bank holding company (i) is engaged in nonbank activity involving
significant leverage or (ii) has a significant amount of outstanding debt that
is held by the general public.
Bank holding companies are required to comply with the Federal Reserve's
risk-based capital guidelines. Under these regulations, the minimum ratio of
total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least half of the
total capital is required to be "Tier I capital,"
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principally consisting of common stockholders' equity, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less certain goodwill items. The remainder ("Tier II capital") may consist of a
limited amount of subordinated debt, certain hybrid capital instruments and
other debt securities, perpetual preferred stock, and a limited amount of the
general loan loss allowance. In addition to the risk-based capital guidelines,
the Federal Reserve has adopted a minimum Tier I capital (leverage) ratio, under
which a bank holding company must maintain a minimum level of Tier I capital to
average total consolidated assets of at least 3% in the case of a bank holding
company which has the highest regulatory examination rating and is not
contemplating significant growth or expansion. All other bank holding companies
are expected to maintain a Tier I capital (leverage) ratio of at least 1% to 2%
above the stated minimum.
Dividend and Repurchase Limitations. In connection with the Conversion,
the Bank has agreed with the FDIC that, during the first three years after
consummation of the Conversion, neither the Company nor the Bank will pay any
taxable dividend or make any other taxable distribution to its stockholders in
excess of their current or retained earnings. Also, the Company and the Bank
have agreed to notify the FDIC before making a return of capital during the
first three years following the Conversion. The Company must obtain Federal
Reserve approval prior to repurchasing Common Stock for in excess of 10% of its
net worth during any twelve-month period unless the Company (i) both before and
after the redemption satisfies capital requirements for "well capitalized" state
member banks; (ii) received a one or two rating in its last examination; and
(iii) is not the subject of any unresolved supervisory issues.
Although the payment of dividends and repurchase of stock by the Company
are subject to certain notice requirements with the Administrator in addition to
other requirements and limitations of North Carolina corporate law, except as
set forth in this paragraph, neither the Administrator nor the FDIC have
promulgated any regulations specifically limiting the right of the Company to
pay dividends and repurchase shares. However, the ability of the Company to pay
dividends or repurchase shares may be dependent upon the Company's receipt of
dividends from the Bank. The Bank's ability to pay dividends is limited. See "
- -- Regulation of the Bank -- Restrictions on Dividends and Other Capital
Distributions."
Capital Maintenance Agreement. In connection with the Administrator's
approval of the Company's application to acquire control of the Bank, the
Company was required to execute a Capital Maintenance Agreement whereby it has
agreed to maintain the Bank's capital in an amount sufficient to enable the Bank
to satisfy all regulatory capital requirements.
Federal Securities Law. The Company has registered its Common Stock with
the SEC pursuant to Section 12(g) of the Exchange Act and will not deregister
the Common Stock for a period of three years following the completion of the
Conversion. As a result of such registration, the proxy and tender offer rules,
insider trading reporting requirements, annual and periodic reporting and other
requirements of the Exchange Act are applicable to the Company.
Regulation of the Bank
General. Federal and state legislation and regulation have significantly
affected the operations of federally insured savings institutions and other
federally regulated financial institutions. In addition, federal legislation
has imposed new limitations on investment authority, and higher insurance and
examination assessments on savings institutions and has made other changes that
may adversely affect the future operations and competitiveness of savings
institutions with other financial institutions, including commercial banks and
their holding companies. The operations of regulated depository institutions,
including the Bank, will continue to be subject to changes in applicable
statutes and regulations from time to time. Such changes may or may not be
favorable to the Bank.
The Bank is a North Carolina-chartered savings bank, is a member of the
FHLB system, and its deposits are insured by the FDIC through the SAIF. It is
subject to examination and regulation by the FDIC and the Administrator and to
regulations governing such matters as capital standards, mergers, establishment
of branch offices, subsidiary investments and activities, and general investment
authority. Generally, North Carolina state chartered savings banks whose
deposits are issued by the SAIF are subject to restrictions with respect to
activities and investments, transactions
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with affiliates and loans-to-one borrower similar to those applicable to SAIF
insured savings associations. Such examination and regulation is intended
primarily for the protection of depositors and the federal deposit insurance
funds.
The Bank is subject to various regulations promulgated by the Federal
Reserve including, without limitation, Regulation B (Equal Credit Opportunity),
Regulation D (Reserves), Regulation E (Electronic Fund Transfers), Regulation O
(Loans to Executive Officers, Directors and Principal Shareholders), Regulation
Z (Truth in Lending), Regulation CC (Availability of Funds) and Regulation DD
(Truth in Savings). As creditors of loans secured by real property and as
owners of real property, financial institutions, including the Bank, may be
subject to potential liability under various statutes and regulations applicable
to property owners generally, including statutes and regulations relating to the
environmental condition of real property.
The FDIC has extensive enforcement authority over North Carolina-chartered
savings banks, including the Bank. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue cease and
desist or removal orders and to initiate injunctive actions. In general, these
enforcement actions may be initiated in response to violations of laws and
regulations and unsafe or unsound practices.
The grounds for appointment of a conservator or receiver for a North
Carolina savings bank on the basis of an institution's financial condition
include: (i) insolvency, in that the assets of the savings bank are less than
its liabilities to depositors and others; (ii) substantial dissipation of assets
or earnings through violations of law or unsafe or unsound practices; (iii)
existence of an unsafe or unsound condition to transact business; (iv)
likelihood that the savings bank will be unable to meet the demands of its
depositors or to pay its obligations in the normal course of business; and (v)
insufficient capital or the incurring or likely incurring of losses that will
deplete substantially all of the institution's capital with no reasonable
prospect of replenishment of capital without federal assistance.
Transactions with Affiliates. Under current federal law, transactions
between the Bank and any affiliate are governed by Sections 23A and 23B of the
Federal Reserve Act. An affiliate of the Bank is any company or entity that
controls, is controlled by or is under common control with the savings bank.
Generally, subsidiaries of a bank, other than a bank subsidiary, and certain
other types of companies are not considered to be affiliates. Generally,
Sections 23A and 23B (i) limit the extent to which the Bank or its subsidiaries
may engage in "covered transactions" with any one affiliate to an amount equal
to 10% of such the Bank's capital stock and surplus, and contain an aggregate
limit on all such transactions with all affiliates to an amount equal to 20% of
such capital stock and surplus and (ii) require that all such transactions be on
terms substantially the same, or at least as favorable, to the Bank or the
subsidiary as those provided to a nonaffiliate. The term "covered transaction"
includes the making of loans or other extensions of credit to an affiliate, the
purchase of assets from an affiliate, the purchase of, or an investment in, the
securities of an affiliate, the acceptance of securities of an affiliate as
collateral for a loan or extension of credit to any person, or issuance of a
guarantee, acceptance or letter of credit on behalf of an affiliate.
Further, current federal law has extended to savings banks the restrictions
contained in Section 22(h) of the Federal Reserve Act and its implementing
regulations with respect to loans to directors, executive officers and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who own more than 10% of a savings bank, and certain affiliated
entities of any of the foregoing, may not exceed, together with all other
outstanding loans to such person and affiliated entities, the savings bank's
loans-to-one borrower limit as established by federal law and all loans to such
persons may not exceed the institution's unimpaired capital and unimpaired
surplus. Section 22(h) also prohibits loans above amounts prescribed by the
appropriate federal banking agency to directors, executive officers and
stockholders who own more than 10% of a savings bank, and their respective
affiliates, unless such loan is approved in advance by a majority of the
disinterested directors of the board of directors of the savings bank and the
Company. Any "interested" director may not participate in the voting. The
Federal Reserve has prescribed the loan amount (which includes all other
outstanding loans to such person), as to which such prior board of director
approval is required, as being the greater of $25,000 or 5% of unimpaired
capital and unimpaired surplus (up to $500,000). Further, pursuant to Section
22(h) the Federal Reserve requires that loans to directors, executive officers,
and principal stockholders be made on terms substantially the same as offered in
comparable transactions to non-executive employees and not involve more than the
normal risk of repayment or present other unfavorable features. Section 22(h)
also generally prohibits a depository institution from paying the overdrafts of
any of its executive officers or directors.
10
<PAGE>
Deposit Insurance. The Bank's deposit accounts are insured by the FDIC
under the Savings Association Insurance Fund ("SAIF") to the maximum extent
permitted by law. The Bank is also subject to insurance assessments imposed by
the FDIC. Under current law, the insurance assessment to be paid by the SAIF
members shall be as specified in a schedule required to be issued by the FDIC
that would specify, at semiannual intervals, target reserve ratios designed to
maintain a reserve ratio of 1.25% of estimated insured deposits (or such higher
ratio as the FDIC may determine in accordance with the statute). Further, the
FDIC is authorized to impose one or more special assessments in any amount
deemed necessary to enable repayment of amounts borrowed by the FDIC from the
United States Treasury Department. The FDIC has established a risk-based
assessment schedule, having assessments ranging from 0% to 0.27% of an
institution's average assessment base, with most banks paying 0%. The actual
assessment to be paid by each SAIF member is based on an institution's
assessment risk classification, which is determined based on whether the
institution is considered "well capitalized," "adequately capitalized" or
"under capitalized," as such terms have been defined in applicable federal
regulations, and whether such institution is considered by its supervisory
agency to be financially sound or to have supervisory concerns. In addition,
the Bank is charged an assessment to help pay interest on the FICO bonds at an
annual rate of approximately 0.015% of the bank's average assessment base until
the earlier of December 31, 1999 or the date upon which the last savings
association ceases to exist. Based on the current financial condition and
capital levels of the Bank, the Bank does not expect that the current risk-based
assessment schedule will have a material impact on the Bank's future earnings.
Community Reinvestment Act. The Bank, like other financial institutions,
is subject to the Community Reinvestment Act, as amended ("CRA"). A purpose of
this Act is to encourage financial institutions to help meet the credit needs of
its entire community, including the needs of low- and moderate-income
neighborhoods. A savings bank is evaluated and rated under three categories: a
lending test, an investment test and a service test. For each of these three
tests, the savings bank is given a rating of either "outstanding," "high
satisfactory," "low satisfactory," "needs to improve" or "substantial non-
compliance." A set of criteria for each rating is included in the regulation.
If an institution disagrees with a particular rating, the institution has the
burden of rebutting the presumption by clearly establishing that the
quantitative measures do not accurately present its actual performance, or that
demographics, competitive conditions or economic or legal limitations peculiar
to the service area should be considered. The ratings received under the three
tests are used to determine the overall composite CRA rating or "outstanding,"
"satisfactory," "needs to improve" or "substantial non-compliance."
During the Bank's last compliance examination, which was performed by the
FDIC under the new CRA regulations in July 1996, the Bank received a
"satisfactory" rating with respect to CRA compliance. The Bank's rating with
respect to CRA compliance would be a factor to be considered by the Federal
Reserve and FDIC in considering applications submitted by the Bank to acquire
branches or to acquire or combine with other financial institutions and take
other actions and could result in the denial of such applications.
Capital Requirements Applicable To The Bank. The FDIC requires the Bank to
have a minimum leverage ratio of Tier I capital (principally consisting of
common stockholders' equity, noncumulative perpetual preferred stock and
minority interests in consolidated subsidiaries, less certain intangible items,
goodwill items, identified losses and investments in securities subsidiaries) to
total assets of at least 3%; provided, however that all institutions, other than
those (i) receiving the highest rating during the examination process and (ii)
not anticipating or experiencing any significant growth, are required to
maintain a ratio of 1% or 2% above the stated minimum, with an absolute minimum
leverage ratio of not less than 4%. The FDIC also requires the Bank to have a
ratio of total capital to risk-weighted assets, including certain off-balance
sheet activities, such as standby letters of credit, of at least 8%. At least
half of the total capital is required to be Tier I capital. The remainder
("Tier II capital") may consist of a limited amount of subordinated debt,
certain hybrid capital instruments, other debt securities, certain types of
preferred stock and a limited amount of loan loss allowance.
An institution which fails to meet minimum capital requirements may be
subject to a capital directive which is enforceable in the same manner and to
the same extent as a final cease and desist order, and must submit a capital
plan within 60 days to the FDIC. If the leverage ratio falls to 2% or less, the
bank may be deemed to be operating in an unsafe or unsound condition, allowing
the FDIC to take various enforcement actions, including possible termination
11
<PAGE>
of insurance or placement of the institution in receivership. At December 31,
1998, the Bank had a leverage ratio of 23.14%.
The Administrator requires that net worth equal at least 5% of total
assets. Intangible assets must be deducted from net worth and assets when
computing compliance with this requirement. At December 31, 1998, the Bank
complied with each of the capital requirements of the FDIC and the
Administrator.
Each federal banking agency was required by law to revise its risk-based
capital standards to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk, and the risk of nontraditional
activities, as well as reflect the actual performance and expected risk of loss
on multi-family mortgages. On August 2, 1995, the federal banking agencies
issued a joint notice of adoption of final risk-based capital rules to take
account of interest rate risk. The final regulation required an assessment of
the need for additional capital on a case-by-case basis, considering both the
level of measured exposure and qualitative risk factors. The final rule also
stated an intent to, in the future, establish an explicit minimum capital charge
for interest rate risk based on the level of a bank's measured interest rate
risk exposure. The final regulation has not had a material impact on the Bank's
capital requirements.
Effective June 26, 1996, the federal banking agencies issued a joint policy
statement announcing the agencies' election not to adopt a standardized measure
and explicit capital charge for interest rate risk at that time. Rather, the
policy statement (i) identifies the main elements of sound interest rate risk
management, (ii) describes prudent principles and practices for each of those
elements, and (iii) describes the critical factors affecting the agencies'
evaluation of a bank's interest rate risk when making a determination of capital
adequacy. The joint policy statement is not expected to have a material impact
on the Bank's management of interest rate risk.
In December 1994, the FDIC adopted a final rule changing its risk-based
capital rules to recognize the effect of bilateral netting agreements in
reducing the credit risk of two types of financial derivatives - interest and
exchange rate contracts. Under the rule, savings banks are permitted to net
positive and negative mark-to-market values of rate contracts with the same
counterparty, subject to legally enforceable bilateral netting contracts that
meet certain criteria. This represents a change from the prior rules which
recognized only a very limited form of netting. The Bank does not anticipate
that this rule will have a material effect upon its financial condition or
results of operations.
Loans-To-One-Borrower. The Bank is subject to the Administrator's loans-
to-one-borrower limits. Under these limits, no loans and extensions of credit
to any borrower outstanding at one time and not fully secured by readily
marketable collateral shall exceed 15% of the net worth of the savings bank.
Loans and extensions of credit fully secured by readily marketable collateral
may comprise an additional 10% of net worth. These limits also authorize
savings banks to make loans-to-one-borrower, for any purpose, in an amount not
to exceed $500,000. A savings bank also is authorized to make loans-to-one-
borrower to develop domestic residential housing units, not to exceed the lesser
of $30 million or 30% of the savings bank's net worth, provided that the
purchase price of each single-family dwelling in the development does not exceed
$500,000 and the aggregate amount of loans made under this authority does not
exceed 150% of net worth. These limits also authorize a savings bank to make
loans-to-one-borrower to finance the sale of real property acquired in
satisfaction of debts in an amount up to 50% of net worth.
As of December 31, 1998, the largest aggregate amount of loans which the
Bank had to any one borrower was $662,000. The Bank had no loans outstanding
which management believes violate the applicable loans-to-one-borrower limits.
The Bank does not believe that the loans-to-one-borrower limits will have a
significant impact on its business, operations and earnings.
Federal Home Loan Bank System. The FHLB system provides a central credit
facility for member institutions. As a member of the FHLB of Atlanta, the Bank
is required to own capital stock in the FHLB of Atlanta in an amount at least
equal to the greater of 1% of the aggregate principal amount of its unpaid
residential mortgage loans, home purchase contracts and similar obligations at
the end of each calendar year, or 5% of its outstanding advances (borrowings)
from the FHLB of Atlanta. On December 31, 1998, the Bank was in compliance with
this requirement with an investment in FHLB of Atlanta stock of $964,000.
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<PAGE>
Each FHLB is required to contribute at least 10% of its reserves and
undivided profits to fund the principal and a portion of the interest on certain
bonds and certain other obligations which are used to fund the resolution of
troubled savings association cases, and to transfer a percentage of its annual
net earnings to the Affordable Housing Program. These contributions continue to
reduce the FHLB of Atlanta's earnings and the Bank's dividends on its FHLB of
Atlanta stock.
Federal Reserve System. Federal Reserve regulations require savings banks,
not otherwise exempt from the regulations, to maintain reserves against their
transaction accounts (primarily negotiable order of withdrawal accounts) and
certain nonpersonal time deposits. The reserve requirements are subject to
adjustment by the Federal Reserve. As of December 31, 1998, the Bank was in
compliance with the applicable reserve requirements of the Federal Reserve.
Restrictions on Acquisitions. Federal law generally provides that no
"person," acting directly or indirectly or through or in concert with one or
more other persons, may acquire "control," as that term is defined in FDIC
regulations, of a state savings bank without giving at least 60 days' written
notice to the FDIC and providing the FDIC an opportunity to disapprove the
proposed acquisition. Pursuant to regulations governing acquisitions of
control, control of an insured institution is conclusively deemed to have been
acquired by, among other things, the acquisition of more than 25% of any class
of voting stock. In addition, control is presumed to have been acquired,
subject to rebuttal, upon the acquisition of more than 10% of any class of
voting stock. Such acquisitions of control may be disapproved if it is
determined, among other things, that (i) the acquisition would substantially
lessen competition; (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the savings bank or prejudice the
interests of its depositors; or (iii) the competency, experience or integrity of
the acquiring person or the proposed management personnel indicates that it
would not be in the interest of the depositors or the public to permit the
acquisitions of control by such person.
For three years following completion of the Conversion, North Carolina
conversion regulations require the prior written approval of the Administrator
before any person may directly or indirectly offer to acquire or acquire the
beneficial ownership of more than 10% of any class of an equity security of the
Bank. If any person were to so acquire the beneficial ownership of more than
10% of any class of any equity security without prior written approval, the
securities beneficially owned in excess of 10% would not be counted as shares
entitled to vote and would not be voted or counted as voting shares in
connection with any matter submitted to stockholders for a vote. Approval is
not required for (i) any offer with a view toward public resale made exclusively
to the Bank or its underwriters or the selling group acting on its behalf or
(ii) any offer to acquire or acquisition of beneficial ownership of more than
10% of the common stock of the Bank by a corporation whose ownership is or will
be substantially the same as the ownership of the Bank, provided that the offer
or acquisition is made more than one year following the consummation of the
Conversion. The regulation provides that within one year following the
Conversion, the Administrator would approve the acquisition of more than 10% of
beneficial ownership only to protect the safety and soundness of the
institution. During the second and third years after the Conversion, the
Administrator may approve such an acquisition upon a finding that (i) the
acquisition is necessary to protect the safety and soundness of the Company and
the Bank or the Boards of Directors of the Company and the Bank support the
acquisition and (iii) the acquiror is of good character and integrity and
possesses satisfactory managerial skills, the acquiror will be a source of
financial strength to the Company and the Bank and the public interests will not
be adversely affected.
Liquidity. The Bank is subject to the Administrator's requirement that the
ratio of liquid assets to total assets equal at least 10%. The computation of
liquidity under North Carolina regulation allows the inclusion of mortgage-
backed securities and investments which, in the judgment of the Administrator,
have a readily marketable value, including investments with maturities in excess
of five years. On December 31, 1998, the Bank's liquidity ratio, calculated in
accordance with North Carolina regulations, was approximately 15.9%. Prior to
and following that date, the Bank's liquidity ratio exceeded 10% of total
assets. At December 31, 1998, the Bank had $12.0 million in available credit
with the FHLB of Atlanta and stable, core-like time deposits of $100,000 or more
of approximately $11.5 million.
Additional Limitations on Activities. FDIC law and regulations generally
provide that the Bank may not engage as principal in any type of activity, or in
any activity in an amount, not permitted for national banks, or directly acquire
or retain any equity investment of a type or in an amount not permitted for
national banks. The FDIC has authority to grant exceptions from these
prohibitions (other than with respect to non-service corporation equity
13
<PAGE>
investments) if it determines no significant risk to the insurance fund is posed
by the amount of the investment or the activity to be engaged in and if the Bank
is and continues to be in compliance with fully phased-in capital standards.
National banks are generally not permitted to hold equity investments other than
shares of service corporations and certain federal agency securities. Moreover,
the activities in which service corporations are permitted to engage are limited
to those of service corporations for national banks.
Savings banks are also generally prohibited from directly or indirectly
acquiring or retaining any corporate debt security that is not of investment
grade (generally referred to as "junk bonds"). State savings banks are also
required to notify the FDIC at least 30 days prior to the establishment or
acquisition of any subsidiary, or at least 30 days prior to conducting any such
new activity. Any such activities must be conducted in accordance with the
regulations and orders of the FDIC and the Administrator.
Prompt Corrective Regulatory Action. Federal law provides the federal
banking agencies with broad powers to take corrective action to resolve problems
of insured depository institutions. The extent of these powers depends upon
whether the institutions in question are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," or
"critically undercapitalized." Under the FDIC regulations applicable to the
Bank, an institution is considered "well capitalized" if it has (i) a total
risk-based capital ratio of 10% or greater, (ii) a Tier I risk-based capital
ratio of 6% or greater, (iii) a leverage ratio of 5% or greater and (iv) is not
subject to any order or written directive to meet and maintain a specific
capital level for any capital measure. An "adequately capitalized" institution
is defined as one that has (i) a total risk-based capital ratio of 8% or
greater, (ii) a Tier I risk-based capital ratio of 4% or greater and (iii) a
leverage ratio of 4% or greater (or 3% or greater in the case of an institution
with the highest examination rating and which is not experiencing or
anticipating significant growth). An institution is considered (A)
"undercapitalized" if it has (i) a total risk-based capital ratio of less than
8%, (ii) a Tier I risk-based capital ratio of less than 4% or (iii) a leverage
ratio of less than 4% (or 3% in the case of an institution with the highest
examination rating and which is not experiencing or anticipating significant
growth); (B) "significantly undercapitalized" if the institution has (i) a total
risk-based capital ratio of less than 6%, or (ii) a Tier I risk-based capital
ratio of less than 3% or (iii) a leverage ratio of less than 3% and (C)
"critically undercapitalized" if the institution has a ratio of tangible equity
to total assets equal to or less than 2%. As of December 31, 1998, the most
recent notification received by the Bank from the FDIC categorized the Bank as
well-capitalized.
Interstate Banking. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act"), effective September 29,
1995, permits adequately capitalized bank and savings bank holding companies to
acquire control of banks and savings banks in any state. The states may
specifically permit interstate acquisitions prior to September 29, 1995, by
enacting legislation that provides for such transactions. North Carolina
adopted nationwide reciprocal interstate acquisition legislation in 1994.
Such interstate acquisitions are subject to certain restrictions. States
may require the bank or savings bank being acquired to have been in existence
for a certain length of time but not in excess of five years. In addition, no
bank or saving bank may acquire more than 10% of the insured deposits in the
United States or more than 30% of the insured deposits in any one state, unless
the state has specifically legislated a higher deposit cap. States are free to
legislate stricter deposit caps.
The Interstate Banking Act also provides for interstate branching,
effective June 1, 1997, allowing interstate branching in all states, provided
that a particular state has not specifically denied interstate branching by
legislation prior to such time. Unlike interstate acquisitions, a state may
deny interstate branching if it specifically elects to do so by June 1, 1997.
States may choose to allow interstate branching prior to June 1, 1997 by opting-
in to a group of states that permits these transactions. These states generally
allow interstate branching via a merger of an out-of-state bank with an in-state
bank, or on a de novo basis. North Carolina has enacted legislation permitting
branching transactions.
Restrictions on Dividends and Other Capital Distributions. A North
Carolina-chartered stock savings bank may not declare or pay a cash dividend on,
or repurchase any of, its capital stock if the effect of such transaction would
be to reduce the net worth of the institution to an amount which is less than
the minimum amount required by applicable federal and state regulations. In
addition, a North Carolina-chartered stock savings bank, for a period of five
years after
14
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its conversion from mutual to stock form, must obtain the written approval from
the Administrator before declaring or paying a cash dividend on its capital
stock in an amount in excess of one-half of the greater of (i) the institution's
net income for the most recent fiscal year end, or (ii) the average of the
institution's net income after dividends for the most recent fiscal year end and
not more than two of the immediately preceding fiscal year ends, if applicable.
Under FDIC regulations, no stock repurchases may be made by the savings bank
during the first year following a conversion from mutual to stock, except that
stock repurchases of no greater than 5% of the bank's outstanding shares may be
repurchased during the first year where compelling and valid business reasons
are established to the satisfaction of the FDIC.
Also, without the prior written approval of the Administrator, a North
Carolina-chartered stock savings bank, for a period of five years after its
conversion from mutual to stock form, may not repurchase any of its capital
stock. The Administrator will give approval to repurchase only upon a showing
that the proposed repurchase will not adversely affect the safety and soundness
of the institution.
In addition, the Bank is not permitted to declare or pay a cash dividend on
or repurchase any of its capital stock if the effect thereof would be to cause
its net worth to be reduced below the amount required for the liquidation
account established in connection with the Bank's conversion from mutual to
stock ownership.
In connection with the Conversion, the Bank has agreed with the FDIC that,
during the first three years after the Conversion, neither the Company nor the
Bank will pay any taxable dividend or make any other taxable distribution in
excess of their current and retained earnings. The Bank has also agreed to
notify the FDIC before making a return of capital during the first three years
following the Conversion.
Other North Carolina Regulations. As a North Carolina-chartered savings
bank, the Bank derives its authority from, and is regulated by, the
Administrator. The Administrator has the right to promulgate rules and
regulations necessary for the supervision and regulation of North Carolina
savings banks under his jurisdiction and for the protection of the public
investing in such institutions. The regulatory authority of the Administrator
includes, but is not limited to, the establishment of reserve requirements; the
regulation of the payment of dividends; the regulation of stock repurchases, the
regulation of incorporators, stockholders, directors, officers and employees;
the establishment of permitted types of withdrawable accounts and types of
contracts for savings programs, loans and investments; and the regulation of the
conduct and management of savings banks, chartering and branching of
institutions, mergers, conversions and conflicts of interest. North Carolina
law requires that the Bank maintain federal deposit insurance as a condition of
doing business.
The Administrator conducts regular examinations of North Carolina-chartered
savings banks. The purpose of such examinations is to assure that institutions
are being operated in compliance with applicable North Carolina law and
regulations and in a safe and sound manner. These examinations are usually
conducted on a joint basis with the FDIC. In addition, the Administrator is
required to conduct an examination of any institution when he has good reason to
believe that the standing and responsibility of the institution is of doubtful
character or when he otherwise deems it prudent. The Administrator is empowered
to order the revocation of the license of an institution if he finds that it has
violated or is in violation of any North Carolina law or regulation and that
revocation is necessary in order to preserve the assets of the institution and
protect the interests of its depositors. The Administrator has the power to
issue cease and desist orders if any person or institution is engaging in, or
has engaged in, any unsafe or unsound practice or unfair and discriminatory
practice in the conduct of its business or in violation of any other law, rule
or regulation.
A North Carolina-chartered savings bank must maintain net worth, computed
in accordance with the Administrator's requirements, of 5% of total assets and
liquidity of 10% of total assets, as discussed above. Additionally, a North
Carolina-chartered savings bank is required to maintain general valuation
allowances and specific loss reserves in the same amounts as required by the
FDIC.
Subject to limitation by the Administrator, North Carolina-chartered
savings banks may make any loan or investment or engage in any activity which is
permitted to federally chartered institutions. However, a North Carolina-
chartered savings bank cannot invest more than 15% of its total assets in
business, commercial, corporate and agricultural loans. In addition to such
lending authority, North Carolina-chartered savings banks are authorized to
invest
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<PAGE>
funds, in excess of loan demand, in certain statutorily permitted investments,
including but not limited to (i) obligations of the United States, or those
guaranteed by it; (ii) obligations of the State of North Carolina; (iii) bank
demand or time deposits; (iv) stock or obligations of the federal deposit
insurance fund or a FHLB; (v) savings accounts of any savings institution as
approved by the board of directors; and (vi) stock or obligations of any agency
of the State of North Carolina or of the United States or of any corporation
doing business in North Carolina whose principal business is to make education
loans.
North Carolina law provides a procedure by which savings institutions may
consolidate or merge, subject to approval of the Administrator. The approval is
conditioned upon findings by the Administrator that, among other things, such
merger or consolidation will promote the best interests of the members or
stockholders of the merging institutions. North Carolina law also provides for
simultaneous mergers and conversions and for supervisory mergers conducted by
the Administrator.
Future Requirements. Statutes and regulations are regularly introduced
which contain wide-ranging proposals for altering the structures, regulations
and competitive relationships of financial institutions. It cannot be predicted
whether or what form any proposed statute or regulation will be adopted or the
extent to which the business of the Company and the Bank may be affected by such
statute or regulation.
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth the location of the Bank's principal office
in Mooresville, North Carolina and its full service branch office in Cornelius
and Huntersville, North Carolina, as well as certain other information relating
to these offices as of December 31, 1998.
<TABLE>
<CAPTION>
Owned
Net Book Value or Deposits
Address of Property leased (In Thousands)
- ------------------------------------- -------------- ------ --------------
<S> <C> <C> <C>
Mooresville: $226,000 Owned $73,794
347 North Main Street
Mooresville, North Carolina 28115
Cornelius: $286,000 Owned $ 7,727
20209 Highway 73 West
Cornelius, North Carolina 28031
Huntersville: $189,000 Owned $ 6,048
401 Gilead Road
Huntersville, North Carolina 28078
$701,000 $87,569
======== =======
</TABLE>
In addition, the Bank owns a 1.24 acre lot located at Highway 150 West, 239
West Plaza Drive, Mooresville, North Carolina, purchased in 1988 for future
expansion purposes. The net book value of this property at December 31, 1998
was $65,000. The total net book value of the Bank's furniture, fixtures and
equipment on December 31, 1998 was $233,000. The properties are considered by
the Bank's management to be in good condition.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
In the opinion of management, neither the Company nor the Bank is involved
in any pending legal proceedings other than routine, non-material proceedings
occurring in the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's stockholders during the
quarter ended December 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
See the information under the section captioned "Common Stock Information"
on page 59 in the Company's 1998 Annual Report, which section is incorporated
herein by reference. See "Item 1. BUSINESS--Regulation of the Bank--
Restrictions on Dividends and Other Capital Distributions" above for regulatory
restrictions which limit the ability of the Bank to pay dividends to the
Company.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in the table captioned
"Selected Consolidated Financial Data" on pages 2 and 3 of the Company's 1998
Annual Report which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
See the information set forth under Item 1 above and the information set
forth under the section captioned "Management's Discussion and Analysis of
Financial Condition and Operating Results" on pages 4 through 18 in the
Company's 1998 Annual Report, which section is incorporated herein by reference.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pages 6 and 7 of the Company's 1998 Annual Report are herein incorporated
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and supplementary data
set forth on pages 19 through 57 of the Company's 1998 Annual Report are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
N/A.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item regarding directors and executive
officers of the Company is set forth under the sections captioned "Proposal 1 -
Election of Directors - Nominees" on pages 6 through 7 of the Proxy Statement of
the 1999 Annual Meeting of Stockholders (the "Proxy Statement") and "Proposal 1
- - Election of Directors - Executive Officers" on page 9 of the Proxy Statement,
which sections are incorporated herein by reference.
The information required by this Item regarding compliance with Section
16(a) of the Securities Exchange Act of 1934 is set forth under the section
captioned "Section 16(a) Beneficial Ownership Reporting Compliance" set forth on
page 6 of the Proxy Statement, which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth under the sections
captioned "Proposal 1 - Election of Directors - Directors' Compensation" on
pages 8 through 9 and " - Executive Compensation" on pages 10 through 13 of the
Proxy Statement, which sections are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from the
section captioned "Security Ownership of Certain Beneficial Owners" on pages 3
through 6 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the section captioned "Proposal 1 - Election of Directors - Certain
Indebtedness and Transactions of Management" on page 16 of the Proxy Statement,
which section is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
14(a)1. Consolidated Financial Statements (contained in the Company's
1998 Annual Report which is attached hereto as Exhibit (13) and
incorporated herein by reference) including the following:
(a) Independent Auditors' Report
(b) Consolidated Statements of Financial Condition as of December 31,
1998 and 1997
(c) Consolidated Statements of Income and Comprehensive Income for
the Years Ended December 31, 1998, 1997 and 1996
(d) Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
(e) Consolidated Statements of Stockholder's Equity for the Years
Ended December 31, 1998, 1997 and 1996
(f) Notes to Consolidated Financial Statements
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
14(a)2. Consolidated Financial Statement Schedules
All schedules have been omitted as the required information is
either inapplicable or included in the Notes to Consolidated
Financial Statements.
<CAPTION>
<S> <C> <C>
14(a)3. Exhibits
Exhibit (3)(i) Certificate of Incorporation, incorporated herein by reference to Exhibit
(3)(i) to the Registration Statement on Form S-1, Registration No. 333-
35497, dated September 12, 1997, and amended on November 5 and 10, 1997.
Exhibit (3)(ii) Bylaws, incorporated herein by reference to Exhibit (3)(ii) to the
Registration Statement on Form S-1, Registration No. 333-35497, dated
September 12, 1997, and amended on November 5 and 10, 1997.
Exhibit (4) Specimen Stock Certificate, incorporated herein by reference to Exhibit
(4) to the Registration Statement on Form S-1, Registration No. 333-35497,
dated September 12, 1997, and amended on November 5 and 10, 1997.
Exhibit (10)(a) Employment Agreement between Mooresville Savings Bank, Inc., S.S.B. and
George W. Brawley, Jr. dated December 30, 1997, as amended on December 15,
1998.
Exhibit (10)(b) Employment Agreement between Mooresville Savings Bank, Inc., S.S.B. and
Dale W. Brawley dated December 30, 1997, as amended on December 15, 1998.
Exhibit (10)(c) Employment Agreement between Mooresville Savings Bank, Inc., S.S.B. and
Billy R. Williams dated December 30, 1997, as amended on December 15, 1998.
Exhibit (10)(d) Employee Stock Ownership Plan and Trust of Mooresville Savings Bank, Inc.,
S.S.B., incorporated by reference to Exhibit 10(d) to the Company's Form
10-K for the year ended December 31, 1997.
Exhibit (10)(e) Mooresville Savings Bank, Inc., S.S.B. Severance Plan, incorporated herein
by reference to Exhibit 10(f) to the Registration Statement on Form S-1,
Registration No. 333-35497, dated September 12, 1997, and as amended on
November 5 and 10, 1997.
Exhibit (10)(f) Capital Maintenance Agreement between Coddle Creek Financial Corp. and
Mooresville Savings Bank, Inc., S.S.B., incorporated by reference to Exhibit
10(f) to the Company's Form 10-K for the year ended December 31, 1997.
Exhibit (10)(g) Management Recognition Plan of Mooresville Savings Bank, Inc., S.S.B.
Exhibit (10)(h) Stock Option Plan of Coddle Creek Financial Corp.
Exhibit (10)(i) (i) Amended and Restated Retirement Payment Agreements between Mooresville
Savings Bank, Inc., S.S.B. and each of Donald R. Belk,
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
George W. Brawley and Claude U. Voils, Jr. dated September 3, 1979, as amended
and restated September 8, 1997.
(ii) Retirement Payment Agreement between Mooresville Savings Federal Savings &
Loan Association and Calvin E. Tyner dated September 3, 1979, as amended on
September 8, 1997.
(iii) Amended and Restated Director's Deferred Compensation Agreements between
Mooresville Savings Bank, Inc., S.S.B. and each of Donald R. Belk, George W.
Brawley, Jr., Calvin E. Tyner, and Claude U. Voils, Jr. dated January 1, 1985, as
amended and restated on March 31, 1988 and September 8, 1997 and as amended for
Messrs. Belk, Brawley, and Voils on December 16, 1998.
(iv) Amended and Restated Director's Deferred Compensation Agreements between
Mooresville Savings Bank, Inc., S.S.B. and each of Donald R. Belk, George W.
Brawley, Jr.., Calvin E. Tyner, and Claude U. Voils, Jr. dated December 1, 1985,
as amended and restated on September 8, 1997 and as amended for Messrs. Belk,
Brawley and Voils on December 16, 1998.
(v) Amended and Restated Retirement Plan Agreements between Mooresville Savings
Bank, Inc., S.S.B. and each of George W. Brawley, Jr., Donald R. Belk, Claude U.
Voils, Jr. and Calvin E. Tyner dated November 1, 1993, as amended and restated on
September 15, 1997, and as amended for Messrs. Brawley, Belk, and Voils on December
16, 1998.
(vi) Amended and Restated Retirement Payment Agreements between Mooresville Savings
Bank, S.S.B. and George W. Brawley, Jr. dated December 1, 1990, as amended and
restated on September 8, 1997 and as amended on December 16, 1998.
(vii) Amended and Restated Retirement Payment Agreement between Mooresville Savings
Bank, S.S.B. and Dale W. Brawley dated November 1, 1990, amended and restated on
October 21, 1993, as amended and restated on September 8, 1997.
(viii) Amended and Restated Retirement Payment Agreements between (a) Mooresville
Savings Bank, Inc., S.S.B. and each of Donald R. Belk, George W. Brawley, Jr.,
and Claude U. Voils, Jr. dated March 1, 1993, as amended and restated on September
8, 1997 and as amended for each of them on December 16, 1998 and (b) Mooresville
Savings Bank, Inc., S.S.B. and Dale W. Brawley dated February 11, 1993, as amended
and restated on October 21, 1993 and September 8, 1997.
(ix) Amended and Restated Retirement Payment Agreements between Mooresville Savings
Bank, Inc., S.S.B. and each of Dale W. Brawley and George W. Brawley, Jr. dated August
1, 1993, amended and restated on October 23, 1993 for Dale W. Brawley, as amended and
restated on September 8, 1997, and as amended for George W. Brawley on December 16, 1998.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(x) Amended and Restated Retirement Payment Agreement between Mooresville Savings
Bank, Inc., S.S.B. and Jack G. Lawler dated June 1, 1994, as amended and restated on
September 8, 1997.
(xi) Amended and Restated Salary Continuation Agreements between Mooresville Savings
Bank, Inc., S.S.B. and each of Dale W. Brawley, George W. Brawley, Jr., Patricia B.
Clontz, and Richard E. Woods dated September 1, 1984, as amended and restated on
September 17, 1997, and as amended for George W. Brawley on December 16, 1998.
(xii) Amended and Restated Supplemental Income Agreements between Mooresville
Savings Bank, Inc., S.S.B. and each of Dale W. Brawley, George W. Brawley, Jr.,
Billy R. Williams, Donald G. Jones and Richard E. Woods dated November 1, 1993,
as amended and restated on September 17, 1997, and as amended for George W. Brawley
on December 16, 1998.
(xiii) Amended and Restated Salary Continuation Agreements between Mooresville
Savings Bank, S.S.B. and each of Lucille Doster, Marie Hedrick, Carol Huffman,
Brenda Johnson, D. Glenn Jones, and Nancy Lee Petrea dated February 1, 1988, as
amended and restated on September 17, 1997.
Exhibit (10)(j) Mooresville Savings Bank, Inc., S.S.B. Non-Qualified Excess Savings Plan,
incorporated herein by reference to Exhibit 10(i) to the Registration Statement
on Form S-1, Registration No. 333-35497, dated September 12, 1997, as amended on
November 5 and 10, 1997.
Exhibit (11) Statement regarding computation of per share earnings.
Exhibit (12) Statement regarding computation of ratios.
Exhibit (13) 1998 Annual Report to Security Holders.
Exhibit (21) See Item 1. "Business" for discussion of subsidiaries.
Exhibit (23) Consent of Independent Certified Public Accountants.
Exhibit (27) Financial Data Schedule.
14(b) The Company filed no reports on Form 8-K during the last quarter of the fiscal year ended December
31, 1998.
</TABLE>
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CODDLE CREEK FINANCIAL CORP.
Date: March 25, 1999 By: /s/ George W. Brawley, Jr.
---------------------------------
George W. Brawley, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ George W. Brawley, Jr. President, Chief Executive March 25, 1999
- ------------------------------
George W. Brawley, Jr. Officer and Director
/s/ Dale W. Brawley Executive Vice President, March 25, 1999
- ------------------------------
Dale W. Brawley Treasurer and Director
/s/ Billy R. Williams Chief Financial Officer, March 25, 1999
- ------------------------------
Billy R. Williams Chief Accounting Officer,
Controller and Secretary
/s/ Willis L. Barnette Director March 25, 1999
- ------------------------------
Willis L. Barnette
/s/ Donald R. Belk Director March 25, 1999
- ------------------------------
Donald R. Belk
Director March 25, 1999
- ------------------------------
Jack G. Lawler
/s/ Claude U. Voils, Jr. Director March 25, 1999
- ------------------------------
Claude U. Voils, Jr.
</TABLE>
22
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
Exhibit (10)(a) Employment Agreement between Mooresville Savings Bank, Inc.,
S.S.B. and George W. Brawley, Jr. dated December 30, 1997,
as amended on December 15, 1998.
Exhibit (10)(b) Employment Agreement between Mooresville Savings Bank, Inc.,
S.S.B. and Dale W. Brawley dated December 30, 1997, as
amended on December 15, 1998.
Exhibit (10)(c) Employment Agreement between Mooresville Savings Bank, Inc.,
S.S.B. and Billy R. Williams dated December 30, 1997, as
amended on December 15, 1998.
Exhibit (10)(g) Management Recognition Plan of Mooresville Savings Bank,
Inc., S.S.B.
Exhibit (10)(h) Stock Option Plan of Coddle Creek Financial Corp.
Exhibit (10)(i) (i) Amended and Restated Retirement Payment Agreements
between Mooresville Savings Bank, Inc., S.S.B. and each of
Donald R. Belk, George W. Brawley and Claude U. Voils, Jr.
dated September 3, 1979, as amended and restated September
8, 1997.
(ii) Retirement Payment Agreement between Mooresville
Savings Federal Savings & Loan Association and Calvin E.
Tyner dated September 3, 1979, as amended on September 8,
1997.
(iii) Amended and Restated Director's Deferred Compensation
Agreements between Mooresville Savings Bank, Inc., S.S.B.
and each of Donald R. Belk, George W. Brawley, Jr., Calvin
E. Tyner, and Claude U. Voils, Jr. dated January 1, 1985, as
amended and restated on March 31, 1988 and September 8, 1997
and as amended for Messrs. Belk, Brawley, and Voils on
December 16, 1998.
(iv) Amended and Restated Director's Deferred Compensation
Agreements between Mooresville Savings Bank, Inc., S.S.B.
and each of Donald R. Belk, George W. Brawley, Jr.., Calvin
E. Tyner, and Claude U. Voils, Jr. dated December 1, 1985,
as amended and restated on September 8, 1997 and as amended
for Messrs. Belk, Brawley and Voils on December 16, 1998.
(v) Amended and Restated Retirement Plan Agreements between
Mooresville Savings Bank, Inc., S.S.B. and each of George W.
Brawley, Jr., Donald R. Belk, Claude U. Voils, Jr. and
Calvin E. Tyner dated November 1, 1993, as amended and
restated on September 15, 1997, and as amended for Messrs.
Brawley, Belk, and Voils on December 16, 1998.
(vi) Amended and Restated Retirement Payment Agreements
between Mooresville Savings Bank, S.S.B. and George W.
Brawley, Jr. dated December 1, 1990, as amended and restated
on September 8, 1997 and as amended on December 16, 1998.
(vii) Amended and Restated Retirement Payment Agreement
between Mooresville Savings Bank, S.S.B. and Dale W. Brawley
dated November 1, 1990, amended and restated on October 21,
1993, as amended and restated on September 8, 1997.
23
<PAGE>
Exhibit No. Description
- ----------- -----------
(viii) Amended and Restated Retirement Payment Agreements
between (a) Mooresville Savings Bank, Inc., S.S.B. and each
of Donald R. Belk, George W. Brawley, Jr., and Claude U.
Voils, Jr. dated March 1, 1993, as amended and restated on
September 8, 1997 and as amended for each of them on
December 16, 1998 and (b) Mooresville Savings Bank, Inc.,
S.S.B. and Dale W. Brawley dated February 11, 1993, as
amended and restated on October 21, 1993 and September 8,
1997.
(ix) Amended and Restated Retirement Payment Agreements
between Mooresville Savings Bank, Inc., S.S.B. and each of
Dale W. Brawley and George W. Brawley, Jr. dated August 1,
1993, amended and restated on October 23, 1993 for Dale W.
Brawley, as amended and restated on September 8, 1997, and
as amended for George W. Brawley on December 16, 1998.
(x) Amended and Restated Retirement Payment Agreement
between Mooresville Savings Bank, Inc., S.S.B. and Jack G.
Lawler dated June 1, 1994, as amended and restated on
September 8, 1997.
(xi) Amended and Restated Salary Continuation Agreements
between Mooresville Savings Bank, Inc., S.S.B. and each of
Dale W. Brawley, George W. Brawley, Jr., Patricia B. Clontz,
and Richard E. Woods dated September 1, 1984, as amended and
restated on September 17, 1997, and as amended for George W.
Brawley on December 16, 1998.
(xii) Amended and Restated Supplemental Income Agreements
between Mooresville Savings Bank, Inc., S.S.B. and each of
Dale W. Brawley, George W. Brawley, Jr., Billy R. Williams,
Donald G. Jones and Richard E. Woods dated November 1, 1993,
as amended and restated on September 17, 1997, and as
amended for George W. Brawley on December 16, 1998.
(xiii) Amended and Restated Salary Continuation Agreements
between Mooresville Savings Bank, S.S.B. and each of Lucille
Doster, Marie Hedrick, Carol Huffman, Brenda Johnson, D.
Glenn Jones, and Nancy Lee Petrea dated February 1, 1988, as
amended and restated on September 17, 1997.
Exhibit (11) Statement regarding computation of per share earnings.
Exhibit (12) Statement regarding computation of ratios.
Exhibit (13) 1998 Annual Report to Security Holders.
Exhibit (23) Consent of Independent Certified Public Accountants.
Exhibit (27) Financial Data Schedule.
24
<PAGE>
Exhibit 10(a)
MOORESVILLE SAVINGS BANK, INC., SSB
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of December 30, 1997, by and between
Mooresville Savings Bank, Inc., SSB (hereinafter referred to as the "Savings
Bank") and George W. Brawley, Jr. (hereinafter referred to as the "Officer") and
is joined in by Coddle Creek Financial Corp., the parent holding company of the
Savings Bank (hereinafter referred to as the "Holding Company").
WHEREAS, the Officer has heretofore been employed by the Savings Bank
as its President and Chief Executive Officer; and
WHEREAS, the Savings Bank is a state-chartered stock savings bank and
the wholly-owned subsidiary of the Holding Company; and
WHEREAS, the Savings Bank desires to retain the services of the Officer
as the President and Chief Executive Officer of the Savings Bank upon the terms
and conditions set forth herein; and
WHEREAS, the services of the Officer, his experience and knowledge of
the affairs of the Savings Bank, and his reputation and contacts in the industry
and the local community are extremely valuable to the Savings Bank; and
WHEREAS, the Savings Bank wishes to attract and retain such
well-qualified executives and it is in the best interest of the Savings Bank and
of the Officer to secure the continued services of the Officer notwithstanding
any change in control of the Savings Bank or the Holding Company; and
WHEREAS, the Savings Bank considers the establishment and maintenance
of a sound and vital management to be part of its overall corporate strategy and
to be essential to protecting and enhancing the best interests of the Savings
Bank and its stockholders; and
1
<PAGE>
WHEREAS, the parties desire to enter into this Agreement in order to
set forth the terms and conditions of the Officer's employment relationship with
the Savings Bank.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants and conditions hereinafter set forth and other good and
valuable considerations, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Employment. The Savings Bank hereby agrees to employ the Officer and
----------
the Officer hereby agrees to accept employment, upon the terms and conditions
stated herein, as the President and Chief Executive Officer of the Savings Bank.
The Officer shall render such administrative and management services to the
Savings Bank as are customarily performed by persons situated in a similar
executive capacity. The Officer shall promote the business of the Savings Bank
and perform such other duties as shall, from time to time, be reasonably
prescribed by the Board of Directors of the Savings Bank (the "Board").
2. Compensation. The Savings Bank shall pay the Officer during the term
------------
of this Agreement, as compensation for all service rendered by him to the
Savings Bank, a base salary at the rate of $139,200 per annum, payable in cash
not less frequently than monthly; provided that the rate of such salary shall be
reviewed by the Board not less often than annually. Such rate of salary, or
increased rate of salary, as the case may be, may be further increased from time
to time in such amounts as the Board, in its discretion, may decide. In
determining salary increases, the Board shall compensate the Officer for
increases in the cost of living and may also provide for performance or merit
increases. Participation in incentive compensation, deferred compensation,
discretionary bonus, profit-sharing, retirement, stock option and other employee
benefit plans that the Savings Bank or the Holding Company have adopted or may
from time to time adopt, and participation in any fringe benefits, shall not
reduce the salary payable to the Officer under this Section. The Officer will be
entitled to such customary fringe benefits, vacation and sick leave as
2
<PAGE>
are consistent with the normal practices and established policies of the Savings
Bank. In the event of a Change of Control (as defined in Paragraph 10), the
Officer's rate of salary shall be increased not less than six percent (6%)
annually during the term of this Agreement.
3. Discretionary Bonuses. During the term of this Agreement, the
---------------------
Officer shall be entitled in an equitable manner with all other key management
personnel of the Savings Bank, to such discretionary bonuses as may be
authorized, declared and paid by the Directors to the Savings Bank's key
management employees. No other compensation provided for in this Agreement shall
be deemed a substitute for the Officer's right to such discretionary bonuses
when and as declared by the Directors.
4. Participation in Retirement and Employee Benefit Plans; Fringe
--------------------------------------------------------------
Benefits. The Officer shall be entitled to participate in any plan relating to
- --------
deferred compensation, stock awards, stock options, stock purchases, pension,
thrift, profit sharing, group life insurance, medical coverage, disability
coverage, education, or other retirement or employee benefits that the Savings
Bank or the Holding Company have adopted, or may, from time to time adopt, for
benefit of their executive employees and for employees generally, subject to the
eligibility rules of such plans.
The Officer shall also be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Officer or the
Savings Bank's other executive employees, including the payment of reasonable
expenses for attending annual and periodic meetings of trade associations, and
any other benefits which are commensurate with the duties and responsibilities
to be performed by the Officer under this Agreement. Additionally, the Officer
shall be entitled to such vacation and sick leave as shall be established under
uniform employee policies promulgated by the Directors. The Savings Bank shall
reimburse the Officer for all out-of-pocket reasonable and necessary business
expenses which the Officer may incur in connection with his services on behalf
of the Savings Bank.
3
<PAGE>
The Savings Bank also agrees to provide the Officer with one automobile
of an appropriate class and quality owned or leased by the Savings Bank for use
in connection with the Officer's duties hereunder.
5. Term. The initial term of employment under this Agreement shall be
----
for the period commencing upon the effective date of this Agreement and ending
three (3) calendar years from the effective date of this Agreement. On each
anniversary of the effective date of this Agreement of the Savings Bank, the
term of this Agreement shall automatically be extended for an additional one
year period beyond the then effective expiration date unless written notice from
the Savings Bank or the Officer is received 90 days prior to an anniversary date
advising the other party that this Agreement shall not be further extended;
provided that the Directors shall review the Officer's performance annually and
make a specific determination pursuant to such review to renew this Agreement
prior to the 90 day notice period.
6. Loyalty. The Officer shall devote his full efforts and entire
-------
business time to the performance of his duties and responsibilities under this
Agreement.
The Officer agrees that he will hold in confidence all knowledge or
information of a confidential nature with respect to the respective businesses
of the Holding Company, the Savings Bank or of their subsidiaries, if any,
received by him during the term of this Agreement and will not disclose or make
use of such information without the prior written consent of the Holding Company
or the Savings Bank.
7. Standards. The Officer shall perform his duties and responsibilities
---------
under this Agreement in accordance with such reasonable standards expected of
employees with comparable positions in comparable organizations and as may be
established from time to time by the Board. The Savings Bank will provide the
Officer with the working facilities and staff customary for similar executives
and necessary for him to perform his duties.
4
<PAGE>
8. Termination and Termination Pay.
-------------------------------
(a) The Officer's employment under this Agreement shall be terminated
upon the death of the Officer during the term of this Agreement, in which event,
the Officer's estate shall be entitled to receive the compensation due the
Officer through the last day of the calendar month in which his death shall have
occurred and for a period of one month thereafter. Notwithstanding the
foregoing, in the event of the Officer's death following a change in control (as
defined in Paragraph 10), the Officer's designated beneficiary or the designated
beneficiary's estate shall be entitled to receive the compensation due the
Officer through the last day of the remaining term of this Agreement.
(b) The Officer's employment under this Agreement may be terminated at
any time by the Officer upon sixty (60) days' written notice to the Board of
Directors. Upon such termination, the Officer shall be entitled to receive
compensation through the effective date of such termination.
(c) The Board may terminate the Officer's employment at any time, but
any termination by the Board, other than termination for cause, shall not
prejudice the Officer's right to compensation or other benefits under this
Agreement. The Officer shall have no right to receive compensation or other
benefits for any period after termination for "cause." Termination for "cause"
shall include termination because of the Officer's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provisions of this
Agreement.
5
<PAGE>
9. Additional Regulatory Requirements.
----------------------------------
(a) If the Officer is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(3) and (g)(1)), the Savings Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Savings
Bank may, in its discretion, (i) pay the Officer all or part of the compensation
withheld while its contract obligations were suspended and (ii) reinstate (in
whole or in part) any of its obligations which were suspended.
(b) If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank's affairs by an order issued
under Section 8(e)(4) of Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Savings Bank under
this Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(c) If the Savings Bank is in default as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act (12 U.S.C. ss. 1818(x)(1)), all obligations
under this Agreement shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the Savings Bank, (i) by the Federal Deposit Insurance
Corporation (the "Corporation"), at the time the Corporation enters into an
agreement to provide assistance to or on behalf of the Savings Bank under the
authority contained in Section 13(c) of the Federal Deposit Insurance Act (12
U.S.C. ss. 1818(c)); or (ii) by the Administrator of the Savings Institution
Division of the North
6
<PAGE>
Carolina Department of Commerce (the "Administrator"), at the time the
Administrator approves a supervisory merger to resolve problems related to
operation of the Savings Bank or when the Savings Bank is determined by the
Administrator to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.
10. Change in Control.
-----------------
(a) In the event of a "Change in Control" (as defined in Subparagraph
(b) below), the acquiror shall be prohibited, during the remainder of the term
of this Agreement, from:
(i) Assigning Officer any duties and/or responsibilities that are
inconsistent with his position, duties, responsibilities or status
at the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in
effect at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Paragraph 2 of this Agreement; or
(iii) Reducing in level, scope or coverage or eliminating Officer's
life insurance, medical or hospitalization insurance, disability
insurance, profit sharing plans, stock option plans, stock purchase
plans, deferred compensation plans, management retention plans,
retirement plans or similar plans or benefits being provided by the
Savings Bank or the Holding Company to the Officer as of the
effective date of the Change in Control; or
(iv) Transferring Officer to a location which is an unreasonable
distance from his current principal work location, without the
Officer's express written consent.
(b) For the purposes of this Agreement, the term "Change in Control"
shall mean any of the following events:
(i) a change in control of a nature that would be required to be
reported 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; or
(ii) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Holding Company or Savings Bank
7
<PAGE>
representing 25 percent or more of the combined voting power of the
outstanding Common Stock of the Holding Company or Common Stock of
the Savings Bank, as applicable; or
(iii) individuals who constitute the Board or board of directors of
the Holding Company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding
Company Board, as applicable, or whose nomination for election by
the Savings Bank's or Holding Company's shareholders was approved
by the Savings Bank's or Holding Company's Board of Directors or
Nominating Committee, as applicable, shall be considered as though
he or she were a member of the Incumbent Board or Incumbent Holding
Company Board, as applicable; or
(iv) either the Holding Company or the Savings Bank consolidates or
merges with or into another corporation, association or entity or
is otherwise reorganized, where neither the Holding Company nor the
Savings Bank, respectively, is the surviving corporation in such
transaction; or
(v) all or substantially all of the assets of either the Holding
Company or the Savings Bank are sold or otherwise transferred to or
are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 10, a
transaction or event shall not be considered a Change in Control if, prior to
the consummation or occurrence of such transaction or event, Officer and Savings
Bank agree in writing that the same shall not be treated as a Change in Control
for purposes of this Agreement.
(c) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including this
Section 10, whether instituted by formal legal proceedings or otherwise,
including any action taken by the Officer to enforce the terms of this Section
10 or in defending against any action taken by the Savings Bank, the Savings
Bank shall reimburse the Officer for all costs and expenses incurred in such
proceedings or actions, including attorney's fees, in the event the Officer
prevails in any such action.
8
<PAGE>
11. Successors and Assigns.
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Savings Bank which shall acquire,
directly or indirectly, by conversion, merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Holding Company or the
Savings Bank.
(b) Since the Savings Bank is contracting for the unique and personal
skills of the Officer, the Officer shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Savings Bank.
12. Modification; Waiver; Amendments. No provision of this Agreement
--------------------------------
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing, signed by the Officer and on behalf of the
Savings Bank by such officer as may be specifically designated by the Directors.
No waiver by either party hereto, at any time, of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No amendments or additions to this Agreement shall be binding unless in
writing and signed by both parties, except as herein otherwise provided.
13. Applicable Law. This Agreement shall be governed in all respects
--------------
whether as to validity, construction, capacity, performance or otherwise, by the
laws of North Carolina, except to the extent that federal law shall be deemed to
apply.
14. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first hereinabove written.
MOORESVILLE SAVINGS BANK, INC., SSB
By: /s/ Calvin E. Tyner
-------------------------------------
Chairman of the Board
/s/ George W. Brawley, Jr.
-------------------------------------
(SEAL) George W. Brawley, Jr.
The foregoing Agreement is consented and agreed to by Coddle Creek
Financial Corp., the parent holding company of Mooresville Savings Bank, Inc.,
SSB.
CODDLE CREEK FINANCIAL CORP.
By: /s/ Calvin E. Tyner
-------------------------------------
Chairman of the Board
10
<PAGE>
MODIFICATION TO EMPLOYMENT AGREEMENT
THIS MODIFICATION TO EMPLOYMENT AGREEMENT (the "Modification Agreement") is made
this 15/th/ day of December, 1998, by and between Mooresville Savings Bank,
Inc., SSB (the "Bank") and George W. Brawley, Jr. (the "Officer") and is joined
in by Coddle Creek Financial Corp. (the "Company").
WHEREAS, the Officer is presently employed by the Bank pursuant to an employment
agreement dated December 30, 1997, between the Officer, the Bank and the Company
(the "Employment Agreement"), and those parties desire to modify Paragraph 10 of
the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties agree as follows:
1. Paragraph 10 of the Employment Agreement shall be deleted and
replaced, in its entirety, with the following:
10. Change in Control.
-----------------
(a) In the event of a "Change in Control" (as defined in Subparagraph
(c) below), the term of employment under this Agreement automatically
shall be extended for a period of three (3) years beginning on the
date of the Change in Control, and the acquiror shall be bound by the
terms of this Agreement and shall be prohibited, during the remainder
of such term, from:
(i) Assigning Officer any duties and/or responsibilities that
are inconsistent with his position, duties, responsibilities or
status at the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in
effect at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Paragraph 10(b) of this
Agreement; or
(iii) Reducing in level, scope or coverage or eliminating
Officer's life insurance, medical or hospitalization insurance,
disability insurance, profit sharing plans, stock option plans,
stock purchase plans, deferred compensation plans, management
retention plans, retirement plans, stock ownership plans or
similar plans or benefits being provided by the Savings Bank or
the Holding Company to the Officer as of the effective date of
the Change in Control; or
<PAGE>
(iv) Transferring Officer to a location which is an
unreasonable distance from his current principal work location,
without the Officer's express written consent.
(b) In the event of a Change in Control, the Officer's base salary
shall be adjusted to include an amount equal to the average of the two
previous years' discretionary bonuses, if any, and such adjusted base
salary shall be increased by not less than six percent (6%) annually
beginning at the date of the Change in Control and continuing each
year for the three year term thereafter.
(c) For the purposes of this Agreement, the term "Change in Control"
shall mean any of the following events:
(i) a change in control of a nature that would be required to
be reported 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 Securities Exchange Act of 1934, as amended (the
"Exchange Act"); or
(ii) such time as any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Holding
Company or Savings Bank representing 25 percent or more of the
combined voting power of the outstanding Common Stock of the
Holding Company or Common Stock of the Savings Bank, as
applicable; or
(iii) individuals who constitute the Board or board of directors
of the Holding Company on the date hereof (the "Incumbent Board"
and "Incumbent Holding Company 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
Holding Company Board, as applicable, or whose nomination for
election by the Savings Bank's or Holding Company's shareholders
was approved by the Savings Bank's or Holding Company's Board of
Directors or Nominating Committee, as applicable, shall be
considered as though he or she were a member of the Incumbent
Board or Incumbent Holding Company Board, as applicable; or
2
<PAGE>
(iv) either the Holding Company or the Savings Bank
consolidates or merges with or into another corporation,
association or entity or is otherwise reorganized, where neither
the Holding Company nor the Savings Bank, respectively, is the
surviving corporation in such transaction; or
(v) all or substantially all of the assets of either the
Holding Company or the Savings Bank are sold or otherwise
transferred to or are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 10, a
transaction or event shall not be considered a Change in Control if, prior
to the consummation or occurrence of such transaction or event, Officer and
Savings Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
(d) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including
this Section 10, whether instituted by formal legal proceedings or
otherwise, including any action taken by the Officer to enforce the terms
of this Section 10 or in defending against any action taken by the Savings
Bank, the Savings Bank shall reimburse the Officer for all costs and
expenses incurred in such proceedings or actions, including attorney's
fees, in the event the Officer prevails in any such action.
2. The last sentence of Paragraph 2 of the Employment Agreement shall be
deleted in its entirety.
3. Except as herein modified, the terms and provisions of the Employment
Agreement shall remain unchanged and continue in full force and effect as
therein provided.
IN WITNESS WHEREOF, the parties hereto have executed this Modification Agreement
as of the date first set forth above.
MOORESVILLE SAVINGS BANK, INC.,SSB
By: /s/ Claude U. Voils, Jr.
____________________________________
Claude U. Voils, Jr.
Board of Directors Member
/s/ George W. Brawley, Jr.
_________________________________(SEAL)
George W. Brawley, Jr.
3
<PAGE>
The foregoing Modification Agreement is consented and agreed to by the Company.
CODDLE CREEK FINANCIAL CORP.
By: /s/ Claude U. Voils, Jr.
____________________________________
<PAGE>
Exhibit 10(b)
MOORESVILLE SAVINGS BANK, INC., SSB
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of December 30, 1997, by and between
Mooresville Savings Bank, Inc., SSB (hereinafter referred to as the "Savings
Bank") and Dale W. Brawley (hereinafter referred to as the "Officer") and
is joined in by Coddle Creek Financial Corp., the parent holding company of the
Savings Bank (hereinafter referred to as the "Holding Company").
WHEREAS, the Officer has heretofore been employed by the Savings Bank
as its Executive Vice President and Treasurer; and
WHEREAS, the Savings Bank is a state-chartered stock savings bank and
the wholly-owned subsidiary of the Holding Company; and
WHEREAS, the Savings Bank desires to retain the services of the Officer
as the Executive Vice President and Treasurer of the Savings Bank upon the terms
and conditions set forth herein; and
WHEREAS, the services of the Officer, his experience and knowledge of
the affairs of the Savings Bank, and his reputation and contacts in the industry
and the local community are extremely valuable to the Savings Bank; and
WHEREAS, the Savings Bank wishes to attract and retain such
well-qualified executives and it is in the best interest of the Savings Bank and
of the Officer to secure the continued services of the Officer notwithstanding
any change in control of the Savings Bank or the Holding Company; and
WHEREAS, the Savings Bank considers the establishment and maintenance
of a sound and vital management to be part of its overall corporate strategy and
to be essential to protecting and enhancing the best interests of the Savings
Bank and its stockholders; and
1
<PAGE>
WHEREAS, the parties desire to enter into this Agreement in order to
set forth the terms and conditions of the Officer's employment relationship with
the Savings Bank.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants and conditions hereinafter set forth and other good and
valuable considerations, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Employment. The Savings Bank hereby agrees to employ the Officer and
----------
the Officer hereby agrees to accept employment, upon the terms and conditions
stated herein, as the President and Chief Executive Officer of the Savings Bank.
The Officer shall render such administrative and management services to the
Savings Bank as are customarily performed by persons situated in a similar
executive capacity. The Officer shall promote the business of the Savings Bank
and perform such other duties as shall, from time to time, be reasonably
prescribed by the Board of Directors of the Savings Bank (the "Board").
2. Compensation. The Savings Bank shall pay the Officer during the term
------------
of this Agreement, as compensation for all service rendered by him to the
Savings Bank, a base salary at the rate of $139,200 per annum, payable in cash
not less frequently than monthly; provided that the rate of such salary shall be
reviewed by the Board not less often than annually. Such rate of salary, or
increased rate of salary, as the case may be, may be further increased from time
to time in such amounts as the Board, in its discretion, may decide. In
determining salary increases, the Board shall compensate the Officer for
increases in the cost of living and may also provide for performance or merit
increases. Participation in incentive compensation, deferred compensation,
discretionary bonus, profit-sharing, retirement, stock option and other employee
benefit plans that the Savings Bank or the Holding Company have adopted or may
from time to time adopt, and participation in any fringe benefits, shall not
reduce the salary payable to the Officer under this Section. The Officer will be
entitled to such customary fringe benefits, vacation and sick leave as
2
<PAGE>
are consistent with the normal practices and established policies of the Savings
Bank. In the event of a Change of Control (as defined in Paragraph 10), the
Officer's rate of salary shall be increased not less than six percent (6%)
annually during the term of this Agreement.
3. Discretionary Bonuses. During the term of this Agreement, the
---------------------
Officer shall be entitled in an equitable manner with all other key management
personnel of the Savings Bank, to such discretionary bonuses as may be
authorized, declared and paid by the Directors to the Savings Bank's key
management employees. No other compensation provided for in this Agreement shall
be deemed a substitute for the Officer's right to such discretionary bonuses
when and as declared by the Directors.
4. Participation in Retirement and Employee Benefit Plans; Fringe
--------------------------------------------------------------
Benefits. The Officer shall be entitled to participate in any plan relating to
- --------
deferred compensation, stock awards, stock options, stock purchases, pension,
thrift, profit sharing, group life insurance, medical coverage, disability
coverage, education, or other retirement or employee benefits that the Savings
Bank or the Holding Company have adopted, or may, from time to time adopt, for
benefit of their executive employees and for employees generally, subject to the
eligibility rules of such plans.
The Officer shall also be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Officer or the
Savings Bank's other executive employees, including the payment of reasonable
expenses for attending annual and periodic meetings of trade associations, and
any other benefits which are commensurate with the duties and responsibilities
to be performed by the Officer under this Agreement. Additionally, the Officer
shall be entitled to such vacation and sick leave as shall be established under
uniform employee policies promulgated by the Directors. The Savings Bank shall
reimburse the Officer for all out-of-pocket reasonable and necessary business
expenses which the Officer may incur in connection with his services on behalf
of the Savings Bank.
3
<PAGE>
The Savings Bank also agrees to provide the Officer with one automobile
of an appropriate class and quality owned or leased by the Savings Bank for use
in connection with the Officer's duties hereunder.
5. Term. The initial term of employment under this Agreement shall be
----
for the period commencing upon the effective date of this Agreement and ending
three (3) calendar years from the effective date of this Agreement. On each
anniversary of the effective date of this Agreement of the Savings Bank, the
term of this Agreement shall automatically be extended for an additional one
year period beyond the then effective expiration date unless written notice from
the Savings Bank or the Officer is received 90 days prior to an anniversary date
advising the other party that this Agreement shall not be further extended;
provided that the Directors shall review the Officer's performance annually and
make a specific determination pursuant to such review to renew this Agreement
prior to the 90 day notice period.
6. Loyalty. The Officer shall devote his full efforts and entire
-------
business time to the performance of his duties and responsibilities under this
Agreement.
The Officer agrees that he will hold in confidence all knowledge or
information of a confidential nature with respect to the respective businesses
of the Holding Company, the Savings Bank or of their subsidiaries, if any,
received by him during the term of this Agreement and will not disclose or make
use of such information without the prior written consent of the Holding Company
or the Savings Bank.
7. Standards. The Officer shall perform his duties and responsibilities
---------
under this Agreement in accordance with such reasonable standards expected of
employees with comparable positions in comparable organizations and as may be
established from time to time by the Board. The Savings Bank will provide the
Officer with the working facilities and staff customary for similar executives
and necessary for him to perform his duties.
4
<PAGE>
8. Termination and Termination Pay.
-------------------------------
(a) The Officer's employment under this Agreement shall be terminated
upon the death of the Officer during the term of this Agreement, in which event,
the Officer's estate shall be entitled to receive the compensation due the
Officer through the last day of the calendar month in which his death shall have
occurred and for a period of one month thereafter. Notwithstanding the
foregoing, in the event of the Officer's death following a change in control (as
defined in Paragraph 10), the Officer's designated beneficiary or the designated
beneficiary's estate shall be entitled to receive the compensation due the
Officer through the last day of the remaining term of this Agreement.
(b) The Officer's employment under this Agreement may be terminated at
any time by the Officer upon sixty (60) days' written notice to the Board of
Directors. Upon such termination, the Officer shall be entitled to receive
compensation through the effective date of such termination.
(c) The Board may terminate the Officer's employment at any time, but
any termination by the Board, other than termination for cause, shall not
prejudice the Officer's right to compensation or other benefits under this
Agreement. The Officer shall have no right to receive compensation or other
benefits for any period after termination for "cause." Termination for "cause"
shall include termination because of the Officer's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provisions of this
Agreement.
5
<PAGE>
9. Additional Regulatory Requirements.
----------------------------------
(a) If the Officer is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(3) and (g)(1)), the Savings Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Savings
Bank may, in its discretion, (i) pay the Officer all or part of the compensation
withheld while its contract obligations were suspended and (ii) reinstate (in
whole or in part) any of its obligations which were suspended.
(b) If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank's affairs by an order issued
under Section 8(e)(4) of Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Savings Bank under
this Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(c) If the Savings Bank is in default as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(x)(1)), all obligations
under this Agreement shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the Savings Bank, (i) by the Federal Deposit Insurance
Corporation (the "Corporation"), at the time the Corporation enters into an
agreement to provide assistance to or on behalf of the Savings Bank under the
authority contained in Section 13(c) of the Federal Deposit Insurance Act (12
U.S.C. (S) 1818(c)); or (ii) by the Administrator of the Savings Institution
Division of the North
6
<PAGE>
Carolina Department of Commerce (the "Administrator"), at the time the
Administrator approves a supervisory merger to resolve problems related to
operation of the Savings Bank or when the Savings Bank is determined by the
Administrator to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.
10. Change in Control.
-----------------
(a) In the event of a "Change in Control" (as defined in Subparagraph
(b) below), the acquiror shall be prohibited, during the remainder of the term
of this Agreement, from:
(i) Assigning Officer any duties and/or responsibilities that are
inconsistent with his position, duties, responsibilities or status
at the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in
effect at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Paragraph 2 of this Agreement; or
(iii) Reducing in level, scope or coverage or eliminating Officer's
life insurance, medical or hospitalization insurance, disability
insurance, profit sharing plans, stock option plans, stock purchase
plans, deferred compensation plans, management retention plans,
retirement plans or similar plans or benefits being provided by the
Savings Bank or the Holding Company to the Officer as of the
effective date of the Change in Control; or
(iv) Transferring Officer to a location which is an unreasonable
distance from his current principal work location, without the
Officer's express written consent.
(b) For the purposes of this Agreement, the term "Change in Control"
shall mean any of the following events:
(i) a change in control of a nature that would be required to be
reported 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; or
(ii) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Holding Company or Savings Bank
representing 25 percent or more of the combined voting power of
7
<PAGE>
the outstanding Common Stock of the Holding Company or Common Stock
of the Savings Bank, as applicable; or
(iii) individuals who constitute the Board or board of directors of
the Holding Company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding
Company Board, as applicable, or whose nomination for election by
the Savings Bank's or Holding Company's shareholders was approved
by the Savings Bank's or Holding Company's Board of Directors or
Nominating Committee, as applicable, shall be considered as though
he or she were a member of the Incumbent Board or Incumbent Holding
Company Board, as applicable; or
(iv) either the Holding Company or the Savings Bank consolidates
or merges with or into another corporation, association or entity
or is otherwise reorganized, where neither the Holding Company nor
the Savings Bank, respectively, is the surviving corporation in
such transaction; or
(v) all or substantially all of the assets of either the Holding
Company or the Savings Bank are sold or otherwise transferred to or
are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 10, a
transaction or event shall not be considered a Change in Control if, prior to
the consummation or occurrence of such transaction or event, Officer and Savings
Bank agree in writing that the same shall not be treated as a Change in Control
for purposes of this Agreement.
(c) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including this
Section 10, whether instituted by formal legal proceedings or otherwise,
including any action taken by the Officer to enforce the terms of this Section
10 or in defending against any action taken by the Savings Bank, the Savings
Bank shall reimburse the Officer for all costs and expenses incurred in such
proceedings or actions, including attorney's fees, in the event the Officer
prevails in any such action.
8
<PAGE>
11. Successors and Assigns.
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Savings Bank which shall acquire,
directly or indirectly, by conversion, merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Holding Company or the
Savings Bank.
(b) Since the Savings Bank is contracting for the unique and personal
skills of the Officer, the Officer shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Savings Bank.
12. Modification; Waiver; Amendments. No provision of this Agreement
--------------------------------
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing, signed by the Officer and on behalf of the
Savings Bank by such officer as may be specifically designated by the Directors.
No waiver by either party hereto, at any time, of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No amendments or additions to this Agreement shall be binding unless in
writing and signed by both parties, except as herein otherwise provided.
13. Applicable Law. This Agreement shall be governed in all respects
--------------
whether as to validity, construction, capacity, performance or otherwise, by the
laws of North Carolina, except to the extent that federal law shall be deemed to
apply.
14. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first hereinabove written.
MOORESVILLE SAVINGS BANK, INC., SSB
By: /s/ Calvin E. Tyner
------------------------------------
Chairman of the Board
(SEAL) /s/ Dale W. Brawley
------------------------------------
Dale W. Brawley
The foregoing Agreement is consented and agreed to by Coddle Creek
Financial Corp., the parent holding company of Mooresville Savings Bank, Inc.,
SSB.
CODDLE CREEK FINANCIAL CORP.
By: /s/ Calvin E. Tyner
-------------------------------------
Chairman of the Board
10
<PAGE>
MODIFICATION TO EMPLOYMENT AGREEMENT
THIS MODIFICATION TO EMPLOYMENT AGREEMENT (the "Modification Agreement") is made
this 15/th/ day of December, 1998, by and between Mooresville Savings Bank,
Inc., SSB (the "Bank") and Dale W. Brawley (the "Officer") and is joined in by
Coddle Creek Financial Corp. (the "Company").
WHEREAS, the Officer is presently employed by the Bank pursuant to an employment
agreement dated December 30, 1997, between the Officer, the Bank and the Company
(the "Employment Agreement"), and those parties desire to modify Paragraph 10 of
the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties agree as follows:
1. Paragraph 10 of the Employment Agreement shall be deleted and
replaced, in its entirety, with the following:
10. Change in Control.
-----------------
(a) In the event of a "Change in Control" (as defined in Subparagraph
(c) below), the term of employment under this Agreement automatically
shall be extended for a period of three (3) years beginning on the
date of the Change in Control, and the acquiror shall be bound by the
terms of this Agreement and shall be prohibited, during the remainder
of such term, from:
(i) Assigning Officer any duties and/or responsibilities that are
inconsistent with his position, duties, responsibilities or
status at the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in
effect at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Paragraph 10(b) of this
Agreement; or
(iii) Reducing in level, scope or coverage or eliminating
Officer's life insurance, medical or hospitalization insurance,
disability insurance, profit sharing plans, stock option plans,
stock purchase plans, deferred compensation plans, management
retention plans, retirement plans, stock ownership plans or
similar plans or benefits being provided by the Savings Bank or
the Holding Company to the Officer as of the effective date of
the Change in Control; or
<PAGE>
(iv) Transferring Officer to a location which is an unreasonable
distance from his current principal work location, without the
Officer's express written consent.
(b) In the event of a Change in Control, the Officer's base salary
shall be adjusted to include an amount equal to the average of the two
previous years' discretionary bonuses, if any, and such adjusted base
salary shall be increased by not less than six percent (6%) annually
beginning at the date of the Change in Control and continuing each
year for the three year term thereafter.
(c) For the purposes of this Agreement, the term "Change in Control"
shall mean any of the following events:
(i) a change in control of a nature that would be required to be
reported 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 Securities Exchange Act of 1934, as amended (the "Exchange
Act"); or
(ii) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Holding
Company or Savings Bank representing 25 percent or more of the
combined voting power of the outstanding Common Stock of the
Holding Company or Common Stock of the Savings Bank, as
applicable; or
(iii) individuals who constitute the Board or board of directors
of the Holding Company on the date hereof (the "Incumbent Board"
and "Incumbent Holding Company 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
Holding Company Board, as applicable, or whose nomination for
election by the Savings Bank's or Holding Company's shareholders
was approved by the Savings Bank's or Holding Company's Board of
Directors or Nominating Committee, as applicable, shall be
considered as though he or she were a member of the Incumbent
Board or Incumbent Holding Company Board, as applicable; or
2
<PAGE>
(iv) either the Holding Company or the Savings Bank consolidates
or merges with or into another corporation, association or entity
or is otherwise reorganized, where neither the Holding Company
nor the Savings Bank, respectively, is the surviving corporation
in such transaction; or
(v) all or substantially all of the assets of either the Holding
Company or the Savings Bank are sold or otherwise transferred to
or are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 10, a
transaction or event shall not be considered a Change in Control if, prior
to the consummation or occurrence of such transaction or event, Officer and
Savings Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
(d) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including
this Section 10, whether instituted by formal legal proceedings or
otherwise, including any action taken by the Officer to enforce the terms
of this Section 10 or in defending against any action taken by the Savings
Bank, the Savings Bank shall reimburse the Officer for all costs and
expenses incurred in such proceedings or actions, including attorney's
fees, in the event the Officer prevails in any such action.
2. The last sentence of Paragraph 2 of the Employment Agreement shall be
deleted in its entirety.
3. Except as herein modified, the terms and provisions of the Employment
Agreement shall remain unchanged and continue in full force and effect as
therein provided.
IN WITNESS WHEREOF, the parties hereto have executed this Modification Agreement
as of the date first set forth above.
MOORESVILLE SAVINGS BANK, INC.,SSB
By: /s/ George W. Brawley, Jr.
____________________________________
President
/s/ Dale W. Brawley
_________________________________(SEAL)
Dale W. Brawley
3
<PAGE>
The foregoing Modification Agreement is consented and agreed to by the Company.
CODDLE CREEK FINANCIAL CORP.
By: /s/ George W. Brawley, Jr.
____________________________________
President
<PAGE>
Exhibit 10(c)
MOORESVILLE SAVINGS BANK, INC., SSB
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of December 30, 1997, by and between
Mooresville Savings Bank, Inc., SSB (hereinafter referred to as the "Savings
Bank") and Billy R. Williams (hereinafter referred to as the "Officer") and is
joined in by Coddle Creek Financial Corp., the parent holding company of the
Savings Bank (hereinafter referred to as the "Holding Company").
WHEREAS, the Officer has heretofore been employed by the Savings Bank as
its Secretary and Controller; and
WHEREAS, the Savings Bank is a state-chartered stock savings bank and the
wholly-owned subsidiary of the Holding Company; and
WHEREAS, the Savings Bank desires to retain the services of the Officer as
the Secretary and Controller of the Savings Bank upon the terms and conditions
set forth herein; and
WHEREAS, the services of the Officer, his experience and knowledge of the
affairs of the Savings Bank, and his reputation and contacts in the industry and
the local community are extremely valuable to the Savings Bank; and
WHEREAS, the Savings Bank wishes to attract and retain such well-qualified
executives and it is in the best interest of the Savings Bank and of the Officer
to secure the continued services of the Officer notwithstanding any change in
control of the Savings Bank or the Holding Company; and
WHEREAS, the Savings Bank considers the establishment and maintenance of a
sound and vital management to be part of its overall corporate strategy and to
be essential to protecting and enhancing the best interests of the Savings Bank
and its stockholders; and
WHEREAS, the parties desire to enter into this Agreement in order to set
forth the terms
<PAGE>
and conditions of the Officer's employment relationship with the Savings Bank.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants and conditions hereinafter set forth and other good and
valuable considerations, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Employment. The Savings Bank hereby agrees to employ the Officer and
----------
the Officer hereby agrees to accept employment, upon the terms and conditions
stated herein, as the Secretary and Controller of the Savings Bank. The Officer
shall render such administrative and management services to the Savings Bank as
are customarily performed by persons situated in a similar executive capacity.
The Officer shall promote the business of the Savings Bank and perform such
other duties as shall, from time to time, be reasonably prescribed by the Board
of Directors of the Savings Bank (the "Board").
2. Compensation. The Savings Bank shall pay the Officer during the term
------------
of this Agreement, as compensation for all service rendered by him to the
Savings Bank, a base salary at the rate of $56,400 per annum, payable in cash
not less frequently than monthly; provided that the rate of such salary shall be
reviewed by the Board not less often than annually. Such rate of salary, or
increased rate of salary, as the case may be, may be further increased from time
to time in such amounts as the Board, in its discretion, may decide. In
determining salary increases, the Board shall compensate the Officer for
increases in the cost of living and may also provide for performance or merit
increases. Participation in incentive compensation, deferred compensation,
discretionary bonus, profit-sharing, retirement, stock option and other employee
benefit plans that the Savings Bank or the Holding Company have adopted or may
from time to time adopt, and participation in any fringe benefits, shall not
reduce the salary payable to the Officer under this Section. The Officer will
be entitled to such customary fringe benefits, vacation and sick leave as are
consistent with the normal practices and established policies of the Savings
Bank and to
2
<PAGE>
reimbursement for continuing professional education expenses and civil and
professional dues. In the event of a Change of Control (as defined in Paragraph
10), the Officer's rate of salary shall be increased not less than six percent
(6%) annually during the term of this Agreement.
3. Discretionary Bonuses. During the term of this Agreement, the Officer
---------------------
shall be entitled in an equitable manner with all other key management personnel
of the Savings Bank, to such discretionary bonuses as may be authorized,
declared and paid by the Directors to the Savings Bank's key management
employees. No other compensation provided for in this Agreement shall be deemed
a substitute for the Officer's right to such discretionary bonuses when and as
declared by the Directors.
4. Participation in Retirement and Employee Benefit Plans; Fringe
--------------------------------------------------------------
Benefits. The Officer shall be entitled to participate in any plan relating to
- --------
deferred compensation, stock awards, stock options, stock purchases, pension,
thrift, profit sharing, group life insurance, medical coverage, disability
coverage, education, or other retirement or employee benefits that the Savings
Bank or the Holding Company have adopted, or may, from time to time adopt, for
benefit of their executive employees and for employees generally, subject to the
eligibility rules of such plans.
The Officer shall also be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Officer or the
Savings Bank's other executive employees, including the payment of reasonable
expenses for attending annual and periodic meetings of trade associations, and
any other benefits which are commensurate with the duties and responsibilities
to be performed by the Officer under this Agreement. Additionally, the Officer
shall be entitled to such vacation and sick leave as shall be established under
uniform employee policies promulgated by the Directors. The Savings Bank shall
reimburse the Officer for all out-of-pocket reasonable and necessary business
expenses which the Officer may incur in connection with his services on behalf
of the Savings Bank.
3
<PAGE>
5. Term. The initial term of employment under this Agreement shall be for
----
the period commencing upon the effective date of this Agreement and ending three
(3) calendar years from the effective date of this Agreement. On each
anniversary of the effective date of this Agreement of the Savings Bank, the
term of this Agreement shall automatically be extended for an additional one
year period beyond the then effective expiration date unless written notice from
the Savings Bank or the Officer is received 90 days prior to an anniversary date
advising the other party that this Agreement shall not be further extended;
provided that the Directors shall review the Officer's performance annually and
make a specific determination pursuant to such review to renew this Agreement
prior to the 90 day notice period.
6. Loyalty. The Officer shall devote his full efforts and entire business
-------
time to the performance of his duties and responsibilities under this Agreement.
The Officer agrees that he will hold in confidence all knowledge or
information of a confidential nature with respect to the respective businesses
of the Holding Company, the Savings Bank or of their subsidiaries, if any,
received by him during the term of this Agreement and will not disclose or make
use of such information without the prior written consent of the Holding Company
or the Savings Bank.
7. Standards. The Officer shall perform his duties and responsibilities
---------
under this Agreement in accordance with such reasonable standards expected of
employees with comparable positions in comparable organizations and as may be
established from time to time by the Board. The Savings Bank will provide the
Officer with the working facilities and staff customary for similar executives
and necessary for him to perform his duties.
8. Termination and Termination Pay.
-------------------------------
(a) The Officer's employment under this Agreement shall be terminated upon
the death of the Officer during the term of this Agreement, in which event, the
Officer's estate shall be
4
<PAGE>
entitled to receive the compensation due the Officer through the last day of the
calendar month in which his death shall have occurred and for a period of one
month thereafter. Notwithstanding the foregoing, in the event of the Officer's
death following a change in control (as defined in Paragraph 10), the Officer's
designated beneficiary or the designated beneficiary's estate shall be entitled
to receive the compensation due the Officer through the last day of the lesser
of (i) the remaining term of this Agreement or (ii) a period of twelve months.
(b) The Officer's employment under this Agreement may be terminated at any
time by the Officer upon sixty (60) days' written notice to the Board of
Directors. Upon such termination, the Officer shall be entitled to receive
compensation through the effective date of such termination.
(c) The Board may terminate the Officer's employment at any time, but any
termination by the Board, other than termination for cause, shall not prejudice
the Officer's right to compensation or other benefits under this Agreement. The
Officer shall have no right to receive compensation or other benefits for any
period after termination for "cause." Termination for "cause" shall include
termination because of the Officer's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, regulation
(other than traffic violations or similar offenses) or final cease-and-desist
order, or material breach of any provisions of this Agreement.
9. Additional Regulatory Requirements.
----------------------------------
(a) If the Officer is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(3) and (g)(1)), the Savings Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
5
<PAGE>
appropriate proceedings. If the charges in the notice are dismissed, the
Savings Bank may, in its discretion, (i) pay the Officer all or part of the
compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
(b) If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank's affairs by an order issued
under Section 8(e)(4) of Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Savings Bank under
this Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(c) If the Savings Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act (12 U.S.C. (S) 1818(x)(1)), all obligations under
this Agreement shall terminate as of the date of default, but this paragraph
shall not affect any vested rights of the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the Savings Bank, (i) by the Federal Deposit Insurance
Corporation (the "Corporation"), at the time the Corporation enters into an
agreement to provide assistance to or on behalf of the Savings Bank under the
authority contained in Section 13(c) of the Federal Deposit Insurance Act (12
U.S.C. (S) 1818(c)); or (ii) by the Administrator of the Savings Institution
Division of the North Carolina Department of Commerce (the "Administrator"), at
the time the Administrator approves a supervisory merger to resolve problems
related to operation of the Savings Bank or when the Savings Bank is determined
by the Administrator to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.
10. Change in Control.
-----------------
6
<PAGE>
(a) In the event of a "Change in Control" (as defined in Subparagraph (b)
below), the acquiror shall be prohibited, during the remainder of the term of
this Agreement, from:
(i) Assigning Officer any duties and/or responsibilities that are
inconsistent with his position, duties, responsibilities or status at
the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in effect
at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Paragraph 2 of this Agreement; or
(iii) Reducing in level, scope or coverage or eliminating Officer's
life insurance, medical or hospitalization insurance, disability
insurance, profit sharing plans, stock option plans, stock purchase
plans, deferred compensation plans, management retention plans,
retirement plans or similar plans or benefits being provided by the
Savings Bank or the Holding Company to the Officer as of the effective
date of the Change in Control; or
(iv) Transferring Officer to a location which is an unreasonable
distance from his current principal work location, without the
Officer's express written consent.
(b) For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(i) a change in control of a nature that would be required to be
reported 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; or
(ii) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Holding Company or Savings Bank
representing 25 percent or more of the combined voting power of the
outstanding Common Stock of the Holding Company or Common Stock of the
Savings Bank, as applicable; or
(iii) individuals who constitute the Board or board of directors of
the Holding Company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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
7
<PAGE>
Holding Company Board, as applicable, or whose nomination for election
by the Savings Bank's or Holding Company's shareholders was approved
by the Savings Bank's or Holding Company's Board of Directors or
Nominating Committee, as applicable, shall be considered as though he
or she were a member of the Incumbent Board or Incumbent Holding
Company Board, as applicable; or
(iv) either the Holding Company or the Savings Bank consolidates or
merges with or into another corporation, association or entity or is
otherwise reorganized, where neither the Holding Company nor the
Savings Bank, respectively, is the surviving corporation in such
transaction; or
(v) all or substantially all of the assets of either the Holding
Company or the Savings Bank are sold or otherwise transferred to or
are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 10, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, Officer and Savings Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
(c) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including this
Section 10, whether instituted by formal legal proceedings or otherwise,
including any action taken by the Officer to enforce the terms of this Section
10 or in defending against any action taken by the Savings Bank, the Savings
Bank shall reimburse the Officer for all costs and expenses incurred in such
proceedings or actions, including attorney's fees, in the event the Officer
prevails in any such action.
11. Successors and Assigns.
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Savings Bank which shall acquire, directly
or indirectly, by conversion, merger, consolidation, purchase or otherwise, all
or substantially all of the assets of the Holding Company or the Savings Bank.
8
<PAGE>
(b) Since the Savings Bank is contracting for the unique and personal
skills of the Officer, the Officer shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Savings Bank.
12. Modification; Waiver; Amendments. No provision of this Agreement may
--------------------------------
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing, signed by the Officer and on behalf of the Savings Bank
by such officer as may be specifically designated by the Directors. No waiver
by either party hereto, at any time, of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties, except as herein otherwise provided.
13. Applicable Law. This Agreement shall be governed in all respects
--------------
whether as to validity, construction, capacity, performance or otherwise, by the
laws of North Carolina, except to the extent that federal law shall be deemed to
apply.
14. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first hereinabove written.
MOORESVILLE SAVINGS BANK, INC., SSB
By: /s/ George W. Brawley, Jr.
---------------------------------------
President
/s/ Billy R. Williams
---------------------------------------
(SEAL)
Billy R. Williams
The foregoing Agreement is consented and agreed to by Coddle Creek
Financial Corp., the parent holding company of Mooresville Savings Bank, Inc.,
SSB.
CODDLE CREEK FINANCIAL CORP.
By: /s/ George W. Brawley, Jr.
---------------------------------------
President
10
<PAGE>
MODIFICATION TO EMPLOYMENT AGREEMENT
THIS MODIFICATION TO EMPLOYMENT AGREEMENT (the "Modification Agreement") is made
this 15/th/ day of December, 1998, by and between Mooresville Savings Bank,
Inc., SSB (the "Bank") and Billy R. Williams (the "Officer") and is joined in
by Coddle Creek Financial Corp. (the "Company").
WHEREAS, the Officer is presently employed by the Bank pursuant to an employment
agreement dated December 30, 1997, between the Officer, the Bank and the Company
(the "Employment Agreement"), and those parties desire to modify Paragraph 10 of
the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties agree as follows:
1. Paragraph 10 of the Employment Agreement shall be deleted and
replaced, in its entirety, with the following:
10. Change in Control.
-----------------
(a) In the event of a "Change in Control" (as defined in Subparagraph
(c) below), the term of employment under this Agreement automatically
shall be extended for a period of three (3) years beginning on the
date of the Change in Control, and the acquiror shall be bound by the
terms of this Agreement and shall be prohibited, during the remainder
of such term, from:
(i) Assigning Officer any duties and/or responsibilities that
are inconsistent with his position, duties, responsibilities or
status at the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in
effect at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Paragraph 10(b) of this
Agreement; or
(iii) Reducing in level, scope or coverage or eliminating
Officer's life insurance, medical or hospitalization insurance,
disability insurance, profit sharing plans, stock option plans,
stock purchase plans, deferred compensation plans, management
retention plans, retirement plans, stock ownership plans or
similar plans or benefits being provided by the Savings Bank or
the Holding Company to the Officer as of the effective date of
the Change in Control; or
<PAGE>
(iv) Transferring Officer to a location which is an
unreasonable distance from his current principal work location,
without the Officer's express written consent.
(b) In the event of a Change in Control, the Officer's base salary
shall be adjusted to include an amount equal to the average of the two
previous years' discretionary bonuses, if any, and such adjusted base
salary shall be increased by not less than six percent (6%) annually
beginning at the date of the Change in Control and continuing each
year for the three year term thereafter.
(c) For the purposes of this Agreement, the term "Change in Control"
shall mean any of the following events:
(i) a change in control of a nature that would be required to
be reported 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 Securities Exchange Act of 1934, as amended (the
"Exchange Act"); or
(ii) such time as any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Holding
Company or Savings Bank representing 25 percent or more of the
combined voting power of the outstanding Common Stock of the
Holding Company or Common Stock of the Savings Bank, as
applicable; or
(iii) individuals who constitute the Board or board of directors
of the Holding Company on the date hereof (the "Incumbent Board"
and "Incumbent Holding Company 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
Holding Company Board, as applicable, or whose nomination for
election by the Savings Bank's or Holding Company's shareholders
was approved by the Savings Bank's or Holding Company's Board of
Directors or Nominating Committee, as applicable, shall be
considered as though he or she were a member of the Incumbent
Board or Incumbent Holding Company Board, as applicable; or
2
<PAGE>
(iv) either the Holding Company or the Savings Bank
consolidates or merges with or into another corporation,
association or entity or is otherwise reorganized, where neither
the Holding Company nor the Savings Bank, respectively, is the
surviving corporation in such transaction; or
(v) all or substantially all of the assets of either the
Holding Company or the Savings Bank are sold or otherwise
transferred to or are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 10, a
transaction or event shall not be considered a Change in Control if, prior
to the consummation or occurrence of such transaction or event, Officer and
Savings Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
(d) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including
this Section 10, whether instituted by formal legal proceedings or
otherwise, including any action taken by the Officer to enforce the terms
of this Section 10 or in defending against any action taken by the Savings
Bank, the Savings Bank shall reimburse the Officer for all costs and
expenses incurred in such proceedings or actions, including attorney's
fees, in the event the Officer prevails in any such action.
2. The last sentence of Paragraph 2 of the Employment Agreement shall be
deleted in its entirety.
3. Except as herein modified, the terms and provisions of the Employment
Agreement shall remain unchanged and continue in full force and effect as
therein provided.
IN WITNESS WHEREOF, the parties hereto have executed this Modification Agreement
as of the date first set forth above.
MOORESVILLE SAVINGS BANK, INC.,SSB
By: /s/ George W. Brawley, Jr.
___________________________________
President
/s/ Billy R. Williams
_________________________________(SEAL)
Billy R. Williams
3
<PAGE>
The foregoing Modification Agreement is consented and agreed to by the Company.
CODDLE CREEK FINANCIAL CORP.
By: /s/ George W. Brawley, Jr.
____________________________________
President
4
<PAGE>
MOORESVILLE SAVINGS BANK, SSB
MANAGEMENT RECOGNITION PLAN
Mooresville Savings Bank, SSB (the "Bank"), does herein set forth the terms
of its Management Recognition Plan (the "Plan").
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,
Coddle Creek Financial Corp. (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, as amended (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 discretionary duties as
the Committee may see fit.
1
<PAGE>
(d) Any unallocated, undistributed or forfeited shares of Common Stock
held under this Plan shall be held by the Committee.
Section 3. Shares of Common Stock Available Under the Plan.
---------- ------------------------------------------------
The Plan shall acquire up to 26,979 shares of Common Stock of the
Corporation. Such shares of Common Stock may be purchased by the Plan 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 Plan
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 shall be held or delivered by the Trustees or shall be allocated and
distributed pursuant to the terms of this Plan.
Section 4. Eligibility and Awards.
---------- ----------------------
(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 the
Corporation or any Subsidiary, and such officers and employees of the Bank, the
Corporation and/or of any Subsidiary as may be designated by the Committee.
(b) As promptly as practicable after a determination is made that an
Award of Common Stock is to be made, the Committee shall notify the Participant
in writing of the grant of the Award, the number of shares of Common Stock
covered by the Award, and the terms upon which the Common Stock subject to the
Award shall vest and be distributed to the Participant. Awards of Common Stock
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 Common
Stock (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 an Award hereunder, such awards being at the total discretion of the
Committee.
Section 5. Vesting and Distribution of Common Stock.
---------- ----------------------------------------
(a) Awards made under this Plan shall vest and the right of a
Participant to the Award 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, the Corporation 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
2
<PAGE>
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 14 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, the Corporation 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").
(e) In the event that a Participant ceases to be an employee or a
director of the Bank, the Corporation 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) Shares of Common Stock 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 shares of
Common Stock have vested in accordance with the schedule contained in the Stock
Grant Agreement.
3
<PAGE>
(g) 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 shares or delivery of any cash or other
assets with respect to shares or otherwise pursuant to this Plan.
Alternatively, the 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, cash and other assets to be distributed
shall be valued on the date the withholding obligation is incurred.
(h) Each Participant receiving an Award 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 Shares. Awards of Common Stock 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
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 shares
except in accordance with all then applicable federal and state securities laws,
and the Board or the Committee may cause a legend to be placed on the stock
certificate(s) representing the distributed shares in order to restrict the
transfer of the distributed shares for such period of time or under such
circumstances as the Board 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 the Corporation or any Subsidiary, nor any right to continued
employment with the Bank, the Corporation 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
---------- ---------------------------------------------
has been made, the Participant or Permitted Transferee shall be entitled to
receive all cash dividends declared upon the shares awarded and to direct the
Committee as to the voting of the 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 which
have been awarded as to which Participants or Permitted Transferees have not
directed the voting shall be voted by the Committee in the same proportion as
the trustees of the Bank's Employee Stock Ownership Plan vote 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.
Notwithstanding the foregoing, if a Participant or Permitted
Transferee hereunder forfeits any Awards pursuant to the terms of this Plan, the
Participant or Permitted Transferee, as applicable, shall, within 30 days after
the effective date of such forfeiture, pay the Corporation an amount equal to
the dividends received by such Participant or Permitted Transferee with respect
to such forfeited Awards.
4
<PAGE>
Section 9. 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 10. Non-Transferability. Prior to the time Awards become vested
----------- -------------------
and are distributed by the Committee, 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 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. 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
10. Awards which are transferred pursuant to this Section 10 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.
Section 11. 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 12. 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 13. Exculpation and Indemnification. In connection with this
----------- -------------------------------
Plan, no member of the Board, no member of the board of directors of the
Corporation and no member of the Committee 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, 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
5
<PAGE>
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, and the Committee 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 14. 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 theretofore made to a Participant
under this Plan without the consent of such Participant or any Permitted
Transferee of such Participant.
Section 15. 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 may be made under this Plan
thereafter. Such termination shall not effect any Award theretofore made.
Section 16. 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. 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.
(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.
(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.
6
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF IREDELL
STOCK GRANT AGREEMENT
THIS STOCK GRANT AGREEMENT (the "Agreement") is made and entered into as of
the ____ of ___________________, _______ (the "Effective Date"), by and among
Mooresville Savings Bank, SSB (the "Bank"), and _____________________________
__________________ (the "Participant").
WHEREAS, a Management Recognition Plan (the "Plan") was adopted by the
Board of Directors of the Bank (the "Bank") and approved by the Board of
Directors and by the shareholders of Coddle Creek Financial Corp., the holding
company of the Bank (the "Corporation") on ____________, 1999.
WHEREAS, it has been determined that it is desirable and in the best
interest of the Bank to make an award (the "Award") of certain shares of the
Common Stock of the Corporation, under the Plan, to the Participant, subject to
certain restrictions as specified below; and
WHEREAS, capitalized terms not otherwise defined herein shall have the same
meaning given to such terms in the Plan.
NOW, THEREFORE, the Parties agree as follows:
1. Date of Award. The date of making the Award under this Agreement is
-------------
the _____ day of _________________, 1999. This Award has been made in
recognition of the Participant's status and service as a ____________________ of
_____________________________________________. The Participant is ____ or _____
is not a director or executive officer of the Bank.
2. Award of Plan Shares. The Participant is awarded, in the aggregate,
--------------------
___________________________ (__________) shares of Common Stock (the "Plan
Shares"), which shares become vested and nonforfeitable pursuant to paragraph 5
of this Agreement.
3. Investment Representation and Transfer Restrictions.
---------------------------------------------------
(a) Investment Representation. Participant makes and agrees to the
-------------------------
investment representation, if any, attached hereto as Annex A, and the
Management Recognition Plan Committee (the "Committee") may cause a legend to be
placed on any certificate representing any of the Plan Shares to make
appropriate reference to such representation, as necessary.
(b) Securities Law and Regulations. The Participant agrees that the
-------------------------------
Plan Shares shall be subject to such stop-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange or
interdealer quotation system upon which the Common Stock is then listed and any
other applicable federal or state securities laws, rules or regulations, and the
Committee may cause a legend or legends to be placed on any certificate
representing any of the Plan Shares to make appropriate reference to such
restrictions.
1
<PAGE>
4. Vesting and Delivery of Plan Shares by the Committee.
----------------------------------------------------
(a) Periodic Vesting. Plan Shares shall vest and become
----------------
nonforfeitable in accordance with the following schedule:
_________ shares on ___________________, 1999
_________ shares on ___________________, 2000
_________ shares on ___________________, 2001
_________ shares on ___________________, 2002
In addition, Plan Shares shall become vested and nonforfeitable upon disability,
death and a change in control as set forth in the Plan.
(b) Delivery of Vested Plan Shares to the Participant. After the date
-------------------------------------------------
on which the Plan Shares have become vested as provided in this Agreement and in
the Plan, the Committee shall deliver to the Participant, the Participant's
designee, such other person as shall have been designated as Participant's
beneficiary in accordance with this Agreement, or any other permitted recipient
pursuant to the Plan, as applicable, certificates representing the Plan Shares
which have become vested and nonforfeitable, as the Committee shall determine,
free from any restrictions imposed by this Agreement other than such
restrictions and conditions as may be deemed necessary by the Committee pursuant
to paragraph 3 above.
(c) Delivery of Forfeited Plan Shares. If the Plan Shares, or any of
---------------------------------
them, are forfeited pursuant to the Plan, the Committee shall determine the
appropriate disposition of such forfeited shares. Thereafter such forfeited
shares shall cease to be subject to this Agreement.
5. Repayment of Dividends. If the Participant forfeits Plan Shares
----------------------
pursuant to the Plan, the Participant shall, within 30 days after the effective
date of such forfeiture, pay the Corporation an amount equal to the dividends
received by the Participant with respect to forfeited Plan Shares as set forth
in the Plan.
6. Designation of Beneficiary. The Participant hereby designates the
--------------------------
person(s) described on Annex B as the beneficiary or beneficiaries who shall be
entitled to receive the Plan Shares and other assets, if any, distributable to
the Participant upon his death. The Participant may, from time to time, revoke
or change his beneficiary designation without the consent of any prior
beneficiary, if any, by filing a new designation with the Committee. The last
such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death, and
in no event shall it be effective as of a date prior to such receipt.
If no such beneficiary designation is in effect at the time of the
Participant's death, or if no designated beneficiary survives the Participant,
or if such designation conflicts with law, the Participant's estate shall be
deemed to have been designated his beneficiary and shall receive the Plan Shares
and other assets, if any, distributable to the Participant upon his death. If
the Committee is in doubt as to the right of any person to receive such
distribution, the Committee may retain the Plan Shares and other assets, without
liability for any interest in respect thereof, until the rights thereto are
2
<PAGE>
determined, or the Committee may transfer such Plan Shares into any court of
appropriate jurisdiction and such transfer shall be deemed a complete discharge
of the obligations of the Bank, the Corporation, and the Committee hereunder.
7. Effect of Award on Status of Participant. The fact that an Award has
----------------------------------------
been made to the Participant under this Plan shall not confer on the Participant
any right to continued service on the Board, on the board of directors of the
Corporation or on the board of directors of any Subsidiary, nor to continued
employment with the Bank, the Corporation or any Subsidiary; nor shall it limit
the right of the Bank, the Corporation or of any Subsidiary to remove the
Participant from any such boards, or to terminate his employment at any time
without prior notice.
8. Impact of Award on Other Benefits of Participant. The value of the
------------------------------------------------
Plan Shares on the date of the Award or at the time the Plan 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 plans.
9. Tax Withholding. All Plan Shares distributed pursuant to this
---------------
Agreement shall be subject to applicable federal, state and local withholding
for taxes. The Participant expressly acknowledges and agrees to such
withholding without regard to whether the Plan Shares may then be sold or
otherwise transferred by the Participant. The Participant acknowledges and
agrees to the tax withholding provisions which are set forth in the Plan.
10. Notices. Any notices or other communications required or permitted to
-------
be given under this Agreement shall be in writing and shall be deemed to have
been sufficiently given if delivered personally or three (3) business days after
deposit in the United States mail by Certified Mail, return receipt requested,
properly addressed and postage prepaid, if to the Bank or the Committee at the
Bank's principal office address at 347 North Main Street, Mooresville, North
Carolina 28115; and, if to the Participant, at his last address appearing on the
books of the Bank. The Bank and the Participant may change their address or
addresses by giving written notice of such change as provided herein. Any
notice or other communication hereunder shall be deemed to have been given on
the date actually delivered or as of the third (3rd) business day following the
date mailed as set forth above, as the case may be.
11. Construction Controlled by Plan. The Plan, a copy of which is
-------------------------------
attached hereto as Annex C, is incorporated herein by reference. The Award
shall be subject to the terms and conditions of the Plan, and the Participant
hereby assumes and agrees to comply with all of the obligations imposed upon the
Participant in the Plan. This Agreement shall be construed so as to be
consistent with the Plan; and the provisions of the Plan shall be deemed to be
controlling in the event that any provision hereof should appear to be
inconsistent therewith.
12. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provision or part
thereof shall not be affected thereby and this Agreement shall continue to be
binding on the parties hereto as if such unenforceable, invalid or illegal
provision or part thereof had not been included herein.
3
<PAGE>
13. 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 Agreement.
14. Modification of Agreement; Waiver. This Agreement may be modified,
---------------------------------
amended, suspended or terminated, and any terms, representations or conditions
may be waived, but only by a written instrument signed by each of the parties
hereto or their successors in interest. No waiver hereunder shall constitute a
waiver with respect to any subsequent occurrence or other transaction hereunder
or of any other provision hereof.
15. Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the parties hereto, and their respective heirs, legatees,
personal representatives, executors, and administrators, successors and assigns.
16. Entire Agreement. This Agreement and the Plan constitute and embody
----------------
the entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the Bank has caused this instrument to be executed in
its corporate name by its President, or one of its Vice Presidents, and attested
by its Secretary or one of its Assistant Secretaries, and its corporate seal to
be hereto affixed, all by, authority of its Board of Directors first duly given;
and each individual party hereto has hereunto set his hand and adopted as his
seal the typewritten word "SEAL" appearing beside his name, all done this the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
By:____________________________
__________________ President
ATTEST:
__________________________________
____________________Secretary
[Corporate Seal]
PARTICIPANT
___________________________(SEAL)
4
<PAGE>
ANNEX A
Investment Representation
-------------------------
5
<PAGE>
ANNEX B
Management Recognition Plan
---------------------------
Beneficiary Designation Form
----------------------------
As Beneficiary to receive any shares of stock distributable on my behalf
pursuant to the Mooresville Savings Bank, SSB Management Recognition Plan, I
hereby designate the following:
Name Address Relationship
Primary Beneficiary:_____________________________________________________
_____________________________________________________
_____________________________________________________
Contingent Beneficiary:
(if any) _____________________________________________________
_____________________________________________________
_____________________________________________________
If more than one primary beneficiary is named, shares will be paid in equal
shares to surviving primary beneficiaries. Should the contingent beneficiaries
be eligible to receive the benefits (i.e., all primary beneficiaries are
deceased), such benefits will be paid in equal shares to such surviving
contingent beneficiaries.
Name of Spouse if not given above: ______________________________________
- ---------------------------- -------------------------------------------
Witness Participant
-------------------------------------------
Date
<PAGE>
ANNEX C
Management Recognition Plan
---------------------------
<PAGE>
CODDLE CREEK FINANCIAL CORP.
STOCK OPTION PLAN
THIS IS THE STOCK OPTION PLAN ("Plan") of Coddle Creek Financial Corp. (the
"Corporation"), a North Carolina corporation, with its principal office in
Mooresville, Iredell 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, Mooresville Savings
Bank, 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
fifty percent (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,
employees and others to remain in the management and service 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.
<PAGE>
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 ("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 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 67,447 shares, which is ten
percent (10%) of the total number of shares of Common Stock issued by the
Corporation in connection with the conversion of the Bank from a state-chartered
mutual savings bank to a state-chartered stock savings bank on December 30, 1997
(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. In the discretion of the Committee, the shares of Common Stock necessary
to be delivered to satisfy exercised options may be from authorized and unissued
shares of Common Stock or may be purchased in the open market.
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 is capable of evaluating the merits
and risks of the investment involved in the exercise of the Options.
2
<PAGE>
(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 of which such employee is a shareholder, partner or
beneficiary shall be considered as owned by such director or employee.
5. OPTION AGREEMENT 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 one hundred percent (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 percent
(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
one hundred and ten percent (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.
3
<PAGE>
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 (a)
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
ten (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 five (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.
8. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) All Options must be granted within ten (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 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.
4
<PAGE>
(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 Internal
Revenue Code of 1986, as amended, and it shall be administered solely for
that purpose.
9. EXERCISE OF OPTIONS.
-------------------
(a) Unless otherwise set forth in the Option Agreement, all Options
granted to an optionee under the Plan shall be fully vested, exercisable
and nonforfeitable immediately at the time of the grant.
(b) 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 6 recipient of an Option Agreement which comports with
the requirements of Section 5 and Section 8(c). The exercise of any Option
must be evidenced by written notice to the Corporation that the optionee
intends to exercise his Option.
(c) 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.
(d) 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.
5
<PAGE>
(e) Notwithstanding anything to the contrary herein, an optionee
receiving the grant of an Option by virtue of his 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 Options within the
periods set forth in Sections 10, 11 and 12 below.
10. TERMINATION OF EMPLOYMENT - EXCEPT BY DISABILITY 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 at least
one of the Corporation, the Bank or any Subsidiary for any reason other than
death 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 at least one of the Corporation,
the Bank and any Subsidiary for any reason other than death 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 he 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. 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 at least one of the Corporation,
the Bank or any Subsidiary due to his becoming disabled within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended, 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 at least
one of the Corporation, the Bank and any Subsidiary due to his becoming disabled
within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended, such optionee may, (i) at any time within twelve (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 portions of Options of optionees who are terminated
because they become disabled which are not so exercised shall terminate and be
forfeited.
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, 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 and be forfeited.
6
<PAGE>
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 receipt of an option pursuant to this Plan) for any
reason after the occurrence of a "change in control" the optionee must exercise
any Incentive Stock Options within three (3) months after his date of
termination and may exercise any Nonqualified Stock Options at any time prior to
the date of expiration of the Option. 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) 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 or the Bank's 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
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.
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, or such Incentive Stock Options are terminated and forfeited,
and may exercise any Nonqualified Stock Options at any time prior to the date of
expiration of the Option.
14. STOCK APPRECIATION RIGHTS.
-------------------------
(a) General Terms and Conditions. The Committee may, but shall not be
obligated to, grant rights to optionees to surrender an exercisable Option,
or any portion thereof, in consideration for the payment by the Corporation
of an amount equal to the excess of the market value (determined as set
forth in Section 6 above) of the shares of Common Stock subject to the
Option, or portion thereof, surrendered over the exercise price of the
Option with respect to such shares (any such authorized surrender and
payment being hereinafter referred to as a "Stock Appreciation Right").
Such payment, at the discretion of the Committee, may be made in shares of
Common Stock valued at the then market value thereof (determined as set
forth in Section 6 above), or in cash, or partly in cash and partly in
shares of Common Stock.
The terms and conditions set with respect to a Stock Appreciation
Right may include (without limitation), subject to other provisions of this
Section 14 and this Plan,
7
<PAGE>
the period during which, date by which or event upon which the Stock
Appreciation Right may be exercised (which shall be on the same terms as
the Option to which is related); the method for valuing shares of Common
Stock for purposes of this Section 14; a ceiling on the amount of
consideration which the Corporation may pay in connection with exercise of
the Stock Appreciation Right; and arrangements for income tax withholding.
The Committee shall have complete discretion to determine whether, when and
to whom Stock Appreciation Rights may be granted.
(b) Time Limitations. A Stock Appreciation Right may be exercised
only within the period, if any, within which the Option to which it relates
may be exercised. Notwithstanding the foregoing, any election by an
optionee to exercise Stock Appreciation Rights shall be made during the
period beginning on the third business day following the release for
publication of quarterly or annual financial information required to be
prepared and disseminated by the Corporation pursuant to the requirements
of the Exchange Act and ending on the twelfth business day following such
date. The required release of information shall be deemed to have been
satisfied when the specified financial data appears on or in a wire
service, financial news service or newspaper of general circulation or is
otherwise first made publicly available.
(c) Effects of Exercise of Stock Appreciation Rights or Options. Upon
the exercise of a Stock Appreciation Right, the number of shares of Common
Stock available under the Option to which it relates shall decrease by a
number equal to the number of shares for which the Stock Appreciation Right
was exercised. Upon the exercise of an Option, any related Stock
Appreciation Right shall terminate as to any number of shares of Common
Stock subject to the Stock Appreciation Right that exceeds the total number
of shares for which the Option remains unexercised.
(d) Time of Grant. A Stock Appreciation Right granted in connection
with an Incentive Stock Option must be granted concurrently with the Option
to which is relates, while a Stock Appreciation Right granted in connection
with a Nonqualified Stock Option may be granted concurrently with the
Option to which it relates or at any time thereafter prior to the exercise
or expiration of such Option. No optionee shall have any Stock
Appreciation Rights unless (i) in the case of Incentive Stock Options and
Nonqualified Stock Options, the Stock Option Agreement shall so state or
(ii) in the case of Nonqualified Stock Options, the Committee shall have
executed an amendment to the Stock Option Agreement so stating.
(e) Non-Transferable. A Stock Appreciation Right may not be
transferred or assigned except in connection with a transfer of the Option
to which it relates.
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.
8
<PAGE>
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 and
Stock Appreciation Rights 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 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.
(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 or Stock Appreciation Right 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.
(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 Internal Revenue Code of 1986, as amended.
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
9
<PAGE>
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 or Stock
-------------------------
Appreciation Right shall impose no obligation upon the optionee to exercise such
Option or Stock Appreciation Right.
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 Stock Appreciation Rights 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 or Stock Appreciation Right hereunder. The granting of an Option
and Stock Appreciation Right 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. CASH PAYMENTS. At the time of the payment of any dividend or other
-------------
distribution with respect to the Common Stock, in the absolute discretion of,
and upon direction of the Board, the Corporation shall cause to be paid to
existing directors and employees of the Corporation, the Bank or any Subsidiary
who hold nonforfeited, unexercised Options under this Plan, a cash amount equal
to the number of shares of Common Stock subject to nonforfeited, unexercised
options held by such optionee multiplied by the amount of any dividends or other
distributions paid per share of Common Stock outstanding. The Board shall have
the discretion to approve cash payments at the time of some dividends or
distributions but not others. Notwithstanding the foregoing, no amounts shall be
paid to optionees pursuant to this Section 23 with respect to any dividend or
distribution if at the time of such dividend or distribution, the exercise price
of the Options shall have been reduced pursuant to Section 16(b) above.
If any director or employee of the Corporation, the Board or any Subsidiary
shall receive any cash payment from the Company, the Board or any Subsidiary
pursuant to this Section 23 with respect to an Option, and if such Option shall
be forfeited, then within 30 days after the effective date of such forfeiture,
the optionee shall pay to the Corporation, the Bank or the Subsidiary (as
applicable) an amount equal to the cash payment received by such optionee with
respect to such forfeited Option. In the alternative, at the option of the
Corporation, the Bank or
10
<PAGE>
the Subsidiary (as applicable) the amount to be repaid may be withheld from the
final compensation payable to the optionee.
24. 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.
25. 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 or Stock Appreciation Right previously granted, make any
alteration which would deprive the optionee of his rights with respect thereto.
26. 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.
27. 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 Bank's Board, 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
11
<PAGE>
such liabilities, costs, and expenses as may arise out of, or result from the
bad faith, willful misconduct or criminal acts of such persons.
28. 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.
29. 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.
30. 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.
12
<PAGE>
EXHIBIT A
---------
STOCK OPTION GRANT AND AGREEMENT
THIS STOCK OPTION GRANT AND AGREEMENT (this "Agreement"), being made
according to and subject to the terms and conditions of the CODDLE CREEK
FINANCIAL CORP. STOCK OPTION PLAN (the "Plan"), a copy of which is attached to
this Agreement as Annex A and is incorporated by reference into and made a part
of this Agreement, is executed and effective the _______ day of _______________,
_____, between Coddle Creek Financial Corp. (the "Corporation") and
____________________ (the "Optionee"):
1. Grant. As of the above date, the Corporation hereby grants to the
-----
Optionee (applicable provisions are marked):
[_] an Incentive Stock Option [as that term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code")] to purchase
________ shares of Common Stock of the Corporation at the price stated
in this Agreement;
[_] a Nonqualified Stock Option to purchase __________ shares of Common
Stock of the Corporation at the price stated in this Agreement.
The Optionee [_] shall [_] shall not have Stock Appreciation Rights in
connection with the Options granted hereby, in accordance with Section
14 of the Plan.
The Option(s) and any Stock Appreciation Rights granted under this
section and as described in this Agreement is (are) in all respects
subject to and conditioned by the terms, definitions, and provisions of
this Agreement and of the Plan. Capitalized terms in this Agreement
which are not otherwise defined but which are defined in the Plan shall
have the same meaning given to those terms in the Plan.
The Optionee has been granted Options under the Plan as a result of the
Optionee's position as a [_] director [_] employee of the Corporation,
the Bank or a Subsidiary.
2. Price. The Option price is $_____________ for each share.
-----
3. Exercise of Option. The Option(s) granted under this Agreement shall be
------------------
exercisable pursuant to the terms and conditions of the Plan and as set
forth below:
1
<PAGE>
(a) Right to Exercise: In addition to the terms and conditions imposed
-----------------
on the Optionee's right to exercise his Options and any Stock
Appreciation Rights imposed in the Plan, the following terms and
conditions are applicable:
- --------------------------------------------------------------------------------
(b) Immediate Vesting: Subject to the terms and conditions of the
-----------------
Plan, all of the Options are vested and exercisable.
(c) Method of Exercise: The Options and any Stock Appreciation Rights
------------------
granted under this Agreement shall be exercisable by a written notice
to the Secretary of the Corporation which shall:
(1) State the election to exercise the Option or the election to
surrender an exercisable Option and exercise Stock Appreciation
Rights, the number of shares in respect of which the Option or Stock
Appreciation Right is being exercised, the person in whose name any
stock certificate or certificates for such shares of Common Stock is
to be registered or to whom any cash is to be paid, his address, and
social security number;
(2) Contain any such representation and agreements as to Optionee's
investment intent with respect to shares of Common Stock as may be
required by the Committee;
(3) Be signed by the person entitled to exercise the Option and, if
the Option is being exercised by any person or persons other than
the Optionee, be accompanied by proof, satisfactory to the
Corporation, of the right of such person or persons to exercise the
Option or Stock Appreciation Rights in accordance with the Plan; and
(4) Be accompanied by payment of the purchase price of any shares
with respect to which the Option is being exercised which payment
shall be in form acceptable to the Committee pursuant to Section
6(b) of the Plan.
(d) Representations and Warranties: In order to exercise an Option or
------------------------------
Stock Appreciation Right, the person exercising the Option or Stock
Appreciation Right must make the representations and warranties to
the Corporation as may be required by any applicable law or
regulation, or as may otherwise be required pursuant to the Plan.
(e) Approvals. In order for an Option or Stock Appreciation Right to
---------
be exercised, all filings and approvals required by applicable law
and regulations or pursuant to the Plan must have been made and
obtained.
2
<PAGE>
4. Non-transferability. Neither any Option nor any Stock Appreciation
-------------------
Rights may be transferred in any manner otherwise than by will or the laws of
descent and distribution and such Option and any Stock Appreciation Rights may
be exercised during the life of the Optionee only by him.
5. Investment Purpose. This Option and any Stock Appreciation Rights
------------------
may not be exercised if the issuance of shares or payment of cash upon such
exercise would constitute a violation of any applicable federal or state
securities law or other law or valid regulation.
6. Expiration. This Option and any corresponding Stock Appreciation
----------
Rights shall expire on _____________, 2009.
7. Escrow. All stock purchased pursuant to 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 Optionee who has exercised the
Option shall have all rights of a stockholder, 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, and it shall be
administered solely for this purpose.
8. Repayment of Cash Payments. If the Optionee hereunder forfeits any
--------------------------
Options pursuant to the Plan, the Optionee shall, within 30 days after the
effective date of such forfeiture, pay the Corporation, the Bank or a Subsidiary
(as applicable) an amount equal to the cash payments received by the Optionee
from the Corporation, the Bank or any Subsidiary with respect to such forfeited
Options pursuant to Section 23 of the Plan. In the alternative, at the option
of the Corporation, the Bank or a Subsidiary, the amount to be repaid may be
withheld by the Corporation, the Bank or a Subsidiary from the final
compensation or fees payable to the Optionee. Each acceptance by an Optionee
of cash payments pursuant to such Section 23 with respect to Options still
subject to forfeiture shall constitute a reaffirmation of the agreements set
forth in this paragraph 8.
9. Tax Withholding. All stock, cash and other assets distributed
---------------
pursuant to this Agreement shall be subject to applicable federal, state and
local withholding for taxes. The Optionee expressly acknowledges and agrees to
such withholding. The Optionee acknowledges and agrees to the tax withholding
provisions which are set forth in the Plan.
10. Resolution of Disputes. Any dispute or disagreement which should
----------------------
arise under, or as a result of, or in any way relate to, the interpretation,
construction, or application of this Agreement or the Plan will be determined by
the Committee designated in Section 2 of the Plan. Any determination made by
such Committee shall be final, binding, and conclusive for all purposes.
11. Construction Controlled by Plan. The Options and any corresponding
-------------------------------
Stock Appreciation Rights evidenced hereby shall be subject to all of the
requirements, conditions and provisions of the Plan. This Agreement shall be
construed so as to be consistent with the Plan;
3
<PAGE>
and the provisions of the Plan shall be deemed to be controlling in the event
that any provision should appear to be inconsistent therewith.
12. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provision or part
thereof shall not be affected thereby and this Agreement shall continue to be
binding on the parties hereto as if such unenforceable, invalid or illegal
provision or part thereof had not been included herein.
13. Modification of Agreement; Waiver. This Agreement may be modified,
---------------------------------
amended, suspended or terminated, and any terms, representations or conditions
may be waived, but only by a written instrument signed by each of the parties
hereto and only subject to the limitations set forth in the Plan. No waiver
hereunder shall constitute a waiver with respect to any subsequent occurrence or
other transaction hereunder or of any other provision.
14. 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 Agreement. 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.
15. Governing Law; Venue and Jurisdiction. 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 Agreement.
16. Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the Corporation, and its successors and assigns, and
shall be binding upon and inure to the benefit of the Optionee, and his heirs,
legatees, personal representative, executor, administrator and permitted
assigns.
17. Entire Agreement. This Agreement and the Plan constitute and embody
----------------
the entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.
18. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first above written.
CODDLE CREEK FINANCIAL CORP.
ATTEST:
______________________________ By:_________________________________
(Corporate Seal) ________________ President
OPTIONEE:
____________________________________
(SEAL)
5
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 3rd day of September, 1979, and amended and restated this the 8th
day of September, 1997 (the "Agreement"), by and between Mooresville Savings
Bank, SSB, a mutual savings bank organized and existing under the laws of the
State of North Carolina (the "Bank"), and Donald R. Belk (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated September 3, 1979; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $200.00 per month from September 3, 1979 through August 31, 1984; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of his 70th birthday.
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
70th birthday (except as otherwise specifically provided herein), the Bank will
pay to him $935 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Director's 70th
birthday shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of six percent (6%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of six percent (6%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his 70th
birthday, the Bank will pay $935 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director died. In the event of the death of the
last living Beneficiary before all installment payments shall have been made,
the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of six percent (6%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of six percent (6%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his 70th birthday, he (or his Beneficiary)
shall be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since September 3, 1979, the original effective date of
this Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's 70th birthday or, if
earlier, death occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's
shareholders was approved by the Bank's or its holding company's board of
directors or nominating committee, as applicable, shall be considered as
though he or she were a member of the Incumbent Board or Incumbent
Holding Company Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company,
respectively, is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by
any other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
6
<PAGE>
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ ---------------------------------
, Secretary
- --------- Title: President
------------------------------------
[Corporate Seal]
/s/ Donald R. Belk (Seal)
------------------------------
DONALD R. BELK
Director
7
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 3rd day of September, 1979, and amended and restated this the 8th
day of September, 1997 (the "Agreement"), by and between Mooresville Savings
Bank, SSB, a mutual savings bank organized and existing under the laws of the
State of North Carolina (the "Bank"), and George W. Brawley, Jr. (the
"Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated September 3, 1979; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $200.00 per month from September 3, 1979 through August 31, 1984; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of his 70th birthday.
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
70th birthday (except as otherwise specifically provided herein), the Bank will
pay to him $1,195 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Director's 70th
birthday shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of six percent (6%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of six percent (6%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his 70th
birthday, the Bank will pay $1,195 per month for a continuous period of 120
months to the Beneficiary or Beneficiaries of the Director. The first such
monthly installment payment shall be made on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director died. In the event of the
death of the last living Beneficiary before all installment payments shall have
been made, the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of six percent (6%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of six percent (6%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his 70th birthday, he (or his Beneficiary)
shall be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for each
full year served since September 3, 1979, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's 70th birthday or, if
earlier, death occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
6
<PAGE>
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ Calvin E. Tyner
- ------------------------------ ----------------------------------------
, Secretary
- --------- Title: CHAIRMAN OF THE BOARD
-------------------------------------
[Corporate Seal]
George W. Brawley, Jr. (Seal)
------------------------------
GEORGE W. BRAWLEY, JR.
Director
7
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 3rd day of September, 1979, and amended and restated this the 8th
day of September, 1997 (the "Agreement"), by and between Mooresville Savings
Bank, SSB, a mutual savings bank organized and existing under the laws of the
State of North Carolina (the "Bank"), and Claude U. Voils, Jr. (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated September 3, 1979; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $200.00 per month from September 3, 1979 through August 31, 1984; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of his 70th birthday.
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
70th birthday (except as otherwise specifically provided herein), the Bank will
pay to him $897 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Director's 70th
birthday shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of six percent (6%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of six percent (6%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his 70th
birthday, the Bank will pay $897 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director died. In the event of the death of the
last living Beneficiary before all installment payments shall have been made,
the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of six percent (6%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of six percent (6%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his 70th birthday, he (or his Beneficiary)
shall be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since September 3, 1979, the original effective date of
this Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's 70th birthday or, if
earlier, death occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
6
<PAGE>
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams
- ------------------------------ By: /s/ George W. Brawley, Jr.
, Secretary ------------------------------------
- --------- Title: President
------------------------------------
[Corporate Seal]
/s/ Claude U. Voils, Jr. (Seal)
------------------------------
CLAUDE U. VOILS, JR.
Director
7
<PAGE>
FIRST AMENDMENT TO
RETIREMENT PAYMENT AGREEMENT
THIS FIRST AMENDMENT to that certain Retirement Payment Agreement
originally entered into as of the 3rd day of September, 1979 by and between
Mooresville Savings Bank, SSB, a mutual savings bank organized and existing
under the laws of the State of North Carolina (the "Bank"), and Calvin E. Tyner
(the "Director") (the "Agreement"), made this the 8th day of September, 1997.
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated September 3, 1979; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is currently receiving benefits under the Agreement;
and
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
1. The text of Section 4 of the Agreement is deleted in its entirety, so
that as amended, Section 4 shall read as follows:
4. [Deleted].
2. The text of Section 5, Paragraph D of the Agreement is deleted in its
entirety, so that as amended, Section 5, Paragraph D shall read as follows:
5. General Provisions:
------------------
D. [Deleted].
<PAGE>
IN WITNESS THEREOF, the Bank has caused this First Amendment to Retirement
Payment Agreement to be signed in its corporate name by its duly authorized
officer, and impressed with its corporate seal, attested by its Secretary, and
the Director has hereunto set his hand and seal, all on the day and year first
above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ ------------------------------
Secretary
- -----------------, Title: President
------------------------------
[Corporate Seal] /s/ Calvin E. Tyner (Seal)
-----------------------------
CALVIN E. TYNER
Director
2
<PAGE>
RETIREMENT PAYMENT AGREEMENT
AGREEMENT entered into as of 3rd day of September, 1979 between Mooresville
Federal Savings & Loan Association, a domestic Corporation having its principal
office in Mooresville NC (hereinafter referred to as the Association) and Calvin
E. Tyner of Mooresville, NC (hereinafter referred to as the Director).
WITNESSETH:
WHEREAS, the Director is rendering valuable service and it is the desire of the
Association to have the benefit of his continued loyalty and service and also to
assist him in providing for the contingencies of retirement and death; and,
WHEREAS, the Director hereby agrees to waive fees paid to him as a Director in
the amount of $200 per month for five years from the date of the execution of
this agreement;
NOW THEREFORE, in consideration of the premises contained herein, the parties
hereto mutually agree as follows:
1. Retirement Benefit: Should the Director still be in the Directorship
------------------
of the Association upon attainment of his 70th birthday, the Association will
commence to pay him $590 per month for a continuous period of 120 months. In the
event that the Director should die after becoming entitled to receive said
monthly installments but before any or all of said installments have been paid,
the Association will pay or will continue to pay said installments to such
beneficiary or beneficiaries as the Director has directed by filing with the
Association a notice in writing. In the event of the death of the last named
beneficiary before all the unpaid payments have been made, the balance of any
amount which remains unpaid at said death shall be commuted on the basis of 6
percent per annum compound interest and shall be paid in a single sum to the
executor or administrator of the estate of the last named beneficiary to die. In
the absence of any such beneficiary designation, any amount remaining unpaid at
the Director's death shall be commuted on the basis of 6 percent per annum
compound interest and shall be paid in a single sum to the executor or
administrator of the Director's estate.
2. Death Benefit: Should the Director die while in the Directorship of
-------------
the Association and prior to the attainment of his 70th birthday, the
Association (beginning at a date to be determined by the Association but within
six months from the date of such death) will commence to pay $590 per month for
a continuous period of 120 months to such beneficiary or beneficiaries as the
Director has directed by filing with the Association a notice in writing.
Irrespective of the above, however, if the Director dies as a result of suicide
within two years of the execution of this agreement, the death benefit shall not
exceed an amount equal to his waived Directors' fees plus interest at the rate
of 7 1/2 percent per annum compounded annually. In the event of the death of the
last named beneficiary before all the unpaid payments have been made, the
balance of any amount which remains unpaid at said death shall be commuted on
the basis of 6 percent per annum compound interest and shall be paid in a single
sum to the executor or administrator of the estate of the last named beneficiary
to die. In the absence of any such beneficiary designation, any amount remaining
unpaid at the Director's death shall be commuted on the basis of 6 percent per
annum compound interest and shall be paid in a single sum to the executor or
administrator of the Director's estate.
<PAGE>
3. Termination of Directorship:
---------------------------
A. If the Director terminates his Directorship, for reasons other than death
or the attainment of his 70th birthday, prior to two years from the
------
execution date of this Agreement, the Director's benefits shall be limited
to his waived Director fees plus interest at the rate of 7 1/2 percent per
annum compounded annually and shall be paid in a single sum as soon as
practical following the termination of his Directorship.
B. If the Director terminates his Directorship, for reasons other than death
or the attainment of his 70th birthday, at the end of two or more years
------
from the execution date of this Agreement, he or his beneficiary, as
applicable, shall be entitled upon the attainment of his 70th birthday, or
------
his prior death, to a percentage of the retirement benefits stated in
Section 1 or this Agreement as determined by the following table:
<TABLE>
<CAPTION>
FULL NUMBER OF YEARS SERVED PERCENTAGE OF RETIREMENT
AS DIRECTOR FROM DATE OF BENEFITS STATED IN SECTION
EXECUTION OF THIS AGREEMENT 1 OF THIS AGREEMENT TO WHICH THE
UNTIL TERMINATION OF DIRECTORSHIP DIRECTOR IS ENTITLED
- --------------------------------- --------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
4. Forfeiture Provisions:
---------------------
A. During the period the retirement benefit is payable to the Director under
Section 1 of this Agreement, the Director shall not engage in business
activities which are in competition with the Association without first
obtaining the written consent of the Association.
B. During the period the retirement payment is payable to the Director under
Section 1 of the Agreement, the Director shall be available to render
consulting services to the Association upon request by an officer of the
Association, but such requests shall not be made more frequently than once
each month. The Director shall not be considered to have breached this
condition if he is unable to consult because of his mental or physical
disability.
C. Payment of the retirement benefit under this Agreement may be terminated
by the Association, if the Director fails to comply with either of the
conditions set forth in paragraph (A) and (B) of this Section 4.
<PAGE>
5. General Provisions:
------------------
A. Except as otherwise provided by this Agreement, it is agreed that
neither the Director, nor his beneficiary shall have any right to commute,
sell, assign, transfer or otherwise convey the right to receive any
payments hereunder, which payments and the right thereto are expressly
declared to be nonassignable and nontransferable.
B. The benefits payable under this Agreement shall be independent of, and
in addition to, any other employment agreements that may exist from time to
time between the parties hereto, concerning any other compensation payable
by the Association to the Director whether as salary, bonus, or otherwise.
This Agreement shall not be deemed to constitute a contract of employment
between the parties hereto, nor shall any provision hereof restrict the
right of the Association to discharge the Director or restrict the right of
the Director to terminate his Directorship.
C. The rights of the Director under this Agreement and of any beneficiary
of the Director shall be solely those of an unsecured creditor of the
Association. Any asset acquired by the Association in connection with the
liabilities assumed by it hereunder, shall not be deemed to be held under
any trust for the benefit of the Director or his beneficiaries or to be
considered security for the performance of the obligations of the
Association but shall be, and remain, a general, unpledged, unrestricted
asset of the Association.
D. The Association hereby reserves the right to accelerate the payments
specified in Sections 1, 2 and 3 above without the consent of the Director,
his estate, beneficiaries, or any other person claiming through or under
him.
E. The Association agrees that it will not merge or consolidate with any
other Association or organization, or permit its business activities to be
taken over by any other organization unless and until the succeeding or
continuing Association or other organization shall expressly assume the
rights and obligations of the Association herein set forth. The Association
further agrees that it will not cease its business activities or terminate
its existence, other than as heretofore set forth in this Section, without
having made adequate provision for the fulfilling of its obligations
hereunder.
F. This Agreement may be revoked or amended in whole or in part by a
writing signed by both of the parties hereto.
G. This Agreement shall be subject to the construed under the laws of the
State of North Carolina.
<PAGE>
IN WITNESS THEREOF, the said Association has caused this Agreement to be
signed in its Corporate name by its duly authorized officer, and impressed with
its corporate seal, attested by its Secretary, and the said Director has
hereunto set his hand and seal, all on the day and year first above written.
ATTEST: Mooresville Federal Savings & Loan Association
/s/ Claude U. Voils, Jr. By /s/ George W. Brawley, Jr. (Seal)
- ---------------------------- ---------------------------
President
WITNESS: /s/ Donald R. Belk /s/ Calvin E. Tyner (Seal)
-------------------- ---------------------------
(The Director)
<PAGE>
AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DIRECTOR'S DEFERRED COMPENSATION AGREEMENT,
originally entered into as of the 1st day of January, 1985, and amended and
restated March 31, 1988 and amended and restated this the 8th day of September,
1997 (the "Agreement"), by and between Mooresville Savings Bank, SSB, a mutual
savings bank organized and existing under the laws of the State of North
Carolina (the "Bank"), and Donald R. Belk (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered into a Director's Deferred Compensation Agreement
with the Director, dated January 1, 1985, and subsequently amended and restated
March 31, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $3,600.00 per year from January 1, 1985 through December 31, 1989; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of the later of his 65th birthday or January 1, 1989 (the "Retirement
Age").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank will
pay to him $1,750.00 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the calendar
month following the calendar month in which the Director's Retirement Age shall
occur. In the event that the Director should die after becoming entitled to
receive such installment payments but before all such payments have been made,
the Bank will pay all remaining installment payments to such beneficiary or
beneficiaries as the Director has designated in writing to the Bank (the
"Beneficiaries"). In the event of the death of the last living Beneficiary
before all remaining installment payments have been made, the balance of any
payments which remain unpaid at such Beneficiary's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded interest
and shall be paid in a single sum to the estate of the last Beneficiary to die.
In the absence of any such beneficiary designation, or if no Beneficiary
survives the Director, any payments remaining unpaid at the Director's death
shall be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his Retirement
Age, the Bank will pay $1,833.33 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the calendar month following the calendar
month in which the Director died. In the event of the death of the last living
Beneficiary before all installment payments shall have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent
(7 1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his Retirement Age, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for each
full year served since January 1, 1985, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the calendar month following
the calendar month in which the Director's Retirement Age or, if earlier, death
occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Director's Deferred Compensation Agreement to be signed in its corporate name by
its duly authorized officer, and impressed with its corporate seal, attested by
its Secretary, and the Director has hereunto set his hand and seal, all on the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ -------------------------------
, Secretary
- ---------
Title: President
-------------------------------
[Corporate Seal]
/s/ Donald R. Belk (Seal)
------------------------------
DONALD R. BELK
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND DONALD R. BELK
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and Donald R. Belk (the
"Director") previously entered into a Deferred Compensation Agreement on January
1, 1985, and amended and restated said agreement on March 31, 1988, and amended
and restated said agreement again on September 8, 1997 through the execution of
the Amended and Restated Director's Deferred Compensation Agreement (the
"Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank
will pay to him $1,750.00 per month for a continuous period of 120 months.
Such continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director ceases
being a Director of the Bank (except as otherwise provided herein). If the
Director's service with the Bank continues past the Director's Retirement
Age, then the monthly benefit payments shall be postponed and shall be
increased on an annual basis by five percent (5%) for each full Year of
Service of the Director occurring after the Director's Retirement Age and
continuing until age 70 or such time as the Director ceases serving as a
Director, whichever shall occur first (hereafter "the Increased Benefit").
For purposes of this Agreement, the Director will receive credit for a year
of service for each twelve month period during which he completes 1,000
hours of service. If the Director reaches age 70 and has not previously
begun receiving his retirement benefits under this Section 2, the monthly
payments will begin upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary
<PAGE>
before all remaining installment payments have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death
shall be commuted on the basis of seven and one-half percent (7 1/2%) per
annum compounded interest and shall be paid in a single sum to the estate
of the last Beneficiary to die. In the absence of such beneficiary
designation, any payments remaining unpaid at the Director's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's
estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted in
lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $1,833.33 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary
designation, any amount remaining unpaid at a Director's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's
estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-----------------------------
/s/ Billy R. Williams Title: President
- -------------------------- -----------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
-----------------------------------
Donald R. Belk
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $1,750.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $1,837.50
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $1,929.38
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $2,025.84
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $2,127.14
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $2,233.49
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DIRECTOR'S DEFERRED COMPENSATION AGREEMENT,
originally entered into as of the 1st day of January, 1985, and amended and
restated March 31, 1988 and amended and restated this the 8th day of September,
1997 (the "Agreement"), by and between Mooresville Savings Bank, SSB, a mutual
savings bank organized and existing under the laws of the State of North
Carolina (the "Bank"), and George W. Brawley, Jr. (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered into a Director's Deferred Compensation Agreement
with the Director, dated January 1, 1985, and subsequently amended and restated
March 31, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $3,600.00 per year from January 1, 1985 through December 31, 1989; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of the later of his 65th birthday or January 1, 1989 (the "Retirement
Age").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank will
pay to him $1,833.33 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the calendar
month following the calendar month in which the Director's Retirement Age shall
occur. In the event that the Director should die after becoming entitled to
receive such installment payments but before all such payments have been made,
the Bank will pay all remaining installment payments to such beneficiary or
beneficiaries as the Director has designated in writing to the Bank (the
"Beneficiaries"). In the event of the death of the last living Beneficiary
before all remaining installment payments have been made, the balance of any
payments which remain unpaid at such Beneficiary's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded interest
and shall be paid in a single sum to the estate of the last Beneficiary to die.
In the absence of any such beneficiary designation, or if no Beneficiary
survives the Director, any payments remaining unpaid at the Director's death
shall be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his Retirement
Age, the Bank will pay $1,916.66 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the calendar month following the calendar
month in which the Director died. In the event of the death of the last living
Beneficiary before all installment payments shall have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent (7
1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his Retirement Age, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since January 1, 1985, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the calendar month following
the calendar month in which the Director's Retirement Age or, if earlier, death
occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Director's Deferred Compensation Agreement to be signed in its corporate name by
its duly authorized officer, and impressed with its corporate seal, attested by
its Secretary, and the Director has hereunto set his hand and seal, all on the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams
- ------------------------------ By: /s/ Calvin E. Tyner
, Secretary ---------------------------------
- --------- Title: Chairman of the Board
---------------------------------
[Corporate Seal] /s/ George W. Brawley, Jr.
-----------------------------(Seal)
GEORGE W. BRAWLEY, JR.
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND GEORGE W. BRAWLEY, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and George W. Brawley,
Jr. (the "Director") previously entered into a Deferred Compensation Agreement
on January 1, 1985, and amended and restated said agreement on March 31, 1988,
and amended and restated said agreement again on September 8, 1997 through the
execution of the Amended and Restated Director's Deferred Compensation Agreement
(the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is
inserted in lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank
will pay to him $1,833.33 per month for a continuous period of 120 months.
Such continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director ceases
being a Director of the Bank (except as otherwise provided herein). If the
Director's service with the Bank continues past the Director's Retirement
Age, then the monthly benefit payments shall be postponed and shall be
increased on an annual basis by five percent (5%) for each full Year of
Service of the Director occurring after the Director's Retirement Age and
continuing until age 70 or such time as the Director ceases serving as a
Director, whichever shall occur first (hereafter "the Increased Benefit").
For purposes of this Agreement, the Director will receive credit for a year
of service for each twelve month period during which he completes 1,000
hours of service. If the Director reaches age 70 and has not previously
begun receiving his retirement benefits under this Section 2, the monthly
payments will begin upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all remaining
installment payments have been made, the balance of any
<PAGE>
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of such beneficiary designation,
any payments remaining unpaid at the Director's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded
interest and shall be paid in a single sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is
inserted in lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $1,916.66 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary
designation, any amount remaining unpaid at a Director's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's
estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which
will be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not
modified in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Claude U. Voils, Jr.
-----------------------------
/s/ Billy R. Williams Title: Director
- ---------------------------- --------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
----------------------------------
George W. Brawley, Jr.
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Date of Benefit Amount of Increased Monthly Benefit
- ----------------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $1,833.33
- ----------------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $1,925.00
- ----------------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $2,021.25
- ----------------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $2,1-22.31
- ----------------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $2,228.42
- ---------------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $2,339.85
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DIRECTOR'S DEFERRED COMPENSATION AGREEMENT,
originally entered into as of the 1st day of January, 1985, and amended and
restated March 31, 1988 and amended and restated this the 8th day of September,
1997 (the "Agreement"), by and between Mooresville Savings Bank, SSB, a mutual
savings bank organized and existing under the laws of the State of North
Carolina (the "Bank"), and Calvin E. Tyner (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered into a Director's Deferred Compensation Agreement
with the Director, dated January 1, 1985, and subsequently amended and restated
March 31, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $3,600.00 per year from January 1, 1985 through December 31, 1989; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of the later of his 65th birthday or January 1, 1989 (the "Retirement
Age").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank will
pay to him $916.66 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director's Retirement
Age shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent
(7 1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his Retirement
Age, the Bank will pay $1,083.33 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the calendar month following the calendar
month in which the Director died. In the event of the death of the last living
Beneficiary before all installment payments shall have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent
(7 1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his Retirement Age, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
2 40%
3 60%
4 80%
5 100%
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since January 1, 1985, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the calendar month following
the calendar month in which the Director's Retirement Age or, if earlier, death
occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Director's Deferred Compensation Agreement to be signed in its corporate name by
its duly authorized officer, and impressed with its corporate seal, attested by
its Secretary, and the Director has hereunto set his hand and seal, all on the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ ---------------------------------
, Secretary
- --------- Title: President
---------------------------------
[Corporate Seal]
/s/ Calvin E. Tyner (Seal)
------------------------------
CALVIN E. TYNER
Director
6
<PAGE>
AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DIRECTOR'S DEFERRED COMPENSATION AGREEMENT,
originally entered into as of the 1st day of January, 1985, and amended and
restated March 31, 1988 and amended and restated this the 8th day of September,
1997 (the "Agreement"), by and between Mooresville Savings Bank, SSB, a mutual
savings bank organized and existing under the laws of the State of North
Carolina (the "Bank"), and Claude U. Voils, Jr. (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered into a Director's Deferred Compensation Agreement
with the Director, dated January 1, 1985, and subsequently amended and restated
March 31, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $3,600.00 per year from January 1, 1985 through December 31, 1989; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to receive
benefits under this Agreement, the Director must be a Director of the Bank as of
the later of his 65th birthday or January 1, 1989 (the "Retirement Age").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank will
pay to him $1,250.00 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the calendar
month following the calendar month in which the Director's Retirement Age shall
occur. In the event that the Director should die after becoming entitled to
receive such installment payments but before all such payments have been made,
the Bank will pay all remaining installment payments to such beneficiary or
beneficiaries as the Director has designated in writing to the Bank (the
"Beneficiaries"). In the event of the death of the last living Beneficiary
before all remaining installment payments have been made, the balance of any
payments which remain unpaid at such Beneficiary's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded interest
and shall be paid in a single sum to the estate of the last Beneficiary to die.
In the absence of any such beneficiary designation, or if no Beneficiary
survives the Director, any payments remaining unpaid at the Director's death
shall be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his Retirement
Age, the Bank will pay $1,500.00 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the calendar month following the calendar
month in which the Director died. In the event of the death of the last living
Beneficiary before all installment payments shall have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if no
Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent (7
1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his Retirement Age, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for each
full year served since January 1, 1985, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the calendar month following
the calendar month in which the Director's Retirement Age or, if earlier, death
occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Director's Deferred Compensation Agreement to be signed in its corporate name by
its duly authorized officer, and impressed with its corporate seal, attested by
its Secretary, and the Director has hereunto set his hand and seal, all on the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ ---------------------------------
, Secretary
- ---------
Title: President
---------------------------------
[Corporate Seal]
/s/ Claude U. Voils, Jr. (Seal)
--------------------------------
CLAUDE U. VOILS, JR.
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND CLAUDE U. VOILS, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and Claude U. Voils,
Jr. (the "Director") previously entered into a Deferred Compensation Agreement
on January 1, 1985, and amended and restated said agreement on March 31, 1988,
and amended and restated said agreement again on September 8, 1997 through the
execution of the Amended and Restated Director's Deferred Compensation Agreement
(the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted
in lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank
will pay to him $1,250.00 per month for a continuous period of 120 months.
Such continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director ceases
being a Director of the Bank (except as otherwise provided herein). If the
Director's service with the Bank continues past the Director's Retirement
Age, then the monthly benefit payments shall be postponed and shall be
increased on an annual basis by five percent (5%) for each full Year of
Service of the Director occurring after the Director's Retirement Age and
continuing until age 70 or such time as the Director ceases serving as a
Director, whichever shall occur first (hereafter "the Increased Benefit").
For purposes of this Agreement, the Director will receive credit for a year
of service for each twelve month period during which he completes 1,000
hours of service. If the Director reaches age 70 and has not previously
begun receiving his retirement benefits under this Section 2, the monthly
payments will begin upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary
<PAGE>
before all remaining installment payments have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death
shall be commuted on the basis of seven and one-half percent (7 1/2%) per
annum compounded interest and shall be paid in a single sum to the estate
of the last Beneficiary to die. In the absence of such beneficiary
designation, any payments remaining unpaid at the Director's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's
estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted
in lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $1,500.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary
designation, any amount remaining unpaid at a Director's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's
estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not
modified in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-------------------------------
/s/ Billy R. Williams Title: President
- ----------------------------- ----------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
-----------------------------------
Claude U. Voils, Jr.
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $1,250.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $1,312.50
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $1,378.13
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $1,447.03
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $1,519.38
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $1,595.35
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DIRECTOR'S DEFERRED COMPENSATION AGREEMENT,
originally entered into as of the 1st day of December, 1985, and amended and
restated this the 8th day of September, 1997 (the "Agreement"), by and between
Mooresville Savings Bank, SSB, a mutual savings bank organized and existing
under the laws of the State of North Carolina (the "Bank"), and Donald R. Belk
(the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered into a Director's Deferred Compensation Agreement
with the Director, dated December 1, 1985; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $2,400.00 per year from December 1, 1985 through December 31, 1990;
and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to receive
benefits under this Agreement, the Director must be a Director of the Bank as of
the later of his 65th birthday or December 1, 1989 (the "Retirement Age").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank will
pay to him $966.67 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the calendar
month following the calendar month in which the Director's Retirement Age shall
occur. In the event that the Director should die after becoming entitled to
receive such installment payments but before all such payments have been made,
the Bank will pay all remaining installment payments to such beneficiary or
beneficiaries as the Director has designated in writing to the Bank (the
"Beneficiaries"). In the event of the death of the last living Beneficiary
before all remaining installment payments have been made, the balance of any
payments which remain unpaid at such Beneficiary's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded interest
and shall be paid in a single sum to the estate of the last Beneficiary to die.
In the absence of any such beneficiary designation, or if no Beneficiary
survives the Director, any payments remaining unpaid at the Director's death
shall be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his Retirement
Age, the Bank will pay $1,100.00 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the calendar month following the calendar
month in which the Director died. In the event of the death of the last living
Beneficiary before all installment payments shall have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if no
Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent (7
1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his Retirement Age, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for each
full year served since January 1, 1985, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the calendar month following
the calendar month in which the Director's Retirement Age or, if earlier, death
occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank
or its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or
its holding company are sold or otherwise transferred to or are acquired by
any other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In addition,
the Bank agrees it shall not enter into any agreement providing for the merger
of the Bank with and into another business entity or the sale of more than a
majority of the Bank's assets to another business entity, person or group of
persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Director's Deferred Compensation Agreement to be signed in its corporate name by
its duly authorized officer, and impressed with its corporate seal, attested by
its Secretary, and the Director has hereunto set his hand and seal, all on the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ ------------------------------
, Secretary
- --------- Title: President
---------------------------
[Corporate Seal]
/s/ Donald R. Belk (Seal)
------------------------------
DONALD R. BELK
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND DONALD R. BELK
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and Donald R. Belk (the
"Director") previously entered into a Deferred Compensation Agreement on
December 1, 1985, and amended and restated said agreement on September 8, 1997
through the execution of the Amended and Restated Director's Deferred
Compensation Agreement (the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank
will pay to him $966.67 per month for a continuous period of 120 months.
Such continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director ceases
being a Director of the Bank (except as otherwise provided herein). If the
Director's service with the Bank continues past the Director's Retirement
Age, then the monthly benefit payments shall be postponed and shall be
increased on an annual basis by five percent (5%) for each full Year of
Service of the Director occurring after the Director's Retirement Age and
continuing until age 70 or such time as the Director ceases serving as a
Director, whichever shall occur first (hereafter "the Increased Benefit").
For purposes of this Agreement, the Director will receive credit for a year
of service for each twelve month period during which he completes 1,000
hours of service. If the Director reaches age 70 and has not previously
begun receiving his retirement benefits under this Section 2, the monthly
payments will begin upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all remaining
installment payments have been made, the balance of any
<PAGE>
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of such beneficiary designation,
any payments remaining unpaid at the Director's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded
interest and shall be paid in a single sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted in
lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $1,100.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary
designation, any amount remaining unpaid at a Director's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's
estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
---------------------------
/s/ Billy R. Williams Title: President
- --------------------------------- ---------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
-----------------------------------
Donald R. Belk
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $ 966.67
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $1,015.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $1,065.75
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $1,119.04
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $1,174.99
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $1,233.74
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DIRECTOR'S DEFERRED COMPENSATION AGREEMENT,
originally entered into as of the 1st day of December, 1985, and amended and
restated this the 8th day of September, 1997 (the "Agreement"), by and between
Mooresville Savings Bank, SSB, a mutual savings bank organized and existing
under the laws of the State of North Carolina (the "Bank"), and George W.
Brawley, Jr. (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered into a Director's Deferred Compensation Agreement
with the Director, dated December 1, 1985; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $2,400.00 per year from December 1, 1985 through December 31, 1990;
and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of the later of his 65th birthday or December 1, 1989 (the "Retirement
Age").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank will
pay to him $1,033.33 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the calendar
month following the calendar month in which the Director's Retirement Age shall
occur. In the event that the Director should die after becoming entitled to
receive such installment payments but before all such payments have been made,
the Bank will pay all remaining installment payments to such beneficiary or
beneficiaries as the Director has designated in writing to the Bank (the
"Beneficiaries"). In the event of the death of the last living Beneficiary
before all remaining installment payments have been made, the balance of any
payments which remain unpaid at such Beneficiary's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded interest
and shall be paid in a single sum to the estate of the last Beneficiary to die.
In the absence of any such beneficiary designation, or if no Beneficiary
survives the Director, any payments remaining unpaid at the Director's death
shall be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his Retirement
Age, the Bank will pay $1,158.33 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the calendar month following the calendar
month in which the Director died. In the event of the death of the last living
Beneficiary before all installment payments shall have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent (7
1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his Retirement Age, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- -------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since January 1, 1985, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the calendar month following
the calendar month in which the Director's Retirement Age or, if earlier, death
occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Director's Deferred Compensation Agreement to be signed in its corporate name by
its duly authorized officer, and impressed with its corporate seal, attested by
its Secretary, and the Director has hereunto set his hand and seal, all on the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ Calvin E. Tyner
- ------------------------------ -------------------------------
, Secretary
- --------- Title: Chairman of the Board
-------------------------------
[Corporate Seal]
/s/ George W. Brawley, Jr. (Seal)
--------------------------
GEORGE W. BRAWLEY, JR.
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND GEORGE W. BRAWLEY, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and George W. Brawley,
Jr. (the "Director") previously entered into a Deferred Compensation Agreement
on December 1, 1985, and amended and restated said agreement on September 8,
1997 through the execution of the Amended and Restated Director's Deferred
Compensation Agreement (the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank
will pay to him $1,033.33 per month for a continuous period of 120 months.
Such continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director ceases
being a Director of the Bank (except as otherwise provided herein). If the
Director's service with the Bank continues past the Director's Retirement
Age, then the monthly benefit payments shall be postponed and shall be
increased on an annual basis by five percent (5%) for each full Year of
Service of the Director occurring after the Director's Retirement Age and
continuing until age 70 or such time as the Director ceases serving as a
Director, whichever shall occur first (hereafter "the Increased Benefit").
For purposes of this Agreement, the Director will receive credit for a year
of service for each twelve month period during which he completes 1,000
hours of service. If the Director reaches age 70 and has not previously
begun receiving his retirement benefits under this Section 2, the monthly
payments will begin upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all remaining
installment payments have been made, the balance of any
<PAGE>
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of such beneficiary designation,
any payments remaining unpaid at the Director's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded
interest and shall be paid in a single sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted in
lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $1,158.33 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary
designation, any amount remaining unpaid at a Director's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's
estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Claude U. Voils, Jr.
----------------------------------
/s/ Billy R. Williams Title: Director
- ------------------------ ----------------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
-----------------------------------------
George W. Brawley, Jr.
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $1,033.33
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $1,085.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $1,139.25
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $1,196.21
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $1,256.10
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $1,318.82
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DIRECTOR'S DEFERRED COMPENSATION AGREEMENT,
originally entered into as of the 1st day of December, 1985, and amended and
restated this the 8th day of September, 1997 (the "Agreement"), by and between
Mooresville Savings Bank, SSB, a mutual savings bank organized and existing
under the laws of the State of North Carolina (the "Bank"), and Calvin E. Tyner
(the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered into a Director's Deferred Compensation Agreement
with the Director, dated December 1, 1985; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $2,400.00 per year from December 1, 1985 through December 31, 1990;
and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of the later of his 65th birthday or December 1, 1989 (the "Retirement
Age").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank will
pay to him $508.33 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director's Retirement
Age shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent (7
1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his Retirement
Age, the Bank will pay $691.67 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the calendar month following the calendar
month in which the Director died. In the event of the death of the last living
Beneficiary before all installment payments shall have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent (7
1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his Retirement Age, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since January 1, 1985, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the calendar month following
the calendar month in which the Director's Retirement Age or, if earlier, death
occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Director's Deferred Compensation Agreement to be signed in its corporate name by
its duly authorized officer, and impressed with its corporate seal, attested by
its Secretary, and the Director has hereunto set his hand and seal, all on the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- --------------------------- ---------------------------------
, Secretary
- --------- Title: President
---------------------------------
[Corporate Seal]
/s/ Calvin E. Tyner (Seal)
------------------------------
CALVIN E. TYNER
Director
6
<PAGE>
AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DIRECTOR'S DEFERRED COMPENSATION AGREEMENT,
originally entered into as of the 1st day of December, 1985, and amended and
restated this the 8th day of September, 1997 (the "Agreement"), by and between
Mooresville Savings Bank, SSB, a mutual savings bank organized and existing
under the laws of the State of North Carolina (the "Bank"), and Claude U. Voils,
Jr. (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered into a Director's Deferred Compensation Agreement
with the Director, dated December 1, 1985; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $2,400.00 per year from December 1, 1985 through December 31, 1990;
and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of the later of his 65th birthday or December 1, 1989 (the "Retirement
Age").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank will
pay to him $708.33 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director's Retirement
Age shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent
(7 1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his Retirement
Age, the Bank will pay $891.67 per month for a continuous period of 120 months
to the Beneficiary or Beneficiaries of the Director. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the calendar month following the calendar
month in which the Director died. In the event of the death of the last living
Beneficiary before all installment payments shall have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or if
no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven and one-half percent
(7 1/2%) per annum compounded interest and shall be paid in a single sum to the
Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his Retirement Age, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
- --------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since January 1, 1985, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the calendar month following
the calendar month in which the Director's Retirement Age or, if earlier, death
occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Director's Deferred Compensation Agreement to be signed in its corporate name by
its duly authorized officer, and impressed with its corporate seal, attested by
its Secretary, and the Director has hereunto set his hand and seal, all on the
day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- -------------------------- ----------------------------
,Secretary
- ---------- Title: President
--------------------------
[Corporate Seal]
/s/ Claude U. Voils, Jr. (Seal)
--------------------------------
CLAUDE U. VOILS, JR.
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND CLAUDE U. VOILS, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and Claude U. Voils,
Jr. (the "Director") previously entered into a Deferred Compensation Agreement
on December 1, 1985, and amended and restated said agreement on September 8,
1997 through the execution of the Amended and Restated Director's Deferred
Compensation Agreement (the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
Retirement Age (except as otherwise specifically provided herein), the Bank
will pay to him $708.33 per month for a continuous period of 120 months.
Such continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
calendar month following the calendar month in which the Director ceases
being a Director of the Bank (except as otherwise provided herein). If the
Director's service with the Bank continues past the Director's Retirement
Age, then the monthly benefit payments shall be postponed and shall be
increased on an annual basis by five percent (5%) for each full Year of
Service of the Director occurring after the Director's Retirement Age and
continuing until age 70 or such time as the Director ceases serving as a
Director, whichever shall occur first (hereafter "the Increased Benefit").
For purposes of this Agreement, the Director will receive credit for a year
of service for each twelve month period during which he completes 1,000
hours of service. If the Director reaches age 70 and has not previously
begun receiving his retirement benefits under this Section 2, the monthly
payments will begin upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all remaining
installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be
<PAGE>
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of such beneficiary designation,
any payments remaining unpaid at the Director's death shall be commuted on
the basis of seven and one-half percent (7 1/2%) per annum compounded
interest and shall be paid in a single sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted in
lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $891.67 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary
designation, any amount remaining unpaid at a Director's death shall be
commuted on the basis of seven and one-half percent (7 1/2%) per annum
compounded interest and shall be paid in a single sum to the Director's
estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-----------------------------
/s/ Billy R. Williams Title: President
- -------------------------- -----------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
------------------------------------
Claude U. Voils, Jr.
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $708.33
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $743.75
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $780.93
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $819.98
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $860.98
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $904.03
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
RETIREMENT PLAN AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PLAN AGREEMENT originally entered into
the 1st day of November, 1993 and amended and restated this the 15th day of
September, 1997 (the "Agreement"), by and between Mooresville Savings Bank, SSB,
a mutual state savings bank organized and existing under the laws of the State
of North Carolina (the "Bank"), and those persons listed on attached Exhibit A
(the "Director" or the "Directors").
W I T N E S S E T H:
WHEREAS, the Bank recognizes the valuable services heretofore performed for
it by the Directors and wishes to encourage their further service and assist
them in providing for the contingencies of retirement and death;
WHEREAS, the parties hereto wish to provide the terms and conditions upon
which the Bank shall make certain payments to the Directors or their designated
beneficiaries;
WHEREAS, the parties hereto intend that this Agreement be considered an
unfunded arrangement maintained to provide deferred compensation benefits for
the Directors; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
herein contained, the parties hereto agree as follows:
Section 1. Retirement Benefits. The Bank agrees that, except as otherwise
--------- -------------------
specifically provided herein, upon the later to occur of a Director's 65th
birthday and November 1, 1998 (the "Normal Retirement Date"), the Bank will pay
the Director $1,000.00 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Director's Normal
Retirement Date shall occur.
In the event that a Director should die after becoming entitled to receive
monthly installment payments under this Section 1 but before any or all
remaining installment payments have been made, the Bank will pay all remaining
installment payments to such beneficiary or beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of the
death of the Director's last living Beneficiary before all installment payments
have been made, the balance of any payments which remain unpaid at the time of
such Beneficiary's death shall be commuted on the basis of seven percent (7%)
per annum compounded interest and shall be paid in a single sum to the estate of
the last Beneficiary to die. In the absence of such beneficiary designation,
any payments remaining unpaid at the Director's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the Director's estate. Any
<PAGE>
amount payable to a Director or his Beneficiary under this Section 1 shall be
reduced by any disability payments already paid to such Director under Section 3
of this Agreement.
Section 2. Pre-Retirement Death Benefits. Should a Director die while
--------- -----------------------------
serving as a director of the Bank, and prior to the Normal Retirement Date, the
Bank will pay $1,000.00 per month for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first such monthly installment
payment shall be made on a date to be determined by the Bank, but in no event
later than the first day of the sixth calendar month following the calendar
month in which the Director died.
In the event of the death of the Director's last living Beneficiary before
all the unpaid payments shall have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, any amount remaining unpaid at a Director's death
shall be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the Director's estate. Any amount
payable to a Director's Beneficiary under this Section 2 shall be reduced by any
disability payments already paid to such Director under Section 3 of this
Agreement.
Section 3. Disability Benefits. If a Director shall become disabled (as
---------- --------------------
defined herein) prior to his Normal Retirement Date while continuing to serve as
a Director of the Bank, the Bank shall commence to pay him $1,000 per month for
a continuous period of 120 months. Such continuous monthly installment payments
shall commence on a date to be determined by the Bank, but in no event later
than the first day of the sixth calendar month following the calendar month in
which the Director is determined to be disabled.
In the event that a Director should die after becoming entitled to receive
monthly installment payments under this Section 3 but before any or all
remaining installment payments have been made, the Bank will pay all remaining
installment payments to the Director's Beneficiary or Beneficiaries. In the
event of the death of the Director's last living Beneficiary before all
installment payments have been made, the balance of any payments which remain
unpaid at the time of such Beneficiary's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, any payments remaining unpaid at the Director's death
shall be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the Director's estate.
The Director shall be considered disabled for the purpose of this Agreement
if he is unable to perform the duties of his position for a continuous period of
six (6) months or more. During such six (6) month period, the Director must be
under the regular care of a medical doctor (M.D.) or osteopathic physician
(D.O.) licensed in the State of North Carolina. For the purpose of this
section, or any other section relating to disability, if there is any dispute
between the parties as to the
2
<PAGE>
Director's physical or mental disability, such dispute shall be settled by the
opinion of a medical doctor or osteopathic physician licensed in the State of
North Carolina who is selected by the mutual consent of the Director and the
Bank or their representatives. If the parties cannot agree within ten (10) days
after a written request for the designation of an examining physician is made by
either party to the other, then the examining physician shall be designated by
the president of the Iredell County Medical Society then serving. Certification
of that physician as to the matter in dispute shall be final and binding upon
the Director, his Beneficiaries, the Bank, and all parties claiming any right or
interest under this Agreement through them.
Section 4. Termination Benefits. Should a Director voluntarily resign as
--------- --------------------
a director prior to the Normal Retirement Date for any reason other than death
or disability, he or his Beneficiaries, as applicable, shall be entitled to
receive, commencing on a date to be determined by the Bank, but in no event
later than the first day of the first calendar month following the month in
which the earlier of the Director's Normal Retirement Date or death shall occur,
a percentage of the amount of the monthly installment payment stated in Section
1 of this Agreement determined under the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF MONTHLY INSTALLMENT
PAYMENT STATED IN SECTION 1 OF THIS
IF DIRECTOR'S TERMINATION OCCURS AGREEMENT TO WHICH DIRECTOR IS
ON OR AFTER ENTITLED
-------------------------------- -----------------------------------
<S> <C>
March 31, 1994 20%
March 31, 1995 40%
March 31, 1996 60%
March 31, 1997 80%
March 31, 1998 100%
</TABLE>
Section 5. Extraordinary Transactions. In the event that a Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 1 and the Normal Retirement Date shall be deemed to be the date that
such Change in Control occurred. The Bank shall commence to make monthly
installment payments to the Director as described in Section 1 on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Director's service as a
director of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
3
<PAGE>
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to a Director if,
prior to the consummation or occurrence of such transaction or event, the
Director and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Directors, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Directors or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Directors to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Directors or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other
4
<PAGE>
employment agreements that may exist from time to time between the parties
hereto, concerning any other compensation payable by the Bank to a Director
whether as fees, salary, bonus, or otherwise. This Agreement shall not be deemed
to constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge a Director or
restrict the right of a Director to terminate his directorship. The rights
accruing to the Directors or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by all of the parties hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Directors, the
Directors' Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Directors be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Directors, the Directors' designated Beneficiaries or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to a Director hereunder without such Director's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
5
<PAGE>
every obligation of the Bank to the Directors under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Directors to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Retirement Plan Agreement as of the day and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
__________________________ By: _________________________________
_______________, Secretary
[Corporate Seal] Title: _______________________________
6
<PAGE>
DIRECTORS:
__________________________________(Seal)
Donald R. Belk
__________________________________(Seal)
George W. Brawley, Jr.
__________________________________(Seal)
Calvin E. Tyner
__________________________________(Seal)
Claude U. Voils, Jr.
<PAGE>
Exhibit A
Current Directorship and Years of Service
<TABLE>
<CAPTION>
==============================================================
Director Date Service Began Date of Birth
==============================================================
<S> <C> <C>
Donald R. Belk 03-07-1974 11-21-1931
George W. Brawley, Jr. 05-09-1968 04-24-1933
Calvin E. Tyner 12-05-1963 01-04-1924
Claude U. Voils, Jr. 03-05-1970 04-21-1929
==============================================================
</TABLE>
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
RETIREMENT PLAN AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND DONALD R. BELK
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and Donald R. Belk,
(the "Director") previously entered into a Retirement Plan Agreement on November
1, 1993, and amended and restated said agreement on September 15, 1997, through
the execution of the Amended and Restated Retirement Plan Agreement (the
"Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 1 of the Agreement, the Director became
entitled to receive retirement benefits on November 1, 1998 and thus is in pay
status; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 1 is deleted in its entirety and a new Section 1 is inserted in
lieu thereof to read as follows:
Section 1. Retirement Benefits. The Bank agrees that, except as otherwise
---------- -------------------
specifically provided herein, upon the later to occur of a Director's 65th
birthday and November 1, 1998 (the "Normal Retirement Date"), the Bank will
pay the Director $1,000.00 per month for a continuous period of 120 months.
Such continuous monthly installments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
first calendar month following the calendar month in which the Director's
Normal Retirement Date shall occur (except as otherwise provided herein).
If the Director's service with the Bank continues past the Normal
Retirement Date, then the monthly benefit payments shall be postponed and
shall be increased on an annual basis by five percent (5%) for each full
Year of Service of the Director occurring after the Normal Retirement Date
and continuing until age 70 or such time as the Director ceases serving as
a Director, whichever shall occur first (hereafter "the Increased
Benefit"). For purposes of this Agreement, the Director will receive
credit for a year of service for each twelve month period during which he
completes 1,000 hours of service. If the Director reaches age 70 and has
not previously begun receiving his retirement benefits under this Section
1, the monthly payments will begin upon the Director's attainment of age 70
in any event.
<PAGE>
In the event that a Director should die after becoming entitled to
receive monthly installment payments under this Section 1 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all installment
payments have been made, the balance of any payments which remain unpaid at
the time of such Beneficiary's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of
such beneficiary designation, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven percent (7%) per
annum compounded interest and shall be paid in a single sum to the
Director's estate. Any amount payable to a Director or his Beneficiary
under this Section 1 shall be reduced by any disability payments already
paid to such Director under Section 3 of this Agreement.
2. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Pre-Retirement Death Benefits. Should a Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 1, the Bank will pay $1,000.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation,
any amount remaining unpaid at a Director's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid
in a single sum to the Director's estate. Any amount payable to a
Director's Beneficiary under this Section 2 shall be reduced by any
disability payments already paid to such Director under Section 3 of this
Agreement.
3. Section 3 is deleted in its entirety and a new Section 3 is inserted in
lieu thereof to read as follows:
Section 3. Disability Benefits. If a Director shall become disabled (as
---------- -------------------
defined herein) while continuing to serve as a Director of the Bank, the
Bank shall commence to pay
2
<PAGE>
him $1,000 per month (or his Increased Benefit if such applies) for a
continuous period of 120 months. Such continuous monthly installment
payments shall commence on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director is determined to be disabled.
In the event that a Director should die after becoming entitled to
receive monthly installment payments under this Section 3 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to the Director's Beneficiary or
Beneficiaries. In the event of the death of the Director's last living
Beneficiary before all installment payments have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death
shall be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of such beneficiary designation, any
payments remaining unpaid at the Director's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
The Director shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a
continuous period of six (6) months or more. During such six (6) month
period, the Director must be under the regular care of a medical doctor
(M.D.) or osteopathic physician (D.O.) licensed in the State of North
Carolina. For the purpose of this section, or any other section relating
to disability, if there is any dispute between the parties as to the
Director's physical or mental disability, such dispute shall be settled by
the opinion of a medical doctor or osteopathic physician licensed in the
State of North Carolina who is selected by the mutual consent of the
Director and the Bank or their representatives. If the parties cannot agree
within ten (10) days after a written request for the designation of an
examining physician is made by either party to the other, then the
examining physician shall be designated by the president of the Iredell
County Medical Society then serving. Certification of that physician as to
the matter in dispute shall be final and binding upon the Director, his
Beneficiaries, the Bank and all parties claiming any right or interest
under this Agreement through them.
4. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching his Normal Retirement Date.
5. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
3
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-------------------------------
/s/ Billy R. Williams Title: President
- ------------------------- -------------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
--------------------------------------
Donald R. Belk
4
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Current Retirement Age (before amendment) $1,000.00
Age 65
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $1,050.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $1,102.50
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $1,157.63
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $1,215.51
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $1,276.28
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
RETIREMENT PLAN AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND GEORGE W. BRAWLEY, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and George W. Brawley,
Jr.(the "Director") previously entered into a Retirement Plan Agreement on
November 1, 1993, and amended and restated said agreement on September 15, 1997,
through the execution of the Amended and Restated Retirement Plan Agreement (the
"Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 1 of the Agreement, the Director became
entitled to receive retirement benefits on November 1, 1998 and thus is in pay
status; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 1 is deleted in its entirety and a new Section 1 is inserted in
lieu thereof to read as follows:
Section 1. Retirement Benefits. The Bank agrees that, except as otherwise
---------- -------------------
specifically provided herein, upon the later to occur of a Director's 65th
birthday and November 1, 1998 (the "Normal Retirement Date"), the Bank will
pay the Director $1,000.00 per month for a continuous period of 120 months.
Such continuous monthly installments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
first calendar month following the calendar month in which the Director's
Normal Retirement Date shall occur (except as otherwise provided herein).
If the Director's service with the Bank continues past the Normal
Retirement Date, then the monthly benefit payments shall be postponed and
shall be increased on an annual basis by five percent (5%) for each full
Year of Service of the Director occurring after the Normal Retirement Date
and continuing until age 70 or such time as the Director ceases serving as
a Director, whichever shall occur first (hereafter "the Increased
Benefit"). For purposes of this Agreement, the Director will receive
credit for a year of service for each twelve month period during which he
completes 1,000 hours of service. If the Director reaches age 70 and has
not previously begun receiving his retirement benefits under this Section
1, the monthly payments will begin upon the Director's attainment of age 70
in any event.
<PAGE>
In the event that a Director should die after becoming entitled to
receive monthly installment payments under this Section 1 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all installment
payments have been made, the balance of any payments which remain unpaid at
the time of such Beneficiary's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of
such beneficiary designation, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven percent (7%) per
annum compounded interest and shall be paid in a single sum to the
Director's estate. Any amount payable to a Director or his Beneficiary
under this Section 1 shall be reduced by any disability payments already
paid to such Director under Section 3 of this Agreement.
2. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Pre-Retirement Death Benefits. Should a Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 1, the Bank will pay $1,000.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation,
any amount remaining unpaid at a Director's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid
in a single sum to the Director's estate. Any amount payable to a
Director's Beneficiary under this Section 2 shall be reduced by any
disability payments already paid to such Director under Section 3 of this
Agreement.
3. Section 3 is deleted in its entirety and a new Section 3 is inserted in
lieu thereof to read as follows:
Section 3. Disability Benefits. If a Director shall become disabled (as
---------- -------------------
defined herein) while continuing to serve as a Director of the Bank, the
Bank shall commence to pay
2
<PAGE>
him $1,000 per month (or his Increased Benefit if such applies) for a
continuous period of 120 months. Such continuous monthly installment
payments shall commence on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director is determined to be disabled.
In the event that a Director should die after becoming entitled to
receive monthly installment payments under this Section 3 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to the Director's Beneficiary or
Beneficiaries. In the event of the death of the Director's last living
Beneficiary before all installment payments have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death
shall be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of such beneficiary designation, any
payments remaining unpaid at the Director's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
The Director shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a
continuous period of six (6) months or more. During such six (6) month
period, the Director must be under the regular care of a medical doctor
(M.D.) or osteopathic physician (D.O.) licensed in the State of North
Carolina. For the purpose of this section, or any other section relating
to disability, if there is any dispute between the parties as to the
Director's physical or mental disability, such dispute shall be settled by
the opinion of a medical doctor or osteopathic physician licensed in the
State of North Carolina who is selected by the mutual consent of the
Director and the Bank or their representatives. If the parties cannot agree
within ten (10) days after a written request for the designation of an
examining physician is made by either party to the other, then the
examining physician shall be designated by the president of the Iredell
County Medical Society then serving. Certification of that physician as to
the matter in dispute shall be final and binding upon the Director, his
Beneficiaries, the Bank and all parties claiming any right or interest
under this Agreement through them.
4. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching his Normal Retirement Date.
5. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
3
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Claude U. Voils, Jr.
---------------------------------
/s/ Billy R. Williams Title: Director
- -------------------------- ---------------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
----------------------------------------
George W. Brawley, Jr.
4
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Current Retirement Age (before amendment) $1,000.00
Age 65
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $1,050.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $1,102.50
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $1,157.63
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $1,215.51
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $1,276.28
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
RETIREMENT PLAN AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND CLAUDE U. VOILS, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and Claude U. Voils,
Jr., (the "Director") previously entered into a Retirement Plan Agreement on
November 1, 1993, and amended and restated said agreement on September 15, 1997,
through the execution of the Amended and Restated Retirement Plan Agreement (the
"Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 1 of the Agreement, the Director became
entitled to receive retirement benefits on November 1, 1998 and thus is in pay
status; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 1 is deleted in its entirety and a new Section 1 is inserted
in lieu thereof to read as follows:
Section 1. Retirement Benefits. The Bank agrees that, except as otherwise
---------- -------------------
specifically provided herein, upon the later to occur of a Director's 65th
birthday and November 1, 1998 (the "Normal Retirement Date"), the Bank will
pay the Director $1,000.00 per month for a continuous period of 120 months.
Such continuous monthly installments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
first calendar month following the calendar month in which the Director's
Normal Retirement Date shall occur (except as otherwise provided herein).
If the Director's service with the Bank continues past the Normal
Retirement Date, then the monthly benefit payments shall be postponed and
shall be increased on an annual basis by five percent (5%) for each full
Year of Service of the Director occurring after the Normal Retirement Date
and continuing until age 70 or such time as the Director ceases serving as
a Director, whichever shall occur first (hereafter "the Increased
Benefit"). For purposes of this Agreement, the Director will receive credit
for a year of service for each twelve month period during which he
completes 1,000 hours of service. If the Director reaches age 70 and has
not previously begun receiving his retirement benefits under this Section
1, the monthly payments will begin upon the Director's attainment of age 70
in any event.
<PAGE>
In the event that a Director should die after becoming entitled to
receive monthly installment payments under this Section 1 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all installment
payments have been made, the balance of any payments which remain unpaid at
the time of such Beneficiary's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of
such beneficiary designation, any payments remaining unpaid at the
Director's death shall be commuted on the basis of seven percent (7%) per
annum compounded interest and shall be paid in a single sum to the
Director's estate. Any amount payable to a Director or his Beneficiary
under this Section 1 shall be reduced by any disability payments already
paid to such Director under Section 3 of this Agreement.
2. Section 2 is deleted in its entirety and a new Section 2 is inserted
in lieu thereof to read as follows:
Section 2. Pre-Retirement Death Benefits. Should a Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 1, the Bank will pay $1,000.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation,
any amount remaining unpaid at a Director's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid
in a single sum to the Director's estate. Any amount payable to a
Director's Beneficiary under this Section 2 shall be reduced by any
disability payments already paid to such Director under Section 3 of this
Agreement.
3. Section 3 is deleted in its entirety and a new Section 3 is inserted
in lieu thereof to read as follows:
Section 3. Disability Benefits. If a Director shall become disabled (as
---------- -------------------
defined herein) while continuing to serve as a Director of the Bank, the
Bank shall commence to pay
2
<PAGE>
him $1,000 per month (or his Increased Benefit if such applies) for a
continuous period of 120 months. Such continuous monthly installment
payments shall commence on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director is determined to be disabled.
In the event that a Director should die after becoming entitled to
receive monthly installment payments under this Section 3 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to the Director's Beneficiary or
Beneficiaries. In the event of the death of the Director's last living
Beneficiary before all installment payments have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death
shall be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of such beneficiary designation, any
payments remaining unpaid at the Director's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
The Director shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a
continuous period of six (6) months or more. During such six (6) month
period, the Director must be under the regular care of a medical doctor
(M.D.) or osteopathic physician (D.O.) licensed in the State of North
Carolina. For the purpose of this section, or any other section relating
to disability, if there is any dispute between the parties as to the
Director's physical or mental disability, such dispute shall be settled by
the opinion of a medical doctor or osteopathic physician licensed in the
State of North Carolina who is selected by the mutual consent of the
Director and the Bank or their representatives. If the parties cannot
agree within ten (10) days after a written request for the designation of
an examining physician is made by either party to the other, then the
examining physician shall be designated by the president of the Iredell
County Medical Society then serving. Certification of that physician as to
the matter in dispute shall be final and binding upon the Director, his
Beneficiaries, the Bank and all parties claiming any right or interest
under this Agreement through them.
4. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching his Normal Retirement Date.
5. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
3
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
----------------------------------
/s/ Billy R. Williams Title: President
- ---------------------------- -------------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
-------------------------------------
Claude U. Voils, Jr.
4
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- -------------------------------------------------------------------------------
<S> <C>
Current Retirement Age (before amendment) $1,000.00
Age 65
- -------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $1,050.00
- -------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $1,102.50
- -------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $1,157.63
- -------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $1,215.51
- -------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $1,276.28
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of December, 1990, and amended and restated this the 8th
day of September, 1997 (the "Agreement"), by and between Mooresville Savings
Bank, SSB, a mutual savings bank organized and existing under the laws of the
State of North Carolina (the "Bank"), and George W. Brawley, Jr. (the
"Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated December 1, 1990; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director heretofore deferred receipt of director's fees in the
amount of $500.00 per month from December 1, 1990 through November 30, 1995; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director heretofore has deferred the
--------- -----------------
receipt by him of director's fees as described above. In exchange for such
deferral, the Director shall receive from the Bank the benefits hereinafter
described. Except as otherwise specifically provided herein, in order to
receive benefits under this Agreement, the Director must be a Director of the
Bank as of his 65th birthday.
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
65th birthday (except as otherwise specifically provided herein), the Bank will
pay to him $1,957 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Director's 65th
birthday shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the occurrence of his 65th
birthday, the Bank will pay $1,957 per month for a continuous period of 120
months to the Beneficiary or Beneficiaries of the Director. The first such
monthly installment payment shall be made on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director died. In the event of the
death of the last living Beneficiary before all installment payments shall have
been made, the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of eight percent (8%) per
annum compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Director, any payments remaining unpaid at the
Director's death shall be commuted on the basis of eight percent (8%) per annum
compounded interest and shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his 65th birthday, he (or his Beneficiary)
shall be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- -------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since December 1, 1990, the original effective date of
this Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's 65th birthday or, if
earlier, death occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Bank shall commence to make monthly installment payments to
the Director as described therein on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Director's service as a director of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank or its holding company representing
25 percent or more of the combined voting power of the outstanding common
stock of the Bank or common stock of such holding company, as applicable;
or
(c) individuals who constitute the board of directors of the Bank
or its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's
shareholders was approved by the Bank's or its holding company's board of
directors or nominating committee, as applicable, shall be considered as
though he or she were a member of the Incumbent Board or Incumbent
Holding Company Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company,
respectively, is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or
its holding company are sold or otherwise transferred to or are acquired
by any other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this
--------- -------------
Agreement, it is agreed that neither the Director, any Beneficiary, nor any
other person claiming any right or interest under this Agreement through the
Director or any Beneficiary shall have any right to commute, sell, assign,
transfer or otherwise convey the right to receive any payments hereunder, which
payments and the right hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement
--------- ---------------------
shall be provided out of the general assets of the Bank at the time such
benefits are to be paid. The parties agree that the Bank is under no obligation
to set aside funds in advance of the time for payment hereunder, or to otherwise
provide security for its obligations under this Agreement. The Director, the
Director's Beneficiaries, and any successor in interest shall be and remain a
general creditor of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
6
<PAGE>
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
By:
/s/ Billy R. Williams /s/ Calvin E. Tyner
- ------------------------------ ---------------------------------
, Secretary
- --------- Title: Chairman of the Board
------------------------------
[Corporate Seal]
/s/ George W. Brawley, Jr. (Seal)
---------------------------------
GEORGE W. BRAWLEY, JR.
Director
7
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND GEORGE W. BRAWLEY, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and George W. Brawley,
Jr. (the "Director") previously entered into a Retirement Payment Agreement on
December 1, 1990, and amended and restated said agreement on September 8, 1997
through the execution of the Amended and Restated Retirement Payment Agreement
(the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted
in lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
65/th/ birthday ("Retirement Age") (except as otherwise specifically
provided herein), the Bank will pay to him $1,957.00 per month for a
continuous period of 120 months. Such continuous monthly installment
payments shall commence on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director ceases being a Director of the Bank
(except as otherwise provided herein). If the Director's service with the
Bank continues past the Director's Retirement Age, then the monthly benefit
payments shall be postponed and shall be increased on an annual basis by
five percent (5%) for each full Year of Service of the Director occurring
after the Director's Retirement Age and continuing until age 70 or such
time as the Director ceases serving as a Director, whichever shall occur
first (hereafter "the Increased Benefit"). For purposes of this Agreement,
the Director will receive credit for a year of service for each twelve
month period during which he completes 1,000 hours of service. If the
Director reaches age 70 and has not previously begun receiving his
retirement benefits under this Section 2, the monthly payments will begin
upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all remaining
installment payments have been made, the balance of any
<PAGE>
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of such beneficiary designation, any
payments remaining unpaid at the Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted
in lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $1,957.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation,
any amount remaining unpaid at a Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not
modified in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Claude U. Voils, Jr.
--------------------------------------
/s/ Billy R. Williams Title: Director
- ------------------------------- ------------------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
-----------------------------------------
George W. Brawley, Jr.
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- -------------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $1,957.00
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $2,054.85
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $2,157.59
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $2,265.47
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $2,378.75
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $2,497.68
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of November, 1990, amended and restated October 21, 1993,
and amended and restated this the 8th day of September, 1997 (the "Agreement"),
by and between Mooresville Savings Bank, SSB, a mutual savings bank organized
and existing under the laws of the State of North Carolina (the "Bank"), and
Dale W. Brawley (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive previously served as a Director of the Bank; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Executive,
dated November 1, 1990; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB", and the Executive resigned as a
Director of the Bank; and
WHEREAS, the Executive continued to render valuable service to the Bank in
his capacity as an executive officer of the Bank, and it was the desire of the
Bank to have the benefit of his continued loyalty and service and also to assist
him in providing for the contingencies of retirement and death, and so effective
with the date of the Bank's charter conversion and the Executive's retirement as
a Director of the Bank, the parties amended and restated the Retirement Payment
Agreement on October 21, 1993; and
WHEREAS, the Executive heretofore deferred receipt of compensation and
director's fees in the amount of $500.00 per month from November 1, 1990 through
October 31, 1995; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Executive heretofore has deferred the
--------- -----------------
receipt by him of compensation and director's fees as described above. In
exchange for such deferral, the Executive shall receive from the Bank the
benefits hereinafter described. Except as otherwise specifically
<PAGE>
provided herein, in order to receive benefits under this Agreement, the
Executive must be an Executive of the Bank as of his 65th birthday.
Section 2. Retirement Benefits. Upon the occurrence of the Executive's
--------- -------------------
65th birthday (except as otherwise specifically provided herein), the Bank will
pay to him $8,303 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Executive's 65th
birthday shall occur. In the event that the Executive should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Executive has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Executive, any payments remaining unpaid at the Executive's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Executive's estate.
Section 3. Pre-Retirement Death Benefits. Should the Executive die while
--------- -----------------------------
in the service of the Bank and prior to the occurrence of his 65th birthday, the
Bank will pay $8,303 per month for a continuous period of 120 months to the
Beneficiary or Beneficiaries of the Executive. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Executive died. In the event of the death of the
last living Beneficiary before all installment payments shall have been made,
the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of eight percent (8%) per
annum compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any payments remaining unpaid at the
Executive's death shall be commuted on the basis of eight percent (8%) per annum
compounded interest and shall be paid in a single sum to the Executive's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Executive terminates his service as an executive officer of the Bank, for
any reason other than death or the attainment of his 65th birthday, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Employment To Which the Executive is Entitled
------------------------------- -------------------------------------
<S> <C>
2 40%
3 60%
4 80%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Employment To Which the Executive is Entitled
------------------------------- -------------------------------------
<S> <C>
5 100%
</TABLE>
For purposes of this Section 4, the Executive shall receive credit for each
full year served since November 1, 1990, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Executive's 65th birthday or, if
earlier, death occurs.
Section 5. Extraordinary Transactions. In the event that the Executive's
--------- --------------------------
service as an executive officer of the Bank is terminated for any reason
coincident with or within twenty-four (24) months following a Change in Control
(as defined herein), then the Executive shall be entitled to the benefits set
forth in Section 2 and the Bank shall commence to make monthly installment
payments to the Executive as described therein on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Executive's service as an executive
officer of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Executive and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as salary, bonus, or otherwise. This Agreement shall not be deemed to constitute
a contract of employment between the parties hereto, nor shall any provision
hereof restrict the right of the Bank to discharge the Executive or restrict the
right of the Executive to terminate his employment. The rights accruing to the
Executive or any designated beneficiary under the provisions of the Agreement
shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain a
general creditor of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Executive's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Executive under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams
- ------------------------------ By: /s/ George W. Brawley, Jr.
----------------------------------
- ----------Secretary
Title: President
-------------------------------
[Corporate Seal]
/s/ Dale W. Brawley (Seal)
-------------------------------
DALE W. BRAWLEY
Executive
6
<PAGE>
APPENDIX A
ERISA Claims and Review Procedures.
- ----------------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security
Act of 1974 ("ERISA") (but not for any other purpose), the Bank is
hereby designated as the named fiduciary and Plan Administrator of
this unfunded, nonqualified deferred compensation plan. If any person
believes he is being denied any rights or benefits under the
Agreement, such person may file a claim in writing with the Plan
Administrator for resolution in accordance with the provisions of
Paragraph B of this procedure.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its
decision in writing. Such notification will be written in a manner
calculated to be understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Paragraph C of
this procedure.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if
applicable, within sixty (60) days after the date on which such denial
is considered to have occurred) the claimant (or his duly authorized
representative) may:
7
<PAGE>
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain specific reasons for
the decision as well as specific references to pertinent provisions of
the Agreement. The decision on review will be made within sixty (60)
days after the request for review is received by the Plan
Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request
(such as an election by the Plan Administrator to hold a hearing), and
if written notice of such extension and circumstances is given to the
claimant within the initial sixty (60) day period.
8
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of March, 1993, and amended and restated this the 8th day
of September, 1997 (the "Agreement"), by and between Mooresville Savings Bank,
SSB, a mutual savings bank organized and existing under the laws of the State of
North Carolina (the "Bank"), and Donald R. Belk (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated March 1, 1993; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director previously agreed to defer receipt of director's fees
in the amount of $300.00 per month for a period of five (5) years, which period
commenced on March 1, 1993; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director hereby elects and agrees to
--------- -----------------
continue to defer each month the receipt by him of $300.00 in director's fees
for the sixty (60) months beginning March 1, 1993 and ending February 28, 1998.
In exchange for such deferral, the Director shall receive from the Bank the
benefits hereinafter described. Except as otherwise specifically provided
herein, in order to receive benefits under this Agreement, the Director must be
a Director of the Bank as of March 1, 1998 (the "Qualifying Date").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Qualifying
--------- -------------------
Date (except as otherwise specifically provided herein), the Bank will pay to
the Director $414 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Qualifying Date shall
occur. In the event that the Director should die after becoming entitled to
receive such installment payments but before all such payments have been made,
the Bank will pay all remaining installment payments to such beneficiary or
beneficiaries as the Director has designated in writing to the Bank (the
"Beneficiaries"). In the event of the death of the last living Beneficiary
before all remaining installment payments have been made, the balance of any
payments which remain unpaid at such Beneficiary's death shall be commuted on
the basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the estate of the last Beneficiary to die. In the absence of
any such beneficiary designation, or if no Beneficiary survives the Director,
any payments remaining unpaid at the Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid in a
single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the Qualifying Date, the Bank
will pay $414 per month for a continuous period of 120 months to the Beneficiary
or Beneficiaries of the Director. The first such monthly installment payment
shall be made on a date to be determined by the Bank, but in no event later than
the first day of the sixth calendar month following the calendar month in which
the Director died. In the event of the death of the last living Beneficiary
before all installment payments shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank prior to the
Qualifying Date, for any reason other than death, he (or his Beneficiary) shall
be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- -------------------------------------
2 40%
3 60%
4 80%
5 100%
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since March 1, 1993, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Qualifying Date, or, if earlier, the
Director's death, occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Qualifying Date shall be deemed to be the date that such
Change in Control occurred. The Bank shall commence to make monthly installment
payments to the Director as described in Section 2 on a date to be determined by
the Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's service as a director of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ -------------------------------
, Secretary
- --------- Title: President
-------------------------------
[Corporate Seal]
/s/ Donald R. Belk (Seal)
------------------------------
DONALD R. BELK
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND DONALD R. BELK
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and Donald R. Belk (the
"Director") previously entered into a Retirement Payment Agreement on March 1,
1993, and amended and restated said agreement on June 6, 1994, and amended and
restated said agreement again on September 8, 1997 through the execution of the
Amended and Restated Retirement Payment Agreement (the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted
in lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
65/th/ birthday ("Retirement Age") (except as otherwise specifically
provided herein), the Bank will pay to him $697.00 per month for a
continuous period of 120 months. Such continuous monthly installment
payments shall commence on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director ceases being a Director of the Bank
(except as otherwise provided herein). If the Director's service with the
Bank continues past the Director's Retirement Age, then the monthly benefit
payments shall be postponed and shall be increased on an annual basis by
five percent (5%) for each full Year of Service of the Director occurring
after the Director's Retirement Age and continuing until age 70 or such
time as the Director ceases serving as a Director, whichever shall occur
first (hereafter "the Increased Benefit"). For purposes of this Agreement,
the Director will receive credit for a year of service for each twelve
month period during which he completes 1,000 hours of service. If the
Director reaches age 70 and has not previously begun receiving his
retirement benefits under this Section 2, the monthly payments will begin
upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary
148
<PAGE>
before all remaining installment payments have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death
shall be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of such beneficiary designation, any
payments remaining unpaid at the Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted
in lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $697.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation,
any amount remaining unpaid at a Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
149
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-----------------------------
/s/ Billy R. Williams Title: President
- -------------------------- -----------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
--------------------------------------
Donald R. Belk
150
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $697.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $731.85
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $768.44
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $806.86
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $847.21
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $889.57
- ------------------------------------------------------------------------------------
</TABLE>
151
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of February, 1993, amended and restated October 21, 1993,
and amended and restated this the 8th day of September, 1997 (the "Agreement"),
by and between Mooresville Savings Bank, SSB, a mutual savings bank organized
and existing under the laws of the State of North Carolina (the "Bank"), and
Dale W. Brawley (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive previously served as a Director of the Bank; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Executive,
dated February 1, 1993; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB", and the Executive resigned as a
Director of the Bank; and
WHEREAS, the Executive continued to render valuable service to the Bank in
his capacity as an executive officer of the Bank, and it was the desire of the
Bank to have the benefit of his continued loyalty and service and also to assist
him in providing for the contingencies of retirement and death, and so effective
with the date of the Bank's charter conversion and the Executive's retirement as
a Director of the Bank, the parties amended and restated the Retirement Payment
Agreement on October 21, 1993; and
WHEREAS, the Executive previously agreed to defer receipt of compensation
and director's fees in the amount of $100.00 per month for a period of five (5)
years, which period commenced February 1, 1993; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Executive hereby elects and agrees to
--------- -----------------
continue to defer each month the receipt by him of compensation and director's
fees for sixty (60) months beginning February 1, 1993 and ending January 31,
1998. In exchange for such deferral, the Executive shall receive from the Bank
the benefits hereinafter described. Except as otherwise specifically provided
<PAGE>
herein, in order to receive benefits under this Agreement, the Executive must be
an Executive of the Bank as of his 65th birthday.
Section 2. Retirement Benefits. Upon the occurrence of the Executive's
--------- -------------------
65th birthday (except as otherwise specifically provided herein), the Bank will
pay to him $1,074 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Executive's 65th
birthday shall occur. In the event that the Executive should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Executive has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Executive, any payments remaining unpaid at the Executive's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Executive's estate.
Section 3. Pre-Retirement Death Benefits. Should the Executive die while
--------- -----------------------------
in the service of the Bank and prior to the occurrence of his 65th birthday, the
Bank will pay $1,074 per month for a continuous period of 120 months to the
Beneficiary or Beneficiaries of the Executive. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Executive died. In the event of the death of the
last living Beneficiary before all installment payments shall have been made,
the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of eight percent (8%) per
annum compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any payments remaining unpaid at the
Executive's death shall be commuted on the basis of eight percent (8%) per annum
compounded interest and shall be paid in a single sum to the Executive's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Executive terminates his service as an executive officer of the Bank, for
any reason other than death or the attainment of his 65th birthday, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Employment To Which the Executive is Entitled
------------------------------- -------------------------------------
<S> <C>
2 40%
3 60%
4 80%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Employment To Which the Executive is Entitled
------------------------------- -------------------------------------
<S> <C>
5 100%
</TABLE>
For purposes of this Section 4, the Executive shall receive credit for each
full year served since February 1, 1993, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Executive's 65th birthday or, if
earlier, death occurs.
Section 5. Extraordinary Transactions. In the event that the Executive's
--------- --------------------------
service as an executive officer of the Bank is terminated for any reason
coincident with or within twenty-four (24) months following a Change in Control
(as defined herein), then the Executive shall be entitled to the benefits set
forth in Section 2 and shall be 100% vested therein, and the Bank shall commence
to make monthly installment payments to the Executive as described therein on a
date to be determined by the Bank, but in no event later than the first day of
the sixth calendar month following the calendar month in which the Executive's
service as an executive officer of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Executive and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as salary, bonus, or otherwise. This Agreement shall not be deemed to constitute
a contract of employment between the parties hereto, nor shall any provision
hereof restrict the right of the Bank to discharge the Executive or restrict the
right of the Executive to terminate his employment. The rights accruing to the
Executive or any designated beneficiary under the provisions of the Agreement
shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain a
general creditor of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Executive's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Executive under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ ----------------------------------
Secretary
- ---------
Title: President
-------------------------------
[Corporate Seal]
/s/ Dale W. Brawley (Seal)
--------------------------------
DALE W. BRAWLEY
Executive
6
<PAGE>
APPENDIX A
ERISA Claims and Review Procedures.
- ----------------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security
Act of 1974 ("ERISA") (but not for any other purpose), the Bank is
hereby designated as the named fiduciary and Plan Administrator of
this unfunded, nonqualified deferred compensation plan. If any person
believes he is being denied any rights or benefits under the
Agreement, such person may file a claim in writing with the Plan
Administrator for resolution in accordance with the provisions of
Paragraph B of this procedure.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its
decision in writing. Such notification will be written in a manner
calculated to be understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Paragraph C of
this procedure.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if
applicable, within sixty (60) days after the date on which such denial
is considered to have occurred) the claimant (or his duly authorized
representative) may:
7
<PAGE>
(i) file a written request with the Plan Administrator for a
review of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain specific reasons for
the decision as well as specific references to pertinent provisions of
the Agreement. The decision on review will be made within sixty (60)
days after the request for review is received by the Plan
Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request
(such as an election by the Plan Administrator to hold a hearing), and
if written notice of such extension and circumstances is given to the
claimant within the initial sixty (60) day period.
8
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of March, 1993, and amended and restated this the 8th day
of September, 1997 (the "Agreement"), by and between Mooresville Savings Bank,
SSB, a mutual savings bank organized and existing under the laws of the State of
North Carolina (the "Bank"), and George W. Brawley, Jr. (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated March 1, 1993; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director previously agreed to defer receipt of director's fees
in the amount of $100.00 per month for a period of five (5) years, which period
commenced on March 1, 1993; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director hereby elects and agrees to
--------- -----------------
continue to defer each month the receipt by him of $100.00 in director's fees
for the sixty (60) months beginning March 1, 1993 and ending February 28, 1998.
In exchange for such deferral, the Director shall receive from the Bank the
benefits hereinafter described. Except as otherwise specifically provided
herein, in order to receive benefits under this Agreement, the Director must be
a Director of the Bank as of his 65th birthday.
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Director's
--------- -------------------
65th birthday (except as otherwise specifically provided herein), the Bank will
pay to the Director $333 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Director's 65th
birthday shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the Qualifying Date, the Bank
will pay $333 per month for a continuous period of 120 months to the Beneficiary
or Beneficiaries of the Director. The first such monthly installment payment
shall be made on a date to be determined by the Bank, but in no event later than
the first day of the sixth calendar month following the calendar month in which
the Director died. In the event of the death of the last living Beneficiary
before all installment payments shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank, for any reason
other than death or the attainment of his 65th birthday, he (or his Beneficiary)
shall be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for each
full year served since March 1, 1993, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's 65th birthday, or, if
earlier, death, occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and shall be deemed to be 100% vested therein. The Bank shall commence
to make monthly installment payments to the Director as described in Section 2
on a date to be determined by the Bank, but in no event later than the first day
of the sixth calendar month following the calendar month in which the Director's
service as a director of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank
or its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or
its holding company are sold or otherwise transferred to or are acquired by
any other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In addition,
the Bank agrees it shall not enter into any agreement providing for the merger
of the Bank with and into another business entity or the sale of more than a
majority of the Bank's assets to another business entity, person or group of
persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ Calvin E. Tyner
- ------------------------------ ------------------------------
, Secretary
- --------- Title: Chairman of the Board
---------------------------
[Corporate Seal]
/s/ Geroge W. Brawley, Jr. (Seal)
------------------------------
GEORGE W. BRAWLEY, JR.
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND GEORGE W. BRAWLEY, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and George W. Brawley,
Jr. (the "Director") previously entered into a Retirement Payment Agreement on
March 1, 1993, and amended and restated said agreement on September 8, 1997
through the execution of the Amended and Restated Retirement Payment Agreement
(the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted
in lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
65th birthday ("Retirement Age") (except as otherwise specifically provided
herein), the Bank will pay to him $333.00 per month for a continuous period
of 120 months. Such continuous monthly installment payments shall commence
on a date to be determined by the Bank, but in no event later than the
first day of the sixth calendar month following the calendar month in which
the Director ceases being a Director of the Bank (except as otherwise
provided herein). If the Director's service with the Bank continues past
the Director's Retirement Age, then the monthly benefit payments shall be
postponed and shall be increased on an annual basis by five percent (5%)
for each full Year of Service of the Director occurring after the
Director's Retirement Age and continuing until age 70 or such time as the
Director ceases serving as a Director, whichever shall occur first
(hereafter "the Increased Benefit"). For purposes of this Agreement, the
Director will receive credit for a year of service for each twelve month
period during which he completes 1,000 hours of service. If the Director
reaches age 70 and has not previously begun receiving his retirement
benefits under this Section 2, the monthly payments will begin upon the
Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all remaining
installment payments have been made, the balance of any
<PAGE>
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of such beneficiary designation, any
payments remaining unpaid at the Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted
in lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $333.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation,
any amount remaining unpaid at a Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused this Agreement to
be executed this the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Claude U. Voils, Jr.
------------------------------------
/s/ Billy R. Williams Title: Director
- --------------------------- -----------------------------------
Secretary
3
[Corporate Seal]
DIRECTOR:
/s/
----------------------------------------
George W. Brawley, Jr.
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- --------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $333.00
- --------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $349.65
- --------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $367.13
- --------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $385.49
- --------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $404.76
- --------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $425.00
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of March, 1993, and amended and restated this the 8th day
of September, 1997 (the "Agreement"), by and between Mooresville Savings Bank,
SSB, a mutual savings bank organized and existing under the laws of the State of
North Carolina (the "Bank"), and Claude U. Voils, Jr. (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated March 1, 1993; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director previously agreed to defer receipt of director's fees
in the amount of $300.00 per month for a period of five (5) years, which period
commenced on March 1, 1993; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director hereby elects and agrees to
--------- -----------------
continue to defer each month the receipt by him of $300.00 in director's fees
for the sixty (60) months beginning March 1, 1993 and ending February 28, 1998.
In exchange for such deferral, the Director shall receive from the Bank the
benefits hereinafter described. Except as otherwise specifically provided
herein, in order to receive benefits under this Agreement, the Director must be
a Director of the Bank as of March 1, 1998 (the "Qualifying Date").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Qualifying
--------- -------------------
Date (except as otherwise specifically provided herein), the Bank will pay to
the Director $673 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Qualifying Date shall
occur. In the event that the Director should die after becoming entitled to
receive such installment payments but before all such payments have been made,
the Bank will pay all remaining installment payments to such beneficiary or
beneficiaries as the Director has designated in writing to the Bank (the
"Beneficiaries"). In the event of the death of the last living Beneficiary
before all remaining installment payments have been made, the balance of any
payments which remain unpaid at such Beneficiary's death shall be commuted on
the basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the estate of the last Beneficiary to die. In the absence of
any such beneficiary designation, or if no Beneficiary survives the Director,
any payments remaining unpaid at the Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid in a
single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the Qualifying Date, the Bank
will pay $673 per month for a continuous period of 120 months to the Beneficiary
or Beneficiaries of the Director. The first such monthly installment payment
shall be made on a date to be determined by the Bank, but in no event later than
the first day of the sixth calendar month following the calendar month in which
the Director died. In the event of the death of the last living Beneficiary
before all installment payments shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank prior to the
Qualifying Date, for any reason other than death, he (or his Beneficiary) shall
be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
<TABLE>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since March 1, 1993, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Qualifying Date, or, if earlier, the
Director's death, occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Qualifying Date shall be deemed to be the date that such
Change in Control occurred. The Bank shall commence to make monthly installment
payments to the Director as described in Section 2 on a date to be determined by
the Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's service as a director of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ Geroge W. Brawley, Jr.
- ------------------------------ --------------------------------
, Secretary
- --------- Title: President
--------------------------------
[Corporate Seal]
/s/ Claude U. Voils, Jr. (Seal)
------------------------------
CLAUDE U. VOILS, JR.
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND CLAUDE U. VOILS, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and Claude U. Voils,
Jr. (the "Director") previously entered into a Retirement Payment Agreement on
March 1, 1993, and amended and restated said agreement on September 8, 1997
through the execution of the Amended and Restated Retirement Payment Agreement
(the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted
in lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Director's
---------- -------------------
65/th/ birthday ("Retirement Age") (except as otherwise specifically
provided herein), the Bank will pay to him $673.00 per month for a
continuous period of 120 months. Such continuous monthly installment
payments shall commence on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director ceases being a Director of the Bank
(except as otherwise provided herein). If the Director's service with the
Bank continues past the Director's Retirement Age, then the monthly benefit
payments shall be postponed and shall be increased on an annual basis by
five percent (5%) for each full Year of Service of the Director occurring
after the Director's Retirement Age and continuing until age 70 or such
time as the Director ceases serving as a Director, whichever shall occur
first (hereafter "the Increased Benefit"). For purposes of this Agreement,
the Director will receive credit for a year of service for each twelve
month period during which he completes 1,000 hours of service. If the
Director reaches age 70 and has not previously begun receiving his
retirement benefits under this Section 2, the monthly payments will begin
upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all remaining
installment payments have been made, the balance of any
<PAGE>
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of such beneficiary designation, any
payments remaining unpaid at the Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted
in lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $673.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation,
any amount remaining unpaid at a Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not
modified in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-----------------------------------
/s/ Billy R. Williams Title: President
- ----------------------------- -----------------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
-----------------------------------------
Claude U. Voils, Jr.
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- -------------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $673.00
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $706.65
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $741.98
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $779.08
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $818.04
- -------------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $858.94
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of August, 1993, amended and restated October 21, 1993,
and amended and restated this the 8th day of September 1997 (the "Agreement"),
by and between Mooresville Savings Bank, SSB, a mutual savings bank organized
and existing under the laws of the State of North Carolina (the "Bank"), and
Dale W. Brawley (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive previously served as a Director of the Bank; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Executive,
dated August 1, 1993; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB", and the Executive resigned as a
Director of the Bank; and
WHEREAS, the Executive continued to render valuable service to the Bank in
his capacity as an executive officer of the Bank, and it was the desire of the
Bank to have the benefit of his continued loyalty and service and also to assist
him in providing for the contingencies of retirement and death, and so effective
with the date of the Bank's charter conversion and the Executive's retirement as
a Director of the Bank, the parties amended and restated the Retirement Payment
Agreement on October 21, 1993; and
WHEREAS, the Executive previously agreed to defer receipt of compensation
and director's fees in the amount of $200.00 per month for a period of five (5)
years, which period commenced August 1, 1993; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Executive hereby elects and agrees to
--------- -----------------
continue to defer each month the receipt by him of compensation and director's
fees for sixty (60) months beginning August 1, 1993 and ending July 31, 1998.
In exchange for such deferral, the Executive shall receive from the Bank the
benefits hereinafter described. Except as otherwise specifically provided
herein,
<PAGE>
in order to receive benefits under this Agreement, the Executive must be an
Executive of the Bank as of his 55th birthday.
Section 2. Retirement Benefits. Upon the occurrence of the Executive's
--------- -------------------
55th birthday (except as otherwise specifically provided herein), the Bank will
pay to him $2,070 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Executive's 55th
birthday shall occur. In the event that the Executive should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Executive has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Executive, any payments remaining unpaid at the Executive's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Executive's estate.
Section 3. Pre-Retirement Death Benefits. Should the Executive die while
--------- -----------------------------
in the service of the Bank and prior to the occurrence of his 55th birthday, the
Bank will pay $2,070 per month for a continuous period of 120 months to the
Beneficiary or Beneficiaries of the Executive. The first such monthly
installment payment shall be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Executive died. In the event of the death of the
last living Beneficiary before all installment payments shall have been made,
the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of eight percent (8%) per
annum compounded interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any payments remaining unpaid at the
Executive's death shall be commuted on the basis of eight percent (8%) per annum
compounded interest and shall be paid in a single sum to the Executive's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Executive terminates his service as an executive officer of the Bank, for
any reason other than death or the attainment of his 55th birthday, he (or his
Beneficiary) shall be entitled to a percentage of the benefits set forth in
Section 2 of this Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Employment To Which the Executive is Entitled
------------------------------- -------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Executive shall receive credit for
each full year served since August 1, 1993, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by
the Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Executive's 55th birthday or, if
earlier, death occurs.
Section 5. Extraordinary Transactions. In the event that the
--------- --------------------------
Executive's service as an executive officer of the Bank is terminated for any
reason coincident with or within twenty-four (24) months following a Change in
Control (as defined herein), then the Executive shall be entitled to the
benefits set forth in Section 2 and shall be 100% vested therein, and the Bank
shall commence to make monthly installment payments to the Executive as
described therein on a date to be determined by the Bank, but in no event later
than the first day of the sixth calendar month following the calendar month in
which the Executive's service as an executive officer of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Executive and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as salary, bonus, or otherwise. This Agreement shall not be deemed to constitute
a contract of employment between the parties hereto, nor shall any provision
hereof restrict the right of the Bank to discharge the Executive or restrict the
right of the Executive to terminate his employment. The rights accruing to the
Executive or any designated beneficiary under the provisions of the Agreement
shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain a
general creditor of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Executive's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Executive under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams
- ------------------------------ By: /s/ George W. Brawley, Jr.
Secretary ---------------------------------
- ---------- President
Title: ---------------------------------
[Corporate Seal]
/s/ Dale W. Brawley (Seal)
------------------------------
DALE W. BRAWLEY
Executive
6
<PAGE>
APPENDIX A
ERISA Claims and Review Procedures.
- ----------------------------------
A. General. For the purposes of implementing a claims procedure under this
-------
Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby
designated as the named fiduciary and Plan Administrator of this unfunded,
nonqualified deferred compensation plan. If any person believes he is being
denied any rights or benefits under the Agreement, such person may file a
claim in writing with the Plan Administrator for resolution in accordance
with the provisions of Paragraph B of this procedure.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on which
the Plan Administrator based its denial,
(iii) a description of any additional material or information necessary for
the claimant to perfect such claim and an explanation of why such
material or information is necessary, and
(iv) information as to the steps to be taken if the claimant wishes to
submit a request for review.
Such notification will be given within ninety (90) days after the claim is
received by the Plan Administrator (or within 180 days, if special
circumstances require an extension of time for processing the claim, and if
written notice of such extension and circumstances is given to the claimant
within the initial ninety (90) day period). If such notification is not
given within such period, the claim will be considered denied as of the
last day of such period and the claimant may request a review of his claim
in accordance with Paragraph C of this procedure.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable,
within sixty (60) days after the date on which such denial is considered to
have occurred) the claimant (or his duly authorized representative) may:
7
<PAGE>
(i) file a written request with the Plan Administrator for a review of
his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain specific reasons for the
decision as well as specific references to pertinent provisions of the
Agreement. The decision on review will be made within sixty (60) days
after the request for review is received by the Plan Administrator (or
within one hundred twenty (120) days, if special circumstances require
an extension of time for processing the request (such as an election by
the Plan Administrator to hold a hearing), and if written notice of
such extension and circumstances is given to the claimant within the
initial sixty (60) day period.
8
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of August, 1993, and amended and restated this the 8th
day of September 1997 (the "Agreement"), by and between Mooresville Savings
Bank, SSB, a mutual savings bank organized and existing under the laws of the
State of North Carolina (the "Bank"), and George W. Brawley, Jr. (the
"Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated August 1, 1993; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director previously agreed to defer receipt of director's fees
in the amount of $200.00 per month for a period of five (5) years, which period
commenced on August 1, 1993; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director hereby elects and agrees to
--------- -----------------
continue to defer each month the receipt by him of $200.00 in director's fees
for the sixty (60) months beginning August 1, 1993 and ending July 31, 1998. In
exchange for such deferral, the Director shall receive from the Bank the
benefits hereinafter described. Except as otherwise specifically provided
herein, in order to receive benefits under this Agreement, the Director must be
a Director of the Bank as of August 1, 1998 (the "Qualifying Date").
<PAGE>
Section 2. Retirement Benefits. Upon the occurrence of the Qualifying
--------- -------------------
Date (except as otherwise specifically provided herein), the Bank will pay to
the Director $671 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Qualifying Date shall
occur. In the event that the Director should die after becoming entitled to
receive such installment payments but before all such payments have been made,
the Bank will pay all remaining installment payments to such beneficiary or
beneficiaries as the Director has designated in writing to the Bank (the
"Beneficiaries"). In the event of the death of the last living Beneficiary
before all remaining installment payments have been made, the balance of any
payments which remain unpaid at such Beneficiary's death shall be commuted on
the basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the estate of the last Beneficiary to die. In the absence of
any such beneficiary designation, or if no Beneficiary survives the Director,
any payments remaining unpaid at the Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid in a
single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the Qualifying Date, the Bank
will pay $671 per month for a continuous period of 120 months to the Beneficiary
or Beneficiaries of the Director. The first such monthly installment payment
shall be made on a date to be determined by the Bank, but in no event later than
the first day of the sixth calendar month following the calendar month in which
the Director died. In the event of the death of the last living Beneficiary
before all installment payments shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank prior to the
Qualifying Date for any reason other than death, he (or his Beneficiary) shall
be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
2
<PAGE>
For purposes of this Section 4, the Director shall receive credit for each
full year served since August 1, 1993, the original effective date of this
Agreement.
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Qualifying Date, or, if earlier, the
Director's death, occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Qualifying Date shall be deemed to be the date that such
Change in Control occurred. The Bank shall commence to make monthly installment
payments to the Director as described in Section 2 on a date to be determined by
the Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's service as a director of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
3
<PAGE>
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
4
<PAGE>
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Director be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
5
<PAGE>
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ Calvin E. Tyner
- ------------------------------ --------------------------------------
, Secretary
- --------- Title: Chairman of the Board
-----------------------------------
[Corporate Seal]
/s/ George W. Brawley, Jr. (Seal)
------------------------------
GEORGE W. BRAWLEY, JR.
Director
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND GEORGE W. BRAWLEY, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and George W. Brawley,
Jr. (the "Director") previously entered into a Retirement Payment Agreement on
August 1, 1993, and amended and restated said agreement on September 8, 1997
through the execution of the Amended and Restated Retirement Payment Agreement
(the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 8 of the Agreement, the Bank and the Director
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Retirement Benefits. Upon the occurrence of the Qualifying
---------- -------------------
Date (except as otherwise specifically provided herein), the Bank will pay
to him $671.00 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence on a date to be
determined by the Bank, but in no event later than the first day of the
sixth calendar month following the calendar month in which the Qualifying
Date shall occur (except as otherwise provided herein). If the Director's
service with the Bank continues past the Qualifying Date, then the monthly
benefit payments shall be postponed and shall be increased on an annual
basis by five percent (5%) for each full Year of Service of the Director
occurring after the Director's Retirement Age and continuing until age 70
or such time as the Director ceases serving as a Director, whichever shall
occur first (hereafter "the Increased Benefit"). For purposes of this
Agreement, the Director will receive credit for a year of service for each
twelve month period during which he completes 1,000 hours of service. If
the Director reaches age 70 and has not previously begun receiving his
retirement benefits under this Section 2, the monthly payments will begin
upon the Director's attainment of age 70 in any event.
In the event that a Director should die after becoming entitled to
receive such installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Director to the Bank in writing (the "Beneficiaries"). In the event of
the death of the Director's last living Beneficiary before all remaining
installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be
<PAGE>
commuted on the basis of eight percent (8%) per annum compounded interest
and shall be paid in a single sum to the estate of the last Beneficiary to
die. In the absence of such beneficiary designation, any payments remaining
unpaid at the Director's death shall be commuted on the basis of eight
percent (8%) per annum compounded interest and shall be paid in a single
sum to the Director's estate.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted in
lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Director die while
---------- -----------------------------
serving as a director of the Bank, and prior to his receiving any benefits
under Section 2, the Bank will pay $671.00 per month (or the Increased
Benefit if such applies) for a continuous period of 120 months to the
Director's Beneficiary or Beneficiaries. The first monthly installment
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Director died.
In the event of the death of the Director's last living Beneficiary
before all the unpaid payment shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of eight percent (8%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation,
any amount remaining unpaid at a Director's death shall be commuted on the
basis of eight percent (8%) per annum compounded interest and shall be paid
in a single sum to the Director's estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Director if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Claude U. Voils, Jr.
------------------------------
/s/ Billy R. Williams Title: Director
- --------------------------- ------------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
-------------------------------------
George W. Brawley, Jr.
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Qualifying Date - August 1, 1998 $671.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $704.55
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $739.78
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $776.77
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $815.60
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $856.38
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
RETIREMENT PAYMENT AGREEMENT
THIS AMENDED AND RESTATED RETIREMENT PAYMENT AGREEMENT, originally entered
into as of the 1st day of June, 1994, and amended and restated this the 8th day
of September, 1997 (the "Agreement"), by and between Mooresville Savings Bank,
SSB, a mutual savings bank organized and existing under the laws of the State of
North Carolina (the "Bank"), and Jack G. Lawler (the "Director").
W I T N E S S E T H:
WHEREAS, the Director is serving as a Director of the Bank as of the date
hereof; and
WHEREAS, in that capacity, in order to reward his continued loyalty and
service and also to assist him in providing for the contingencies of retirement
and death, the Bank entered a Retirement Payment Agreement with the Director,
dated June 1, 1994; and
WHEREAS, the Director is rendering valuable service to the Bank and it is
the desire of the Bank to have the benefit of his continued loyalty and service
and also to assist him in providing for the contingencies of retirement and
death; and
WHEREAS, the Director has previously agreed to defer receipt of director's
fees in the amount of $500.00 per month for a period of five (5) years, which
period commenced on June 1, 1994; and
WHEREAS, the parties desire to amend the Agreement and to restate the
Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. The Director hereby elects and agrees to
--------- -----------------
continue to defer each month the receipt by him of $500.00 in director's fees
for the sixty (60) months beginning June 1, 1994 and ending May 31, 1999. In
exchange for such deferral, the Director shall receive from the Bank the
benefits hereinafter described. Except as otherwise specifically provided
herein, in order to receive benefits under this Agreement, the Director must be
a Director of the Bank as of June 1, 1999 (the "Qualifying Date").
Section 2. Retirement Benefits. Upon the occurrence of the Qualifying
--------- -------------------
Date, (except as otherwise specifically provided herein), the Bank will pay to
the Director $882 per month for a continuous period of 120 months. Such
continuous monthly installment payments shall commence
<PAGE>
on a date to be determined by the Bank, but in no event later than the first day
of the sixth calendar month following the calendar month in which the Qualifying
Date shall occur. In the event that the Director should die after becoming
entitled to receive such installment payments but before all such payments have
been made, the Bank will pay all remaining installment payments to such
beneficiary or beneficiaries as the Director has designated in writing to the
Bank (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 3. Pre-Retirement Death Benefits. Should the Director die while
--------- -----------------------------
serving as a director of the Bank and prior to the Qualifying Date, the Bank
will pay $882 per month for a continuous period of 120 months to the Beneficiary
or Beneficiaries of the Director. The first such monthly installment payment
shall be made on a date to be determined by the Bank, but in no event later than
the first day of the sixth calendar month following the calendar month in which
the Director died. In the event of the death of the last living Beneficiary
before all installment payments shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of any such beneficiary designation, or if no Beneficiary survives
the Director, any payments remaining unpaid at the Director's death shall be
commuted on the basis of eight percent (8%) per annum compounded interest and
shall be paid in a single sum to the Director's estate.
Section 4. Termination Benefits. Except as provided in Section 5 hereof,
--------- --------------------
if the Director terminates his service as a director of the Bank prior to the
Qualifying Date for any reason other than death, he (or his Beneficiary) shall
be entitled to a percentage of the benefits set forth in Section 2 of this
Agreement, as determined by the following table:
<TABLE>
<CAPTION>
Percentage of Retirement Benefits
Full Number of Years Served Stated in Section 2 of this Agreement
Until Termination of Directorship To Which the Director is Entitled
--------------------------------- ------------------------------------
<S> <C>
2 40%
3 60%
4 80%
5 100%
</TABLE>
For purposes of this Section 4, the Director shall receive credit for
each full year served since June 1, 1994, the original effective date of this
Agreement.
2
<PAGE>
Payment of such benefits shall commence on a date to be determined by the
Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Qualifying Date or, if earlier, the
Director's death, occurs.
Section 5. Extraordinary Transactions. In the event that the Director's
--------- --------------------------
service as a director of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Director shall be entitled to the benefits set forth in
Section 2 and the Qualifying Date shall be deemed to be the date that such
Change in Control occurred. The Bank shall commence to make monthly installment
payments to the Director as described in Section 2 on a date to be determined by
the Bank, but in no event later than the first day of the sixth calendar month
following the calendar month in which the Director's service as a director of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where
3
<PAGE>
neither the Bank nor its holding company, respectively, is the surviving
corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, the Director and the Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
Section 6. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Director, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Director or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 7. Director's Rights. This Agreement creates no right in the
--------- -----------------
Director to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Director or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Director whether as
fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Director or
restrict the right of the Director to terminate his directorship. The rights
accruing to the Director or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 8. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by both of the parties
hereto.
Section 9. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Director, the Director's
Beneficiaries, and any successor in interest shall be and remain a general
creditor of the Bank with respect to any benefits due under this Agreement, in
the same manner as any other creditor having a general claim for matured and
unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the
4
<PAGE>
extent, nature, and method of such funding. Should the Bank elect to fund this
Agreement, in whole or in part, through the purchase of life insurance,
certificates of deposit, mutual funds, disability policies or annuities, the
Bank reserves the absolute right, in its sole discretion, to terminate such
funding at any time, in whole or in part. At no time shall the Director be
deemed to have any lien upon or right, title or interest in or to any specific
funding investment or to any assets of the Bank.
Section 10. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Director, the Director's designated Beneficiary or any other
person.
Section 11. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 12. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations hereunder without the Director's prior written consent. In
addition, the Bank agrees it shall not enter into any agreement providing for
the merger of the Bank with and into another business entity or the sale of more
than a majority of the Bank's assets to another business entity, person or group
of persons that does not specifically provide that such successor by merger or
purchaser(s) of assets shall assume and satisfy each and every obligation of the
Bank to the Director under this Agreement. In the case of an asset sale, such
assumption shall not relieve the Bank of its liability to fulfill such
obligations.
Section 13. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Director to participate in or be covered
by any qualified or non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of the
Bank's existing or future compensation structure.
Section 14. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 15. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 16. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 17. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
5
<PAGE>
IN WITNESS THEREOF, the Bank has caused this Amended and Restated
Retirement Payment Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Director has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest:
/s/ Billy R. Williams By: /s/ George W. Brawley, Jr.
- ------------------------------ -----------------------------------
, Secretary
- --------- Title: President
--------------------------------
[Corporate Seal]
/s/ Jack G. Lawler (Seal)
------------------------------
JACK G. LAWLER
Director
6
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of September, 1984 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Dale W. Brawley (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on September 1, 1984; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to his Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the
--------- --------------------------
Executive's service as an Executive of the Bank is terminated for any reason
coincident with or within twenty-four (24) months following a "Change in
Control" (as defined herein), then the Executive shall be entitled to the
benefits set forth in Section 1 as if the Executive had remained employed until
Retirement Age, and the Retirement Age shall be deemed to occur on the date that
such Change in Control occurred. The Bank shall commence to make monthly
installment payments to the Executive as described in Section 1 on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's service as
an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of his Retirement Age, or his death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a
review of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
----------------------------------
/s/ Billy R. Williams Title: President
- ------------------------------ ----------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Dale W. Brawley
-----------------------------------------
Dale W. Brawley
6
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of September, 1984 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and George W. Brawley (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on September 1, 1984; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to his Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the
--------- --------------------------
Executive's service as an Executive of the Bank is terminated for any reason
coincident with or within twenty-four (24) months following a "Change in
Control" (as defined herein), then the Executive shall be entitled to the
benefits set forth in Section 1 as if the Executive had remained employed until
Retirement Age, and the Retirement Age shall be deemed to occur on the date that
such Change in Control occurred. The Bank shall commence to make monthly
installment payments to the Executive as described in Section 1 on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's service as
an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of his Retirement Age, or his death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Dale W. Brawley
/s/ Billy R. Williams ------------------------------
- ----------------------------- Title: Executive Vice President
Secretary ------------------------------
[Corporate Seal] EXECUTIVE:
/s/ George W. Brawley, Jr.
-------------------------------------
George W. Brawley, Jr.
6
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND GEORGE W. BRAWLEY, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and George W. Brawley,
Jr. (the "Executive") previously entered into a Salary Continuation Agreement on
September 1, 1984, and amended and restated said agreement on September 17, 1997
through the execution of the Amended and Restated Supplemental Income Agreement
(the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 6 of the Agreement, the Bank and the Executive
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 1 is deleted in its entirety and a new Section 1 is inserted in
lieu thereof to read as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
---------- -------------------
herein, upon the occurrence of the Executive's 65/th/ birthday (the
"Retirement Age"), if the Executive is employed by the Bank at that time,
the Bank will pay the Executive $833.33 per month for a continuous period
of sixty (60) months. The first monthly payment will be made on a date to
be determined by the Bank, but in no event later than the first day of the
first calendar month following the calendar month in which the Executive
retires from service with the Bank (except as otherwise provided herein).
If the Executive's service with the Bank continues past the
Executive's Retirement Age, then the annual benefit payments shall be
postponed and shall be increased on an annual basis by an additional five
percent (5%) for each full Year of Service of the Executive occurring after
the Executive's Retirement Age and continuing until age 70 or such time as
the Executive ceases serving as an Executive, whichever shall occur first
(hereafter "the Increased Benefit"). For purposes of this Agreement, the
Executive will receive credit for a Year of Service for each twelve month
period during which he completes 1,000 hours of service. If the Executive
reaches age 70 and has not previously begun receiving his retirement
benefits under this Section 2, the monthly payments will begin upon the
Executive's attainment of age 70 in any event.
In the event that an Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of
such payments have been made, the Bank will pay all remaining payments to
such beneficiaries as
<PAGE>
are designated by the Executive to the Bank in writing (the
"Beneficiaries"). In the event of the death of the Executive's last living
Beneficiary before all remaining installment payments have been made, the
balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of seven percent (7%)
per annum compounded interest and shall be paid in a single sum to the
estate of the last Beneficiary to die. In the absence of such beneficiary
designation, of if no Beneficiary survives the Executive, any payments
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the Executive's estate.
2. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
---------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay
$833.33 per month for a continuous period of sixty (60) months to the
Executive's Beneficiary or Beneficiaries. Such annual payment shall be
increased five percent (5%) for each full Year of Service of the Executive
occurring after the Executive's Retirement Age (hereafter "the Increased
Benefit"). The first monthly payment shall be made on a date to be
determined by the Bank, but in no event later than the first day of the
first calendar month following the calendar month in which the Executive
died.
In the event of the death of the Executive's last living Beneficiary
before all annual payments shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any amount remaining unpaid at an
Executive's death shall be commuted on the basis of seven percent (7%) per
annum compounded interest and shall be paid in a single sum to the
Executive's estate.
3. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Executive if he continues service with the Bank after
reaching the Retirement Age.
4. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
2
<PAGE>
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Dale W. Brawley
----------------------------------
/s/ Billy R. Williams Title: Executive Vice President
- ------------------------ ----------------------------------
Secretary
[Corporate Seal]
EXECUTIVE:
/s/
-----------------------------------------
George W. Brawley, Jr.
3
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Date of Benefit Amount of Increased Monthly Benefit
- ------------------------------------------------------------------------------------
<S> <C>
Retirement Age -- Age 65 $ 833.33
- ------------------------------------------------------------------------------------
Retire on or after 1/1/00 but before 1/1/01 $ 875.00
- ------------------------------------------------------------------------------------
Retire on or after 1/1/01 but before 1/1/02 $ 918.75
- ------------------------------------------------------------------------------------
Retire on or after 1/1/02 but before 1/1/03 $ 964.68
- ------------------------------------------------------------------------------------
Retire on or after 1/1/03 but before 1/1/04 $1,012.92
- ------------------------------------------------------------------------------------
Retire on or after 1/1/04 but before 1/1/05 $1,063.56
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of September, 1984 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Patricia B. Clontz (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on September 1, 1984; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of her continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate her employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $416.67 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $416.67
per month for a continuous period of sixty (60) months to her Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Executive shall be entitled to the benefits set forth in
Section 1 as if the Executive had remained employed until Retirement Age, and
the Retirement Age shall be deemed to occur on the date that such Change in
Control occurred. The Bank shall commence to make monthly installment payments
to the Executive as described in Section 1 on a date to be determined by the
Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Executive's service as an Executive of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate her employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of her Retirement Age, or her death.
Section 7. Financing of Benefits. All benefits under this Agreement
--------- ---------------------
shall be provided out of the general assets of the Bank at the time such
benefits are to be paid. The parties agree that the Bank is under no obligation
to set aside funds in advance of the time for payment hereunder, or to otherwise
provide security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either
fund the obligations undertaken by this Agreement or to refrain from funding the
same and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in
---------- ---------------------------------------------------
Interest. This Agreement and the Bank's obligations hereunder shall be binding
- --------
upon its successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set her hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
---------------------------------
/s/ Billy R. Williams Title: President
- --------------------------------- ---------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Patricia B. Clontz
---------------------------------------
Patricia B. Clontz
6
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of September, 1984 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Richard E. Woods (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on September 1, 1984; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to his Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the
--------- --------------------------
Executive's service as an Executive of the Bank is terminated for any reason
coincident with or within twenty-four (24) months following a "Change in
Control" (as defined herein), then the Executive shall be entitled to the
benefits set forth in Section 1 as if the Executive had remained employed until
Retirement Age, and the Retirement Age shall be deemed to occur on the date that
such Change in Control occurred. The Bank shall commence to make monthly
installment payments to the Executive as described in Section 1 on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's service as
an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of his Retirement Age, or his death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-----------------------------------
/s/ Billy R. Williams Title: President
- ------------------------------ -----------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Richard E. Woods
-------------------------------------------
Richard E. Woods
6
<PAGE>
AMENDED AND RESTATED
SUPPLEMENTAL INCOME AGREEMENT
THIS AMENDED AND RESTATED SUPPLEMENTAL INCOME AGREEMENT, made and entered
into as of the 1st of November, 1993 and amended and restated this 17th day of
----
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
- ---------
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Dale W. Brawley (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been an employee of the Bank since August 18,
1980, and is a member of a select group of management employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Supplemental Income Agreement with the
Executive on November 1, 1993; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. During the period of the Executive's
--------- -----------------
employment by the Bank, the Executive shall defer monthly a portion of his cash
compensation otherwise receivable by the Executive from the Bank.
Section 2. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday or, if earlier,
upon the Executive's actual retirement after age 60 (the "Retirement Age"), the
Bank will pay the Executive $15,000 annually for a continuous period of fifteen
(15) years. The first annual payment will be made on a date to be determined by
the Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Retirement Age shall occur. Such
annual payment shall be increased five percent (5%) for each full Year of
Service of the Executive occurring after November 1, 1994, except that there
will be no increases in benefits for more than ten (10) years of additional
service. For purposes of this Agreement, the Executive will receive credit for a
Year of Service for each twelve month period during which he completes 1,000
hours of service. The first twelve month
<PAGE>
period shall begin November 1, 1994, and subsequent periods shall begin on the
anniversary of that date.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or, if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the Executive's estate. Any amount payable to an Executive or his
Beneficiary under this Section 2 shall be reduced by any disability payments
already paid to such Executive under Section 4 of this Agreement.
Section 3. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age, the Bank will pay $15,000 annually for a continuous period of
fifteen (15) years to his Beneficiary or Beneficiaries. Such annual payment
shall be increased five percent (5%) for each full Year of Service of the
Executive occurring after November 1, 1994, except that there will be no
increases in benefits for more than ten (10) years of additional service. The
first annual payment will be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Executive's death occurred. In the event of the
death of the last living Beneficiary before all annual installment payments have
been made, the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of seven percent (7%) per
annum compound interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any amount remaining unpaid at the
Executive's death shall be commuted on the basis of seven percent (7%) per annum
compound interest and shall be paid in a single sum to the Executive's estate.
Any amount payable to an Executive's Beneficiary under this Section 3 shall be
reduced by any disability payments already paid to such Executive under Section
4 of this Agreement.
Section 4. Disability Benefits. If the Executive shall become disabled
---------- --------------------
(as defined herein) prior to Retirement Age, while continuing to serve as an
Executive of the Bank, the Bank shall commence to pay to the Executive the same
benefit that would have been payable if the Executive's death occurred on the
date of disability. The first annual payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Executive is determined
to be disabled.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Section 3 but before any or all
remaining installment payments have been made, the Bank will pay all remaining
installment payments to the Executive's Beneficiary or
2
<PAGE>
Beneficiaries. In the event of the death of the Executive's last living
Beneficiary before all installment payments have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of such beneficiary designation, or if no Beneficiary survives the
Executive, any payments remaining unpaid at the Executive's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the Executive's estate.
The Executive shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a continuous
period of six (6) months or more. During such six (6) month period, the
Executive must be under the regular care of a medical doctor (M.D.) or
osteopathic physician (D.O.) licensed in the State of North Carolina. For the
purpose of this section, or any other section relating to disability, if there
is any dispute between the parties as to the Executive's physical or mental
disability, such dispute shall be settled by the opinion of a medical doctor or
osteopathic physician licensed in the State of North Carolina who is selected by
the mutual consent of the Executive and the Bank or their representatives. If
the parties cannot agree within ten (10) days after a written request for the
designation of an examining physician is made by either party to the other, then
the examining physician shall be designated by the President of the Iredell
County Medical Society then serving. Certification of that physician as to the
matter in dispute shall be final and binding upon the Executive, his
Beneficiaries, the Bank, and all parties claiming any right or interest under
this Agreement through them.
Section 5. Termination of Employment. Should the Executive's employment
--------- -------------------------
by the Bank terminate other than by reason of death or retirement upon the
occurrence of the Retirement Age, the Executive or his Beneficiary (or
Beneficiaries), as applicable, shall be entitled upon the occurrence of the
earlier of the Retirement Age and the Executive's death to receive the
percentage of the annual installment payment stated in Section 2 of this
Agreement determined under the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUAL INSTALLMENT
PAYMENT STATED IN SECTION 2 OF THIS
IF EXECUTIVE'S TERMINATION OCCURS AGREEMENT TO WHICH EXECUTIVE IS
ON OR AFTER ENTITLED
--------------------------------- -----------------------------------
<S> <C>
March 31, 1994 20%
March 31, 1995 40%
March 31, 1996 60%
March 31, 1997 80%
March 31, 1998 100%
</TABLE>
Such annual payments shall commence on a date to be determined by the Bank,
but in no event later than the first day of the first calendar month following
the calendar month in which the Retirement Age or the Executive's death, as
applicable, occurs.
Section 6. Extraordinary Transactions. In the event that an Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24)
3
<PAGE>
months following a "Change in Control" (as defined herein), then the Executive
shall be entitled to the maximum benefits set forth in Section 2 as if the
Executive had remained employed until age 65, and the Retirement Age shall be
deemed to occur on the date that such Change in Control occurred. The Bank shall
commence to make annual installment payments to the Executive as described in
Section 2 on a date to be determined by the Bank, but in no event later than the
first day of the first calendar month following the calendar month in which the
Executive's service as an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank
or its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or
its holding company are sold or otherwise transferred to or are acquired by
any other entity or group.
4
<PAGE>
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 7. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 8. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive or
restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 9. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto.
Section 10. Financing of Benefits. All benefits under this Agreement
---------- ---------------------
shall be provided out of the general assets of the Bank at the time such
benefits are to be paid. The parties agree that the Bank is under no obligation
to set aside funds in advance of the time for payment hereunder, or to otherwise
provide security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
5
<PAGE>
Section 11. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 12. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 13. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
Section 14. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 15. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 16. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 17. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 18. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 19. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this
6
<PAGE>
unfunded, nonqualified deferred compensation plan. If any person believes he is
being denied any rights or benefits under the Agreement, such person may file a
claim in writing with the Plan Administrator for resolution in accordance with
the provisions of Paragraph B of this Section 19.
B. Claims Procedure. If any claim filed hereunder is wholly or
----------------
partially denied, the Plan Administrator will notify the claimant of its
decision in writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 19.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain specific reasons for
the decision as well as specific references to pertinent provisions
of the Agreement. The decision on review will be made within sixty
(60) days after the request for review is received by the Plan
Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension
7
<PAGE>
of time for processing the request (such as an election by the Plan
Administrator to hold a hearing), and if written notice of such
extension and circumstances is given to the claimant within the
initial sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
------------------------------
Title: President
/s/ Billy R. Williams -----------------------------
- ---------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Dale W. Brawley
-----------------------------------
Dale W. Brawley
8
<PAGE>
AMENDED AND RESTATED
SUPPLEMENTAL INCOME AGREEMENT
THIS AMENDED AND RESTATED SUPPLEMENTAL INCOME AGREEMENT, made and entered
into as of the 1st of November, 1993 and amended and restated this 17th day of
----
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
- ---------
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and George W. Brawley, Jr. (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been an employee of the Bank since August 9,
1957, and is a member of a select group of management employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Supplemental Income Agreement with the
Executive on November 1, 1993; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. During the period of the Executive's
--------- -----------------
employment by the Bank, the Executive shall defer monthly a portion of his cash
compensation otherwise receivable by the Executive from the Bank.
Section 2. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, on March 31, 1998,or if earlier, upon the Executive's actual retirement
after age 60 (the "Retirement Age"), the Bank will pay the Executive $25,000
annually for a continuous period of fifteen (15) years. The first annual payment
will be made on a date to be determined by the Bank, but in no event later than
the first day of the first calendar month following the calendar month in which
the Retirement Age shall occur. Such annual payment shall be increased five
percent (5%) for each full Year of Service of the Executive occurring after
November 1, 1994, except that there will be no increases in benefits after March
31, 1998. For purposes of this Agreement, the Executive will receive credit for
a Year of Service for each twelve month period during which he completes 1,000
hours of service. The first
<PAGE>
twelve month period shall begin November 1, 1994, and subsequent periods shall
begin on the anniversary of that date.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or, if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the Executive's estate. Any amount payable to an Executive or his
Beneficiary under this Section 2 shall be reduced by any disability payments
already paid to such Executive under Section 4 of this Agreement.
Section 3. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age, the Bank will pay $25,000 annually for a continuous period of
fifteen (15) years to his Beneficiary or Beneficiaries. Such annual payment
shall be increased five percent (5%) for each full Year of Service of the
Executive occurring after November 1, 1994, except that there will be no
increases in benefits after March 31, 1998. The first annual payment will be
made on a date to be determined by the Bank, but in no event later than the
first day of the sixth calendar month following the calendar month in which the
Executive's death occurred. In the event of the death of the last living
Beneficiary before all annual installment payments have been made, the balance
of any payments which remain unpaid at the time of such Beneficiary's death
shall be commuted on the basis of seven percent (7%) per annum compound interest
and shall be paid in a single sum to the estate of the last Beneficiary to die.
In the absence of any such beneficiary designation, or if no Beneficiary
survives the Executive, any amount remaining unpaid at the Executive's death
shall be commuted on the basis of seven percent (7%) per annum compound interest
and shall be paid in a single sum to the Executive's estate. Any amount payable
to an Executive's Beneficiary under this Section 3 shall be reduced by any
disability payments already paid to such Executive under Section 4 of this
Agreement.
Section 4. Disability Benefits. If the Executive shall become disabled
---------- --------------------
(as defined herein) prior to Retirement Age, while continuing to serve as an
Executive of the Bank, the Bank shall commence to pay to the Executive the same
benefit that would have been payable if the Executive's death occurred on the
date of disability. The first annual payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Executive is determined
to be disabled.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Section 3 but before any or all
remaining installment payments have been made, the Bank will pay all remaining
installment payments to the Executive's Beneficiary
2
<PAGE>
or Beneficiaries. In the event of the death of the Executive's last living
Beneficiary before all installment payments have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of such beneficiary designation, or if no Beneficiary survives the
Executive, any payments remaining unpaid at the Executive's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the Executive's estate.
The Executive shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a continuous
period of six (6) months or more. During such six (6) month period, the
Executive must be under the regular care of a medical doctor (M.D.) or
osteopathic physician (D.O.) licensed in the State of North Carolina. For the
purpose of this section, or any other section relating to disability, if there
is any dispute between the parties as to the Executive's physical or mental
disability, such dispute shall be settled by the opinion of a medical doctor or
osteopathic physician licensed in the State of North Carolina who is selected by
the mutual consent of the Executive and the Bank or their representatives. If
the parties cannot agree within ten (10) days after a written request for the
designation of an examining physician is made by either party to the other, then
the examining physician shall be designated by the President of the Iredell
County Medical Society then serving. Certification of that physician as to the
matter in dispute shall be final and binding upon the Executive, his
Beneficiaries, the Bank, and all parties claiming any right or interest under
this Agreement through them.
Section 5. Termination of Employment. Should the Executive's employment
--------- -------------------------
by the Bank terminate other than by reason of death or retirement upon the
occurrence of the Retirement Age, the Executive or his Beneficiary (or
Beneficiaries), as applicable, shall be entitled upon the occurrence of the
earlier of the Retirement Age and the Executive's death to receive the
percentage of the annual installment payment stated in Section 2 of this
Agreement determined under the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUAL INSTALLMENT
PAYMENT STATED IN SECTION 2 OF THIS
IF EXECUTIVE'S TERMINATION OCCURS AGREEMENT TO WHICH EXECUTIVE IS
ON OR AFTER ENTITLED
--------------------------------- -----------------------------------
<S> <C>
March 31, 1994 20%
March 31, 1995 40%
March 31, 1996 60%
March 31, 1997 80%
March 31, 1998 100%
</TABLE>
Such annual payments shall commence on a date to be determined by the Bank,
but in no event later than the first day of the first calendar month following
the calendar month in which the Retirement Age or the Executive's death, as
applicable, occurs.
Section 6. Extraordinary Transactions. In the event that an Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24)
3
<PAGE>
months following a "Change in Control" (as defined herein), then the Executive
shall be entitled to the maximum benefits set forth in Section 2 as if the
Executive had remained employed until March 31, 1998, and the Retirement Age
shall be deemed to occur on the date that such Change in Control occurred. The
Bank shall commence to make annual installment payments to the Executive as
described in Section 2 on a date to be determined by the Bank, but in no event
later than the first day of the first calendar month following the calendar
month in which the Executive's service as an Executive of the Bank is
terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank
or its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or
its holding company are sold or otherwise transferred to or are acquired by
any other entity or group.
4
<PAGE>
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 7. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 8. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive or
restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 9. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto.
Section 10. Financing of Benefits. All benefits under this Agreement
---------- ---------------------
shall be provided out of the general assets of the Bank at the time such
benefits are to be paid. The parties agree that the Bank is under no obligation
to set aside funds in advance of the time for payment hereunder, or to otherwise
provide security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
5
<PAGE>
Section 11. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 12. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 13. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
Section 14. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 15. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 16. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 17. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 18. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 19. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this
6
<PAGE>
unfunded, nonqualified deferred compensation plan. If any person believes he is
being denied any rights or benefits under the Agreement, such person may file a
claim in writing with the Plan Administrator for resolution in accordance with
the provisions of Paragraph B of this Section 19.
B. Claims Procedure. If any claim filed hereunder is wholly or
----------------
partially denied, the Plan Administrator will notify the claimant of its
decision in writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 19.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain specific reasons for
the decision as well as specific references to pertinent provisions
of the Agreement. The decision on review will be made within sixty
(60) days after the request for review is received by the Plan
Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension
7
<PAGE>
of time for processing the request (such as an election by the Plan
Administrator to hold a hearing), and if written notice of such
extension and circumstances is given to the claimant within the
initial sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Dale W. Brawley
------------------------------
Title: Executive Vice President
/s/ Billy R. Williams ------------------------------
- ---------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ George W. Brawley, Jr.
----------------------------------
George W. Brawley, Jr.
8
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
SUPPLEMENTAL INCOME AGREEMENT
BETWEEN MOORESVILLE SAVINGS BANK, SSB AND GEORGE W. BRAWLEY, JR.
WHEREAS, Mooresville Savings Bank, SSB (the "Bank") and George W. Brawley,
Jr. (the "Executive") previously entered into a Supplemental Income Agreement on
November 1, 1993, and amended and restated said agreement on September 17, 1997
through the execution of the Amended and Restated Supplemental Income Agreement
(the "Agreement"); and
WHEREAS, the Board of Directors of the Bank adopted a Resolution on
December 15, 1998 (the "Resolution"), authorizing modifications to the Agreement
as set forth in the Resolution attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 9 of the Agreement, the Bank and the Executive
have agreed to modify the Agreement as provided herein.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Section 2 is deleted in its entirety and a new Section 2 is inserted in
lieu thereof to read as follows:
Section 2. Retirement Benefits. Except as otherwise specifically provided
---------- -------------------
herein, on March 31, 1998, or if earlier, upon the Executive's actual
retirement after age 60 (the "Retirement Age"), the Bank will pay the
Executive $25,000 annually for a continuous period of fifteen (15) years.
The first annual payment will be made on a date to be determined by the
Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Retirement Age shall occur
(except as otherwise provided herein). Such annual payment shall be
increased five percent (5%) for each full Year of Service of the Executive
occurring between November 1, 1994 and March 31, 1998. For purposes of
this Agreement, the Executive will receive credit for a Year of Service for
each twelve month period during which he completes 1,000 hours of service.
The first twelve month period shall begin November 1, 1994, and subsequent
periods shall begin on the anniversary of that date.
If the Executive's service with the Bank continues past the
Executive's Retirement Age, then the annual benefit payments shall be
postponed and shall be increased on an annual basis by an additional five
percent (5%) for each full Year of Service of the Executive occurring after
the Executive's Retirement Age and continuing until age 70 or such time as
the Executive ceases serving as an Executive, whichever shall occur first
(hereafter "the Increased Benefit"). If the Executive reaches age 70 and
has not previously begun receiving his retirement benefits under this
Section 2, the monthly payments will begin upon the Executive's attainment
of age 70 in any event.
<PAGE>
In the event that an Executive should die after becoming entitled to
receive annual installment payments under this Section 2 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to such beneficiaries as are designated by
the Executive to the Bank in writing (the "Beneficiaries"). In the event
of the death of the Executive's last living Beneficiary before all
remaining installment payments have been made, the balance of any payments
which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest
and shall be paid in a single sum to the estate of the last Beneficiary to
die. In the absence of such beneficiary designation, or if no Beneficiary
survives the Executive, any payments remaining unpaid at the Executive's
death shall be commuted on the basis of seven percent (7%) per annum
compounded interest and shall be paid in a single sum to the Executive's
estate. Any amount payable to an Executive or his Beneficiary under this
Section 2 shall be reduced by any disability payments already paid to such
Executive under Section 4 of this Agreement.
2. Section 3 is deleted in its entirety and a new Section 3 is inserted in
lieu thereof to read as follows:
Section 3. Pre-Retirement Death Benefits. Should the Executive die while
---------- -----------------------------
serving as an executive of the Bank, and prior to his receiving any
benefits under Section 2, the Bank will pay $25,000.00 annually for a
continuous period of fifteen (15) years to the Executive's Beneficiary or
Beneficiaries. Such annual payment shall be increased five percent (5%)
for each full Year of Service of the Executive occurring between November
1, 1994 and March 31, 1998. If the Executive continued serving as an
Executive of the Bank after March 31, 1998, then the annual payment will be
increased an additional five percent (5%) for each full Year of Service for
each full Year of Service of the Executive occurring after the Executive's
Retirement Age (hereafter "the Increased Benefit"). The first annual
payment shall be made on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month in which the Executive died.
In the event of the death of the Executive's last living Beneficiary
before all annual payments shall have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall
be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any amount remaining unpaid at an
Executive's death shall be commuted on the basis of seven percent (7%) per
annum compounded interest and shall be paid in a single sum to the
Executive's estate. Any amount payable to an Executive's Beneficiary under
this Section 3 shall be reduced by any disability payments already paid to
such Executive under Section 4 of this Agreement.
2
<PAGE>
3. Section 4 is deleted in its entirety and a new Section 4 is inserted in
lieu thereof to read as follows:
Section 4. Disability Benefits. If the Executive shall become disabled (as
---------- -------------------
defined herein) while continuing to serve as an Executive of the Bank, the
Bank shall commence to pay to the Executive the same benefit that would
have been payable if the Executive had died on the date of disability. The
first annual payment will be made on a date to be determined by the Bank,
but in no event later than the first day of the sixth calendar month
following the calendar month in which the Executive is determined to be
disabled.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Section 4 but before any or
all remaining installment payments have been made, the Bank will pay all
remaining installment payments to the Executive's Beneficiary or
Beneficiaries. In the event of the death of the Executive's last living
Beneficiary before all installment payments have been made, the balance of
any payments which remain unpaid at the time of such Beneficiary's death
shall be commuted on the basis of seven percent (7%) per annum compounded
interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of such beneficiary designation, or if
no Beneficiary survives the Executive, any payments remaining unpaid at the
Executive's death shall be commuted on the basis of seven percent (7%) per
annum compounded interest and shall be paid in a single sum to the
Executive's estate.
The Executive shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a
continuous period of six (6) months or more. During such six (6) month
period, the Executive must be under the regular care of a medical doctor
(M.D.) or osteopathic physician (D.O.) licensed in the State of North
Carolina. For the purpose of this section, or any other section relating
to disability, if there is any dispute between the parties as to the
Executive's physical or mental disability, such dispute shall be settled by
the opinion of a medical doctor or osteopathic physician licensed in the
State of North Carolina who is selected by the mutual consent of the
Executive and the Bank or their representatives. If the parties cannot
agree within ten (10) days after a written request for the designation of
an examining physician is made by either party to the other, then the
examining physician shall be designated by the president of the Iredell
County Medical Society then serving. Certification of that physician as to
the matter in dispute shall be final and binding upon the Executive, his
Beneficiaries, the Bank and all parties claiming any right or interest
under this Agreement through them.
4. Exhibit B attached hereto sets forth the Increased Benefit which will
be payable to the Executive if he continues service with the Bank after
reaching the Retirement Age.
3
<PAGE>
5. All of the other terms and provisions of the Agreement are not modified
in any respect and shall remain in full force and effect.
This Amendment is effective as of the 16th day of December, 1998.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ Claude U. Voils, Jr.
------------------------
/s/ Billy R. Williams Title: Director
- ---------------------------- ------------------------
Secretary
[Corporate Seal]
DIRECTOR:
/s/
--------------------------------
George W. Brawley, Jr.
4
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Date of Benefit Amount of Increased Annual Benefit
- -------------------------------------------------------------------------------------
<S> <C>
Retire before 11/1/94 $25,000.00
- -------------------------------------------------------------------------------------
Retire on or after 11/1/95 but before 11/1/96 $26,250.00
- -------------------------------------------------------------------------------------
Retire on or after 11/1/96 but before 11/1/97 $27,562.50
- -------------------------------------------------------------------------------------
Retire on or after 11/1/97 but before 11/1/98 $28,940.63
- -------------------------------------------------------------------------------------
Retire on or after 11/1/98 but before 11/1/99 $30,387.66
- -------------------------------------------------------------------------------------
Retire on or after 11/1/99 but before 11/1/00 $31,907.04
- -------------------------------------------------------------------------------------
Retire on or after 11/1/00 but before 11/1/01 $33,502.39
- -------------------------------------------------------------------------------------
Retire on or after 11/1/01 but before 11/1/02 $35,177.51
- -------------------------------------------------------------------------------------
Retire on or after 11/1/02 but before 11/1/03 $36,936.39
- -------------------------------------------------------------------------------------
Retire on or after 11/1/03 but before 11/1/04 $38,936.39
- -------------------------------------------------------------------------------------
Retire on or after 11/1/04 but before 11/1/05 $40,722.37
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
SUPPLEMENTAL INCOME AGREEMENT
THIS AMENDED AND RESTATED SUPPLEMENTAL INCOME AGREEMENT, made and entered
into as of the 1st of November, 1993 and amended and restated this 17 day of
September, 1997 (the "Agreement") by and between Mooresville Savings
Bank, SSB, a mutual state savings bank chartered under the laws of the State of
North Carolina (the "Bank"), and Donald G. Jones (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been an employee of the Bank since October 20,
1986, and is a member of a select group of management employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Supplemental Income Agreement with the
Executive on November 1, 1993; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. During the period of the Executive's
--------- -----------------
employment by the Bank, the Executive shall defer monthly a portion of his cash
compensation otherwise receivable by the Executive from the Bank.
Section 2. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday or, if earlier,
upon the Executive's actual retirement after age 60 (the "Retirement Age"), the
Bank will pay the Executive $10,000 annually for a continuous period of fifteen
(15) years. The first annual payment will be made on a date to be determined by
the Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Retirement Age shall occur. Such
annual payment shall be increased five percent (5%) for each full Year of
Service of the Executive occurring after November 1, 1994, except that there
will be no increases in benefits for more than ten (10) years of additional
service. For purposes of this Agreement, the Executive will receive credit for a
Year of Service for each twelve month period during which he completes 1,000
hours of service. The first twelve month
<PAGE>
period shall begin November 1, 1994, and subsequent periods shall begin on the
anniversary of that date.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or, if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the Executive's estate. Any amount payable to an Executive or his
Beneficiary under this Section 2 shall be reduced by any disability payments
already paid to such Executive under Section 4 of this Agreement.
Section 3. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age, the Bank will pay $10,000 annually for a continuous period of
fifteen (15) years to his Beneficiary or Beneficiaries. Such annual payment
shall be increased five percent (5%) for each full Year of Service of the
Executive occurring after November 1, 1994, except that there will be no
increases in benefits for more than ten (10) years of additional service. The
first annual payment will be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Executive's death occurred. In the event of the
death of the last living Beneficiary before all annual installment payments have
been made, the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of seven percent (7%) per
annum compound interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any amount remaining unpaid at the
Executive's death shall be commuted on the basis of seven percent (7%) per annum
compound interest and shall be paid in a single sum to the Executive's estate.
Any amount payable to an Executive's Beneficiary under this Section 3 shall be
reduced by any disability payments already paid to such Executive under Section
4 of this Agreement.
Section 4. Disability Benefits. If the Executive shall become disabled
---------- --------------------
(as defined herein) prior to Retirement Age, while continuing to serve as an
Executive of the Bank, the Bank shall commence to pay to the Executive the same
benefit that would have been payable if the Executive's death occurred on the
date of disability. The first annual payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Executive is determined
to be disabled.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Section 3 but before any or all
remaining installment payments have been made, the Bank will pay all remaining
installment payments to the Executive's Beneficiary
2
<PAGE>
or Beneficiaries. In the event of the death of the Executive's last living
Beneficiary before all installment payments have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of such beneficiary designation, or if no Beneficiary survives the
Executive, any payments remaining unpaid at the Executive's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the Executive's estate.
The Executive shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a continuous
period of six (6) months or more. During such six (6) month period, the
Executive must be under the regular care of a medical doctor (M.D.) or
osteopathic physician (D.O.) licensed in the State of North Carolina. For the
purpose of this section, or any other section relating to disability, if there
is any dispute between the parties as to the Executive's physical or mental
disability, such dispute shall be settled by the opinion of a medical doctor or
osteopathic physician licensed in the State of North Carolina who is selected by
the mutual consent of the Executive and the Bank or their representatives. If
the parties cannot agree within ten (10) days after a written request for the
designation of an examining physician is made by either party to the other, then
the examining physician shall be designated by the President of the Iredell
County Medical Society then serving. Certification of that physician as to the
matter in dispute shall be final and binding upon the Executive, his
Beneficiaries, the Bank, and all parties claiming any right or interest under
this Agreement through them.
Section 5. Termination of Employment. Should the Executive's employment
--------- -------------------------
by the Bank terminate other than by reason of death or retirement upon the
occurrence of the Retirement Age, the Executive or his Beneficiary (or
Beneficiaries), as applicable, shall be entitled upon the occurrence of the
earlier of the Retirement Age and the Executive's death to receive the
percentage of the annual installment payment stated in Section 2 of this
Agreement determined under the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUAL INSTALLMENT
PAYMENT STATED IN SECTION 2 OF THIS
IF EXECUTIVE'S TERMINATION OCCURS AGREEMENT TO WHICH EXECUTIVE IS
ON OR AFTER ENTITLED
--------------------------------- -----------------------------------
<S> <C>
March 31, 1994 20%
March 31, 1995 40%
March 31, 1996 60%
March 31, 1997 80%
March 31, 1998 100%
</TABLE>
Such annual payments shall commence on a date to be determined by the Bank,
but in no event later than the first day of the first calendar month following
the calendar month in which the Retirement Age or the Executive's death, as
applicable, occurs.
Section 6. Extraordinary Transactions. In the event that an Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24)
3
<PAGE>
months following a "Change in Control" (as defined herein), then the Executive
shall be entitled to the maximum benefits set forth in Section 2 as if the
Executive had remained employed until age 65, and the Retirement Age shall be
deemed to occur on the date that such Change in Control occurred. The Bank shall
commence to make annual installment payments to the Executive as described in
Section 2 on a date to be determined by the Bank, but in no event later than the
first day of the first calendar month following the calendar month in which the
Executive's service as an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
4
<PAGE>
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 7. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 8. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive or
restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 9. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto.
Section 10. Financing of Benefits. All benefits under this Agreement
---------- ---------------------
shall be provided out of the general assets of the Bank at the time such
benefits are to be paid. The parties agree that the Bank is under no obligation
to set aside funds in advance of the time for payment hereunder, or to otherwise
provide security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
5
<PAGE>
Section 11. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 12. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 13. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
Section 14. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 15. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 16. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 17. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 18. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 19. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this
6
<PAGE>
unfunded, nonqualified deferred compensation plan. If any person believes he is
being denied any rights or benefits under the Agreement, such person may file a
claim in writing with the Plan Administrator for resolution in accordance with
the provisions of Paragraph B of this Section 19.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 19.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain specific reasons for
the decision as well as specific references to pertinent provisions of
the Agreement. The decision on review will be made within sixty (60)
days after the request for review is received by the Plan
Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension
7
<PAGE>
of time for processing the request (such as an election by the Plan
Administrator to hold a hearing), and if written notice of such
extension and circumstances is given to the claimant within the
initial sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
--------------------------------
/s/ Billy R. Williams Title: President
- -------------------------------- -----------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Donald G. Jones
-----------------------------------
Donald G. Jones
8
<PAGE>
AMENDED AND RESTATED
SUPPLEMENTAL INCOME AGREEMENT
THIS AMENDED AND RESTATED SUPPLEMENTAL INCOME AGREEMENT, made and entered
into as of the 1st of November, 1993 and amended and restated this 17 day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Billy R. Williams (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been an employee of the Bank since July 21,
1986, and is a member of a select group of management employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Supplemental Income Agreement with the
Executive on November 1, 1993; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. During the period of the Executive's
--------- -----------------
employment by the Bank, the Executive shall defer monthly a portion of his cash
compensation otherwise receivable by the Executive from the Bank.
Section 2. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday or, if earlier,
upon the Executive's actual retirement after age 60 (the "Retirement Age"), the
Bank will pay the Executive $7,900 annually for a continuous period of fifteen
(15) years. The first annual payment will be made on a date to be determined by
the Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Retirement Age shall occur. Such
annual payment shall be increased five percent (5%) for each full Year of
Service of the Executive occurring after November 1, 1994, except that there
will be no increases in benefits for more than ten (10) years of additional
service. For purposes of this Agreement, the Executive will receive credit for a
Year of Service for each twelve month period during which he completes 1,000
hours of service. The first twelve month
<PAGE>
period shall begin November 1, 1994, and subsequent periods shall begin on the
anniversary of that date.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or, if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the Executive's estate. Any amount payable to an Executive or his
Beneficiary under this Section 2 shall be reduced by any disability payments
already paid to such Executive under Section 4 of this Agreement.
Section 3. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age, the Bank will pay $7,900 annually for a continuous period of
fifteen (15) years to his Beneficiary or Beneficiaries. Such annual payment
shall be increased five percent (5%) for each full Year of Service of the
Executive occurring after November 1, 1994, except that there will be no
increases in benefits for more than ten (10) years of additional service. The
first annual payment will be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Executive's death occurred. In the event of the
death of the last living Beneficiary before all annual installment payments have
been made, the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of seven percent (7%) per
annum compound interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any amount remaining unpaid at the
Executive's death shall be commuted on the basis of seven percent (7%) per annum
compound interest and shall be paid in a single sum to the Executive's estate.
Any amount payable to an Executive's Beneficiary under this Section 3 shall be
reduced by any disability payments already paid to such Executive under Section
4 of this Agreement.
Section 4. Disability Benefits. If the Executive shall become disabled
---------- --------------------
(as defined herein) prior to Retirement Age, while continuing to serve as an
Executive of the Bank, the Bank shall commence to pay to the Executive the same
benefit that would have been payable if the Executive's death occurred on the
date of disability. The first annual payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Executive is determined
to be disabled.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Section 3 but before any or all
remaining installment payments have been made, the Bank will pay all remaining
installment payments to the Executive's Beneficiary
2
<PAGE>
or Beneficiaries. In the event of the death of the Executive's last living
Beneficiary before all installment payments have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of such beneficiary designation, or if no Beneficiary survives the
Executive, any payments remaining unpaid at the Executive's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the Executive's estate.
The Executive shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a continuous
period of six (6) months or more. During such six (6) month period, the
Executive must be under the regular care of a medical doctor (M.D.) or
osteopathic physician (D.O.) licensed in the State of North Carolina. For the
purpose of this section, or any other section relating to disability, if there
is any dispute between the parties as to the Executive's physical or mental
disability, such dispute shall be settled by the opinion of a medical doctor or
osteopathic physician licensed in the State of North Carolina who is selected by
the mutual consent of the Executive and the Bank or their representatives. If
the parties cannot agree within ten (10) days after a written request for the
designation of an examining physician is made by either party to the other, then
the examining physician shall be designated by the President of the Iredell
County Medical Society then serving. Certification of that physician as to the
matter in dispute shall be final and binding upon the Executive, his
Beneficiaries, the Bank, and all parties claiming any right or interest under
this Agreement through them.
Section 5. Termination of Employment. Should the Executive's employment
--------- -------------------------
by the Bank terminate other than by reason of death or retirement upon the
occurrence of the Retirement Age, the Executive or his Beneficiary (or
Beneficiaries), as applicable, shall be entitled upon the occurrence of the
earlier of the Retirement Age and the Executive's death to receive the
percentage of the annual installment payment stated in Section 2 of this
Agreement determined under the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUAL INSTALLMENT
PAYMENT STATED IN SECTION 2 OF THIS
IF EXECUTIVE'S TERMINATION OCCURS AGREEMENT TO WHICH EXECUTIVE IS
ON OR AFTER ENTITLED
- --------------------------------- -----------------------------------
<S> <C>
March 31, 1994 20%
March 31, 1995 40%
March 31, 1996 60%
March 31, 1997 80%
March 31, 1998 100%
</TABLE>
Such annual payments shall commence on a date to be determined by the Bank,
but in no event later than the first day of the first calendar month following
the calendar month in which the Retirement Age or the Executive's death, as
applicable, occurs.
Section 6. Extraordinary Transactions. In the event that an Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24)
3
<PAGE>
months following a "Change in Control" (as defined herein), then the Executive
shall be entitled to the maximum benefits set forth in Section 2 as if the
Executive had remained employed until age 65, and the Retirement Age shall be
deemed to occur on the date that such Change in Control occurred. The Bank shall
commence to make annual installment payments to the Executive as described in
Section 2 on a date to be determined by the Bank, but in no event later than the
first day of the first calendar month following the calendar month in which the
Executive's service as an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
4
<PAGE>
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 7. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 8. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive or
restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 9. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto.
Section 10. Financing of Benefits. All benefits under this Agreement
---------- ---------------------
shall be provided out of the general assets of the Bank at the time such
benefits are to be paid. The parties agree that the Bank is under no obligation
to set aside funds in advance of the time for payment hereunder, or to otherwise
provide security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
5
<PAGE>
Section 11. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 12. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 13. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
Section 14. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 15. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 16. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 17. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 18. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 19. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this
6
<PAGE>
unfunded, nonqualified deferred compensation plan. If any person believes he is
being denied any rights or benefits under the Agreement, such person may file a
claim in writing with the Plan Administrator for resolution in accordance with
the provisions of Paragraph B of this Section 19.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on which
the Plan Administrator based its denial,
(iii) a description of any additional material or information necessary for
the claimant to perfect such claim and an explanation of why such
material or information is necessary, and
(iv) information as to the steps to be taken if the claimant wishes to
submit a request for review.
Such notification will be given within ninety (90) days after the claim is
received by the Plan Administrator (or within 180 days, if special
circumstances require an extension of time for processing the claim, and if
written notice of such extension and circumstances is given to the claimant
within the initial ninety (90) day period). If such notification is not
given within such period, the claim will be considered denied as of the
last day of such period and the claimant may request a review of his claim
in accordance with Section 19.C hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review of his
denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood
by the claimant and will contain specific reasons for the decision as well
as specific references to pertinent provisions of the Agreement. The
decision on review will be made within sixty (60) days after the request
for review is received by the Plan Administrator (or within one hundred
twenty (120) days, if special circumstances require an extension
7
<PAGE>
of time for processing the request (such as an election by the Plan
Administrator to hold a hearing), and if written notice of such extension
and circumstances is given to the claimant within the initial sixty (60)
day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
------------------------------
/s/ Billy R. Williams Title: President
_________________________________ ---------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Billy R. Williams
_______________________________________
Billy R. Williams
8
<PAGE>
AMENDED AND RESTATED
SUPPLEMENTAL INCOME AGREEMENT
THIS AMENDED AND RESTATED SUPPLEMENTAL INCOME AGREEMENT, made and entered
into as of the 1st of November, 1993 and amended and restated this 17th day of
----
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
- ---------
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Richard E. Woods (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been an employee of the Bank since September 26,
1980, and is a member of a select group of management employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Supplemental Income Agreement with the
Executive on November 1, 1993; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Deferral Election. During the period of the Executive's
--------- -----------------
employment by the Bank, the Executive shall defer monthly a portion of his cash
compensation otherwise receivable by the Executive from the Bank.
Section 2. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday or, if earlier,
upon the Executive's actual retirement after age 60 (the "Retirement Age"), the
Bank will pay the Executive $10,000 annually for a continuous period of fifteen
(15) years. The first annual payment will be made on a date to be determined by
the Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Retirement Age shall occur. Such
annual payment shall be increased five percent (5%) for each full Year of
Service of the Executive occurring after November 1, 1994, except that there
will be no increases in benefits for more than ten (10) years of additional
service. For purposes of this Agreement, the Executive will receive credit for a
Year of Service for each twelve month period during which he completes 1,000
hours of service. The first twelve month
<PAGE>
period shall begin November 1, 1994, and subsequent periods shall begin on the
anniversary of that date.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or, if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the Executive's estate. Any amount payable to an Executive or his
Beneficiary under this Section 2 shall be reduced by any disability payments
already paid to such Executive under Section 4 of this Agreement.
Section 3. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age, the Bank will pay $10,000 annually for a continuous period of
fifteen (15) years to his Beneficiary or Beneficiaries. Such annual payment
shall be increased five percent (5%) for each full Year of Service of the
Executive occurring after November 1, 1994, except that there will be no
increases in benefits for more than ten (10) years of additional service. The
first annual payment will be made on a date to be determined by the Bank, but in
no event later than the first day of the sixth calendar month following the
calendar month in which the Executive's death occurred. In the event of the
death of the last living Beneficiary before all annual installment payments have
been made, the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of seven percent (7%) per
annum compound interest and shall be paid in a single sum to the estate of the
last Beneficiary to die. In the absence of any such beneficiary designation, or
if no Beneficiary survives the Executive, any amount remaining unpaid at the
Executive's death shall be commuted on the basis of seven percent (7%) per annum
compound interest and shall be paid in a single sum to the Executive's estate.
Any amount payable to an Executive's Beneficiary under this Section 3 shall be
reduced by any disability payments already paid to such Executive under Section
4 of this Agreement.
Section 4. Disability Benefits. If the Executive shall become disabled
---------- --------------------
(as defined herein) prior to Retirement Age, while continuing to serve as an
Executive of the Bank, the Bank shall commence to pay to the Executive the same
benefit that would have been payable if the Executive's death occurred on the
date of disability. The first annual payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Executive is determined
to be disabled.
In the event that the Executive should die after becoming entitled to
receive annual installment payments under this Section 3 but before any or all
remaining installment payments have been made, the Bank will pay all remaining
installment payments to the Executive's Beneficiary
2
<PAGE>
or Beneficiaries. In the event of the death of the Executive's last living
Beneficiary before all installment payments have been made, the balance of any
payments which remain unpaid at the time of such Beneficiary's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of such beneficiary designation, or if no Beneficiary survives the
Executive, any payments remaining unpaid at the Executive's death shall be
commuted on the basis of seven percent (7%) per annum compounded interest and
shall be paid in a single sum to the Executive's estate.
The Executive shall be considered disabled for the purpose of this
Agreement if he is unable to perform the duties of his position for a continuous
period of six (6) months or more. During such six (6) month period, the
Executive must be under the regular care of a medical doctor (M.D.) or
osteopathic physician (D.O.) licensed in the State of North Carolina. For the
purpose of this section, or any other section relating to disability, if there
is any dispute between the parties as to the Executive's physical or mental
disability, such dispute shall be settled by the opinion of a medical doctor or
osteopathic physician licensed in the State of North Carolina who is selected by
the mutual consent of the Executive and the Bank or their representatives. If
the parties cannot agree within ten (10) days after a written request for the
designation of an examining physician is made by either party to the other, then
the examining physician shall be designated by the President of the Iredell
County Medical Society then serving. Certification of that physician as to the
matter in dispute shall be final and binding upon the Executive, his
Beneficiaries, the Bank, and all parties claiming any right or interest under
this Agreement through them.
Section 5. Termination of Employment. Should the Executive's employment
--------- -------------------------
by the Bank terminate other than by reason of death or retirement upon the
occurrence of the Retirement Age, the Executive or his Beneficiary (or
Beneficiaries), as applicable, shall be entitled upon the occurrence of the
earlier of the Retirement Age and the Executive's death to receive the
percentage of the annual installment payment stated in Section 2 of this
Agreement determined under the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUAL INSTALLMENT
PAYMENT STATED IN SECTION 2 OF THIS
IF EXECUTIVE'S TERMINATION OCCURS AGREEMENT TO WHICH EXECUTIVE IS
ON OR AFTER ENTITLED
--------------------------------- -----------------------------------
<S> <C>
March 31, 1994 20%
March 31, 1995 40%
March 31, 1996 60%
March 31, 1997 80%
March 31, 1998 100%
</TABLE>
Such annual payments shall commence on a date to be determined by the Bank,
but in no event later than the first day of the first calendar month following
the calendar month in which the Retirement Age or the Executive's death, as
applicable, occurs.
Section 6. Extraordinary Transactions. In the event that an Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24)
3
<PAGE>
months following a "Change in Control" (as defined herein), then the Executive
shall be entitled to the maximum benefits set forth in Section 2 as if the
Executive had remained employed until age 65, and the Retirement Age shall be
deemed to occur on the date that such Change in Control occurred. The Bank shall
commence to make annual installment payments to the Executive as described in
Section 2 on a date to be determined by the Bank, but in no event later than the
first day of the first calendar month following the calendar month in which the
Executive's service as an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of the outstanding common stock of the
Bank or common stock of such holding company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
4
<PAGE>
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 7. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 8. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive or
restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 9. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto.
Section 10. Financing of Benefits. All benefits under this Agreement
---------- ---------------------
shall be provided out of the general assets of the Bank at the time such
benefits are to be paid. The parties agree that the Bank is under no obligation
to set aside funds in advance of the time for payment hereunder, or to otherwise
provide security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
5
<PAGE>
Section 11. No Trust Created. Nothing contained in this Agreement and no
---------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 12. Taxes. The Bank shall have the right to deduct from any
---------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 13. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
Section 14. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 15. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 16. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 17. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 18. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 19. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this
6
<PAGE>
unfunded, nonqualified deferred compensation plan. If any person believes he is
being denied any rights or benefits under the Agreement, such person may file a
claim in writing with the Plan Administrator for resolution in accordance with
the provisions of Paragraph B of this Section 19.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 19.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain specific reasons for
the decision as well as specific references to pertinent provisions of
the Agreement. The decision on review will be made within sixty (60)
days after the request for review is received by the Plan
Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension
7
<PAGE>
of time for processing the request (such as an election by the Plan
Administrator to hold a hearing), and if written notice of such
extension and circumstances is given to the claimant within the
initial sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
---------------------------------
Title: President
/s/ Billy R. Williams
- --------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Richard E. Woods
---------------------------------------
Richard E. Woods
8
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of February, 1988 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Lucille Doster (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on February 1, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of her continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate her employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to her Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Executive shall be entitled to the benefits set forth in
Section 1 as if the Executive had remained employed until Retirement Age, and
the Retirement Age shall be deemed to occur on the date that such Change in
Control occurred. The Bank shall commence to make monthly installment payments
to the Executive as described in Section 1 on a date to be determined by the
Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Executive's service as an Executive of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate her employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of her Retirement Age, or her death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set her hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
----------------------------------
/s/ Billy R. Williams Title: President
- ------------------------------ -------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Lucille Doster
--------------------------------------
Lucille Doster
6
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of February, 1988 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Marie Hedrick (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on February 1, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of her continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate her employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to her Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Executive shall be entitled to the benefits set forth in
Section 1 as if the Executive had remained employed until Retirement Age, and
the Retirement Age shall be deemed to occur on the date that such Change in
Control occurred. The Bank shall commence to make monthly installment payments
to the Executive as described in Section 1 on a date to be determined by the
Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Executive's service as an Executive of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate her employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of her Retirement Age, or her death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the claim is
received by the Plan Administrator (or within 180 days, if special
circumstances require an extension of time for processing the claim, and if
written notice of such extension and circumstances is given to the claimant
within the initial ninety (90) day period). If such notification is not
given within such period, the claim will be considered denied as of the
last day of such period and the claimant may request a review of his claim
in accordance with Section 16.C hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set her hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-----------------------------------
/s/ Billy R. Williams Title: President
- -------------------------------- --------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Marie Hedrick
---------------------------------------
Marie Hedrick
6
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of February, 1988 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Carol Huffman (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on February 1, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of her continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate her employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to her Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the Executive's
--------- --------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Executive shall be entitled to the benefits set forth in
Section 1 as if the Executive had remained employed until Retirement Age, and
the Retirement Age shall be deemed to occur on the date that such Change in
Control occurred. The Bank shall commence to make monthly installment payments
to the Executive as described in Section 1 on a date to be determined by the
Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Executive's service as an Executive of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate her employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of her Retirement Age, or her death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set her hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
-----------------------------------
/s/ Billy R. Williams Title: President
- ---------------------------- ---------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Carol Huffman
---------------------------------------
Carol Huffman
6
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of February, 1988 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Brenda Johnson (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on February 1, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of her continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate her employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to her Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the
--------- --------------------------
Executive's service as an Executive of the Bank is terminated for any reason
coincident with or within twenty-four (24) months following a "Change in
Control" (as defined herein), then the Executive shall be entitled to the
benefits set forth in Section 1 as if the Executive had remained employed until
Retirement Age, and the Retirement Age shall be deemed to occur on the date that
such Change in Control occurred. The Bank shall commence to make monthly
installment payments to the Executive as described in Section 1 on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's service as
an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate her employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of her Retirement Age, or her death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set her hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
/s/ Billy R. Williams ---------------------------------
- ---------------------------- Title: President
Secretary ------------------------------
[Corporate Seal] EXECUTIVE:
/s/ Brenda Johnson
-------------------------------------
Brenda Johnson
6
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of February, 1988 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and D. Glenn Jones (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on February 1, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of his continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate his employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to his Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the
--------- --------------------------
Executive's service as an Executive of the Bank is terminated for any reason
coincident with or within twenty-four (24) months following a "Change in
Control" (as defined herein), then the Executive shall be entitled to the
benefits set forth in Section 1 as if the Executive had remained employed until
Retirement Age, and the Retirement Age shall be deemed to occur on the date that
such Change in Control occurred. The Bank shall commence to make monthly
installment payments to the Executive as described in Section 1 on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's service as
an Executive of the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges with
or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate his employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of his Retirement Age, or his death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
Such notification will be given within ninety (90) days after the claim is
received by the Plan Administrator (or within 180 days, if special circumstances
require an extension of time for processing the claim, and if written notice of
such extension and circumstances is given to the claimant within the initial
ninety (90) day period). If such notification is not given within such period,
the claim will be considered denied as of the last day of such period and the
claimant may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set his hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
/s/ Billy R. Williams --------------------------------
- ---------------------------------
Title: President
- --------------------------------- ------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ D. Glenn Jones
-----------------------------------------
D. Glenn Jones
5
<PAGE>
AMENDED AND RESTATED
SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT, made and entered
into as of the 1st of February, 1988 and amended and restated this 17th day of
September, 1997 (the "Agreement") by and between Mooresville Savings Bank, SSB,
a mutual state savings bank chartered under the laws of the State of North
Carolina (the "Bank"), and Nancy Lee Petrea (the "Executive").
W I T N E S E T H:
WHEREAS, the Executive is a member of a select group of management
employees of the Bank; and
WHEREAS, in order to help assure the Executive's continued service to the
Bank, the Bank previously entered into a Salary Continuation Agreement with the
Executive on February 1, 1988; and
WHEREAS, thereafter, the Bank converted its charter to a state savings bank
charter and changed its name from "Mooresville Federal Savings and Loan
Association" to "Mooresville Savings Bank, SSB"; and
WHEREAS, the value of the Executive is such that assurance of her continued
service is essential to the future growth and profits of the Bank; and
WHEREAS, the Bank desires to retain the services of the Executive, and
realizes that if the Executive were to terminate her employment, the Bank would
suffer a substantial financial loss; and
WHEREAS, the parties hereto desire to amend the Agreement and to restate
the Agreement as amended.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
--------- -------------------
herein, upon the occurrence of the Executive's 65th birthday (the "Retirement
Age"), if the Executive is employed by the Bank at that time, the Bank will pay
the Executive $833.33 per month for a continuous period of sixty (60) months.
The first monthly payment will be made on the first day of the first calendar
month following the calendar month in which the Executive retires from service
with the Bank.
In the event that the Executive should die after becoming entitled to
receive monthly installment payments under this Agreement but before all of such
payments have been paid, the Bank will pay all remaining payments to such
beneficiary or beneficiaries as the Executive has designated to the Bank in
writing (the "Beneficiaries"). In the event of the death of the last living
<PAGE>
Beneficiary before all remaining unpaid payments have been made, the balance of
any payments at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compounded interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of such
beneficiary designation, or if no Beneficiary survives the Executive, any amount
remaining unpaid at the Executive's death shall be commuted on the basis of
seven percent (7%) per annum compounded interest and shall be paid in a single
sum to the Executive's estate.
Section 2. Pre-Retirement Death Benefits. Should the Executive die prior
--------- -----------------------------
to Retirement Age while in the service of the Bank, the Bank will pay $833.33
per month for a continuous period of sixty (60) months to her Beneficiary or
Beneficiaries. The first monthly payment will be made on a date to be
determined by the Bank, but in no event later than the first day of the first
calendar month following the calendar month in which the Executive's death
occurred. In the event of the death of the last living Beneficiary before all
annual installment payments have been made, the balance of any payments which
remain unpaid at the time of such Beneficiary's death shall be commuted on the
basis of seven percent (7%) per annum compound interest and shall be paid in a
single sum to the estate of the last Beneficiary to die. In the absence of any
such beneficiary designation, or if no Beneficiary survives the Executive, any
amount remaining unpaid at the Executive's death shall be commuted on the basis
of seven percent (7%) per annum compound interest and shall be paid in a single
sum to the Executive's estate.
Section 3. Extraordinary Transactions. In the event that the Executive's
--------- -------------------------
service as an Executive of the Bank is terminated for any reason coincident with
or within twenty-four (24) months following a "Change in Control" (as defined
herein), then the Executive shall be entitled to the benefits set forth in
Section 1 as if the Executive had remained employed until Retirement Age, and
the Retirement Age shall be deemed to occur on the date that such Change in
Control occurred. The Bank shall commence to make monthly installment payments
to the Executive as described in Section 1 on a date to be determined by the
Bank, but in no event later than the first day of the first calendar month
following the calendar month in which the Executive's service as an Executive of
the Bank is terminated.
For the purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(a) a change in control of a nature that would be required to be
reported 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
Securities Exchange Act of 1934 (the "Exchange Act"); or
(b) such time as any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank or its holding company representing 25 percent or
more of the combined voting power of
2
<PAGE>
the outstanding common stock of the Bank or common stock of such holding
company, as applicable; or
(c) individuals who constitute the board of directors of the Bank or
its holding company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company 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 Holding Company Board, as applicable, or whose
nomination for election by the Bank's or its holding company's shareholders
was approved by the Bank's or its holding company's board of directors or
nominating committee, as applicable, shall be considered as though he or
she were a member of the Incumbent Board or Incumbent Holding Company
Board, as applicable; or
(d) either the Bank or its holding company consolidates or merges
with or into another corporation, association or entity or is otherwise
reorganized, where neither the Bank nor its holding company, respectively,
is the surviving corporation in such transaction; or
(e) all or substantially all of the assets of either the Bank or its
holding company are sold or otherwise transferred to or are acquired by any
other entity or group.
Notwithstanding the other provisions of this paragraph, a transaction or
event shall not be considered a Change in Control with respect to an Executive
if, prior to the consummation or occurrence of such transaction or event, the
Executive and the Bank agree in writing that the same shall not be treated as a
Change in Control for purposes of this Agreement.
Section 4. Assignability. Except as otherwise provided by this Agreement,
--------- -------------
it is agreed that neither the Executive, any Beneficiary, nor any other person
claiming any right or interest under this Agreement through the Executive or any
Beneficiary shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
hereto are expressly declared to be nonassignable.
Section 5. Executive's Rights. This Agreement creates no right in the
--------- ------------------
Executive to continue in the Bank's service for any specific length of time; nor
does it create any other rights in the Executive or obligations on the part of
the Bank, except those set forth in this Agreement. The benefits payable under
this Agreement shall be independent of and in addition to, any other employment
agreements that may exist from time to time between the parties hereto,
concerning any other compensation payable by the Bank to the Executive whether
as fees, salary, bonus, or otherwise. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive
3
<PAGE>
or restrict the right of the Executive to terminate her employment. The rights
accruing to the Executive or any designated beneficiary under the provisions of
the Agreement shall be solely those of an unsecured creditor of the Bank.
Section 6. Amendment and Termination. This Agreement may be amended or
--------- -------------------------
terminated in whole or in part by a writing signed by the parties hereto. In
addition, except as provided in Section 3 hereof, this Agreement shall terminate
if the Executive's employment with the Bank is terminated for any reason other
than retirement after attainment of her Retirement Age, or her death.
Section 7. Financing of Benefits. All benefits under this Agreement shall
--------- ---------------------
be provided out of the general assets of the Bank at the time such benefits are
to be paid. The parties agree that the Bank is under no obligation to set aside
funds in advance of the time for payment hereunder, or to otherwise provide
security for its obligations under this Agreement. The Executive, the
Executive's Beneficiaries, and any successor in interest shall be and remain
general creditors of the Bank with respect to any benefits due under this
Agreement, in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right in its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and if funded, to determine the extent, nature, and method of such funding.
Should the Bank elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, certificates of deposit, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien upon or right, title or
interest in or to any specific funding investment or to any assets of the Bank.
Section 8. No Trust Created. Nothing contained in this Agreement and no
--------- ----------------
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Bank and the Executive, the Executive's designated Beneficiaries or any other
person.
Section 9. Taxes. The Bank shall have the right to deduct from any
--------- -----
distribution or payment in cash under this Agreement, any state, federal or
local taxes required by law to be withheld with respect to such distribution or
payment.
Section 10. Binding Obligation of the Bank and Any Successor in Interest.
---------- ------------------------------------------------------------
This Agreement and the Bank's obligations hereunder shall be binding upon its
successors and permitted assigns. The Bank may not assign its rights or
obligations to the Executive hereunder without such Executive's prior written
consent. In addition, the Bank agrees it shall not enter into any agreement
providing for the merger of the Bank with and into another business entity or
the sale of more than a majority of the Bank's assets to another business
entity, person or group of persons that does not specifically provide that such
successor by merger or purchaser(s) of assets shall assume and satisfy each and
every obligation of the Bank to the Executive under this Agreement. In the case
of an asset sale, such assumption shall not relieve the Bank of its liability to
fulfill such obligations.
4
<PAGE>
Section 11. Effect on Other Benefit Plans. Nothing contained in this
---------- -----------------------------
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit-sharing, group, bonus
or other supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
Section 12. Severability. The provisions of this Agreement shall be
---------- ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
Section 13. Gender. Whenever in this Agreement words are used in the
---------- ------
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
Section 14. Headings. The titles and headings of Sections are included
---------- --------
for convenience of reference only and are not to be considered in construction
of the provisions of this Agreement.
Section 15. Law Governing. This Agreement shall be governed by the laws
---------- -------------
of the State of North Carolina.
Section 16. Claims and Review Procedures.
---------- ----------------------------
A. General. For the purposes of implementing a claims procedure under
-------
this Agreement as required by the Employee Retirement Income Security Act of
1974 ("ERISA") (but not for any other purpose), the Bank is hereby designated as
the named fiduciary and Plan Administrator of this unfunded, nonqualified
deferred compensation plan. If any person believes he is being denied any
rights or benefits under the Agreement, such person may file a claim in writing
with the Plan Administrator for resolution in accordance with the provisions of
Paragraph B of this Section 16.
B. Claims Procedure. If any claim filed hereunder is wholly or partially
----------------
denied, the Plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to be
understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
5
<PAGE>
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is
given to the claimant within the initial ninety (90) day period). If
such notification is not given within such period, the claim will be
considered denied as of the last day of such period and the claimant
may request a review of his claim in accordance with Section 16.C
hereof.
C. Review Procedure. Within sixty (60) days after the date on which a
----------------
claimant receives a written notice of a denied claim (or, if applicable, within
sixty (60) days after the date on which such denial is considered to have
occurred) the claimant (or his duly authorized representative) may:
(i) file a written request with the Plan Administrator for a review
of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The Plan Administrator will notify the claimant of its decision in writing.
Such notification will be written in a manner calculated to be understood by the
claimant and will contain specific reasons for the decision as well as specific
references to pertinent provisions of the Agreement. The decision on review
will be made within sixty (60) days after the request for review is received by
the Plan Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the request (such as
an election by the Plan Administrator to hold a hearing), and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period.
IN WITNESS WHEREOF, the Bank has caused this Amended and Restated
Supplemental Income Agreement to be signed in its corporate name by its duly
authorized officer, and impressed with its corporate seal, attested by its
Secretary, and the Executive has hereunto set her hand and seal, all on the day
and year first above written.
MOORESVILLE SAVINGS BANK, SSB
Attest: By: /s/ George W. Brawley, Jr.
---------------------------------
/s/ Billy R. Williams Title: President
- --------------------------------- --------------------------------
Secretary
[Corporate Seal] EXECUTIVE:
/s/ Nancy Lea Petrea
--------------------------------------
Nancy Lee Petrea
6
<PAGE>
EXHIBIT 11
The FASB has issued Statement No. 128, Earnings Per Share, which supersedes
APB Opinion No. 15. Statement No. 128 requires the presentation of earnings per
share by all entries that have common stock or potential common stock, such as
options, warrants and convertible securities, outstanding that trade in a public
market. Those entities that have only common stock outstanding are required to
present basic earnings per share amounts. Basic per share amounts are computed
by dividing net income (the numerator) by the weighted-average number of common
shares outstanding (the denominator). All other entities are required to
present basic and diluted per share amounts. Diluted per share amounts assume
the conversion, exercise or issuance of all potential common stock instruments
unless the effect is to reduce the loss or increase the income per common share
from continuing operations. For purposes of this computation, the number of
shares of common stock purchased by the Bank's employee stock ownership plan
which have been not been allocated to participants accounts are not assumed to
be outstanding. The activity from the date of Conversion, December 30, 1997, to
the end of the 1997 fiscal year is insufficient to compute a per share amount
for that fiscal year. See Note 14 in the Notes to the Consolidated Financial
Statements for further information.
Earnings per share has been calculated in accordance with FASB Statement
No. 128, Earnings Per Share. For purposes of this computation, the number of
shares of common stock purchased by the Bank's employee stock ownership plan
which have not been allocated to participant accounts are not assumed to be
outstanding.
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------------------------------------
<S> <C> <C> <C>
Basic and Diluted EPS $2,204,000 622,839 $3.54
========================================
</TABLE>
<PAGE>
EXHIBIT 12
Ratios other than period-end ratios are based on monthly balances.
Management does not believe the use of month-end balances has caused a material
difference in the information provided.
<PAGE>
Coddle Creek
FINANCIAL CORP.
1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
- -----------------------------------------------------------------------------------------------------
<S> <C>
Report to Stockholders 1
Selected Consolidated Financial Data 2 - 3
Management's Discussion and Analysis 4 - 18
Independent Auditor's Report 19
Consolidated Financial Statements:
Statements of financial condition at December 31, 1998 and 1997 20
Statements of income and comprehensive income for the years ended 21
December 31, 1998, 1997 and 1996
Statements of stockholders' equity for the years ended December 31, 1998, 1997 22 - 23
and 1996
Statements of cash flows for the years ended December 31, 1998, 1997 and 1996 24 - 26
Notes to Consolidated Financial Statements 27 - 57
Corporate Information 58 - 59
</TABLE>
This annual report to stockholders contains certain forward-looking statements
consisting of estimates with respect to the financial condition, results of
operations and other business of Coddle Creek Financial Corp. that are subject
to various factors which could cause actual results to differ materially from
those estimates. Factors which could influence the estimates include changes in
the national, regional and local market conditions, legislative and regulatory
conditions, and an adverse interest rate environment.
<PAGE>
Letter Head of Coddle Creek Corp.
Report to Stockholders
Dear Stockholder:
Fiscal 1998 was a historic year for your Company. On December 30, 1997,
Mooresville Savings converted from a state chartered mutual savings bank to a
state chartered stock savings bank and became a wholly-owned subsidiary of
Coddle Creek Financial Corp. As part of the Conversion, Coddle Creek issued
674,475 shares of common stock, generating additional capital of $33.7 million.
The response to our initial public offering was tremendous, as noted by the
large oversubscription of the shares of common stock offered.
The Company's consolidated total assets totaled $135.8 million at December 31,
1998 compared to $149.6 million a year earlier, representing a 9.2% decrease as
a result of the refund for the oversubscription of stock in the amount of $16.0
million. Total stockholders' equity amounted to $45.1 million at December 31,
1998, resulting in a book value per share of $66.89. A detail of financial
results and other information is contained in the accompanying 1998 Annual
Report and Proxy Statement.
The Company is dedicated to providing high quality service for all of our
customers. The Board of Directors continues to study various methods of
increasing the value of your investment. In the future, the Board intends to
consider such issues as regular cash dividends, special dividends and the
Company's repurchase of outstanding common stock.
On behalf of the Board of Directors, management and staff, we would like to
thank you for your loyalty and confidence a s demonstrated by your investment in
Coddle Creek Financial Corp.
Sincerely,
/s/ George W. Brawley, Jr.
----------------------------------
George W. Brawley, Jr.
President and CEO
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------------------------------------------
(Dollars In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Financial Condition Data:
Total assets $135,811 $149,585 $112,552 $108,033 $99,966
Investments securities (1) 20,495 43,441 10,889 13,903 14,220
Loans receivable, net (5) 110,578 101,982 97,951 90,555 82,453
Deposits 87,569 99,382 93,785 92,103 85,105
Stockholders' equity (2) 45,119 46,993 14,412 13,726 12,883
Book value per share (2) 66.89 69.67 - - -
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------------------------------------------------
1998 1997 1996 1995 1994\(4)\
---------------------------------------------------------------------------------
(Dollars in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Interest and dividend income $10,316 $8,997 $8,679 $7,946 $5,544
Interest expense 4,096 4,820 4,658 4,416 2,607
---------------------------------------------------------------------------------
Net interest income 6,220 4,177 4,021 3,530 2,937
Provision for loan losses 205 335 - 12 18
Noninterest income 185 192 200 190 149
Noninterest expense 2,957 2,993 3,146 2,624 2,032
---------------------------------------------------------------------------------
Income before income taxes 3,243 1,041 1,075 1,084 1,036
Income tax expense 1,039 374 354 304 361
---------------------------------------------------------------------------------
Net income 2,204 667 721 780 675
Other comprehensive income, net of tax:
Unrealized gains on securities, net of tax 21 (3) (35) 63 -
---------------------------------------------------------------------------------
Comprehensive income $ 2,225 $ 664 $ 686 $ 843 $ 675
=================================================================================
Basic earnings per share(2) $ 3.54 $ - $ - $ - $ -
Diluted earnings per share(2) 3.54 - - - -
Dividends per share(2) 1.00 - - - -
Dividend payout ratio(7) 28.25% - - - -
</TABLE>
(Continued)
2
<PAGE>
<TABLE>
<CAPTION>
At or For the Years Ended
December 31,
-------------------------------------------------------------------------------------
1998 \(6)\ 1997\(6)\ 1996\(6)\ 1995\(6)\ 1994\(4)(6)\
-------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Selected Other Data:
Number of outstanding loans 2,397 2,482 2,476 2,432 2,281
Number of deposit accounts 7,109 7,957 7,752 7,730 7,248
Number of full-service offices 3 3 3 3 3
Return on average assets 1.62% 0.58% 0.66% 0.75% 0.68%
Return on average equity 4.98% 4.55% 5.37% 6.05% 5.55%
Average equity to average assets 32.59% 12.87% 12.27% 12.37% 12.21%
Interest rate spread 3.11% 2.87% 3.08% 2.85% 3.53%
Net yield on average interest-earning
assets 4.70% 3.68% 3.74% 3.49% 4.05%
Average interest-earning assets to
average interest-earning liabilities 151.32% 119.06% 115.21% 114.59% 114.44%
Ratio of noninterest expense to
average total assets 2.18% 2.62% 2.88% 2.52% 2.04%
Nonperforming assets to total assets (3) 1.02% 1.02% 1.11% 1.11% 1.18%
Nonperforming loans to total loans (3) 1.20% 1.36% 1.23% 1.25% 1.37%
Allowance for loan losses to
nonperforming loans (3) 64.57% 47.83% 31.11% 32.95% 33.67%
Allowance for loan losses to total loans
receivable, net 0.81% 0.68% 0.40% 0.44% 0.48%
Provision for loan losses to total
loans receivable, net 0.19% 0.33% 0.00% 0.01% 0.03%
Net charge-offs to average loans
outstanding 0.00% 0.03% 0.01% 0.01% 0.01%
Stockholders' equity to total assets 33.22% 31.42% 12.80% 12.71% 12.89%
</TABLE>
(1)Includes interest-earning deposits, federal funds sold, certificates of
deposit, FHLB stock and investment securities.
(2)On December 30, 1997, Mooresville Savings converted from a state chartered
mutual savings bank to a state chartered stock savings bank and became a
wholly-owned subsidiary of Coddle Creek Financial Corp. Earnings per share
has been calculated in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings per Share," and is based on net income for the
year, divided by the weighted average number of shares outstanding for the
year. In accordance with the AICPA's SOP 93-6, unallocated ESOP shares were
deducted from outstanding shares used in the computation of earnings per
share. Diluted earnings per share includes the effect of dilutive common
stock equivalents in the weighted average number of shares outstanding.
(3)Nonperforming assets include mortgage loans and consumer loans 90 days or
more delinquent and real estate acquired in settlement of loans. Non
performing loans include nonaccrual loans and accruing loans past due 90 days
or more.
(4)The operating data for December 31, 1994 is for the nine-month period
beginning April 1, 1994 and ending December 31, 1994 due to a change in year
ends.
(5)"Loans receivable, net," represents gross loans less net deferred loan fees,
undisbursed loan funds and allowance for loan losses.
(6)Ratios other than period-end ratios are based on monthly balances. Management
does not believe the use of month-end balances has caused a material
difference in the information provided.
(7)The dividend payout ratio represents dividends per share as a percent of
basic earnings per share.
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
The following discussion and analysis of financial condition and the results
of operations is intended to assist in understanding the financial condition and
changes therein and results of operations of the Company. This discussion and
analysis is intended to compliment, and should be read in conjunction with the
audited financial statements of the Company and related notes appearing
elsewhere in this annual report to stockholders.
Description of Business
Coddle Creek Financial Corp. (the "Company") was incorporated under laws of
the State of North Carolina for the purpose of becoming the bank holding company
of Mooresville Savings Bank, Inc. S.S.B. (the "Bank," or "Mooresville Savings")
in connection with the Bank's conversion from a state chartered mutual savings
bank to a state chartered stock savings bank (the "Conversion"), pursuant to the
Plan of Holding Company Conversion of Moorseville Savings Bank, Inc. S.S.B. (the
"Plan of Conversion"). The Company was organized to acquire all of the common
stock of Mooresville Savings upon its conversion to stock form. A subscription
and community offering of the Company's shares closed on December 30, 1997, at
which time the Company acquired all of the shares of the Bank and commenced
operations.
In accordance with the Plan of Conversion, the Company issued 674,475 shares
of common stock at the price of $50 per share which resulted in proceeds of
$32,494,000, net of conversion costs. The Company transferred $14,134,000 of
the net proceeds to Mooresville Savings for the purchase of all of the capital
stock of the Bank.
The Company has no operations and conducts no business of its own other than
owning Mooresville Savings, investing its portion of the net proceeds received
in the Conversion, and lending funds to the Employee Stock Ownership Plan (the
"ESOP") which was formed in connection with the Conversion. The principal
business of the Bank is accepting deposits from the general public and using
those deposits and other sources of funds to make loans secured by real estate
and other forms of collateral located in the Bank's primary market area of
northern Mecklenburg and southern Iredell counties of North Carolina.
Mooresville Savings' results of operations depend primarily on its net
interest income, which is the difference between interest income from interest-
earning assets and interest expense on interest-bearing liabilities. The Bank's
operations are also affected by noninterest income, such as miscellaneous income
from loans, customer deposit account service charges, and other sources of
revenue. The Bank's principal operating expenses, aside from interest expense,
consist of compensation and associated benefits, federal deposit insurance
premiums, occupancy costs, and other general and administrative expenses.
The Company did not commence operations until December 30, 1997; therefore,
the consolidated entity did not have any operations for the year ended December
31, 1997. The following discussion and analysis contains consolidated financial
results for the year ended December 31, 1998 and the financial results for
Mooresville Savings for the years ended December 31, 1997 and 1996. Because the
Company had no operations and conducted no business other than as described
above prior to December 31, 1997, the "Management's Discussion and Analysis"
concerns primarily the business of the Bank for 1997 and 1996. However, for
ease of reading and because the financial statements are presented on a
consolidated basis, the Company and the Bank are collectively referred to herein
as the "Company" unless otherwise noted.
4
<PAGE>
Comparison of Financial Condition at December 31, 1998, 1997 and 1996
Total assets of the Company amounted to $135.8 million, $149.6 million, and
$112.6 million December 31, 1998, 1997 and 1996, respectively. The growth from
December 31, 1996 to December 31, 1997 can primarily be attributed to the
increase in loans receivable and cash and cash equivalents, funded by proceeds
from the Conversion, savings deposit growth and an increase in investment
securities. The decrease from December 31, 1997 to December 31, 1998 was
primarily due to the Company returning cash deposits to potential investors who
did not receive stock in the Conversion due to an oversubscription of the shares
offered.
The principal category of earnings assets is loans receivable, which amounted
to $110.6 million $102.0 million, and $98.0 million at December 31, 1998, 1997
and 1996, respectively. The Bank was able to increase the size of its loan
portfolio during 1998 and 1997 primarily through its marketing efforts in the
origination of permanent residential 1-4 family mortgages, residential
construction and home equity loans. All other categories of the Bank's loan
portfolio have remained fairly constant from 1996 to 1998. Loan originations
for the year ended December 31, 1998 totaled $51.3 million, other net changes
totaled $0.1 million while loan principal repayments totaled $42.8 million as
the loan portfolio increased by $8.6 million. Loan originations for the year
ended December 31, 1997 totaled $27.4 million, other net changes totaled $0.3
million while principal repayments totaled $23.1 million for a net increase in
the loan portfolio of $4.0 million over 1996. Management believes that its
marketing efforts, competitive rates and contacts within its community
contributed to the increased loan demand. The Bank maintains underwriting and
credit standards designed to maintain the quality of the loan portfolio.
Nonperforming loans at December 31, 1998, 1997 and 1996 totaled $1,386,000,
$1,449,000, and $1,247,00, respectively, and were 1.20%, 1.36%, and 1.23% of
total loans, respectively.
In addition to loans, the Company invests in U.S. Treasury, Government and
federal agency and municipal securities. Management does not engage in the
practice of trading securities, rather, the Company's investment portfolio
consists of securities designated as available for sale or held to maturity.
Investment securities, including interest-bearing deposits, at December 31,
1998, 1997 and 1996 totaled $20.5 million, $43.4 million, and $10.9 million,
respectively. The securities portfolio decreased by $22.9 million for the year
ended December 31, 1998 from December 31, 1997 as cash held in interest-bearing
deposits was returned to investors due to the oversubscription in connection
with the Conversion. The securities portfolio increased $32.5 million for the
year ended December 31, 1997 from December 31, 1996 as $2.0 million in
securities matured and interest-bearing deposits increased $34.4 million due to
cash received in connection with the Conversion.
Savings deposits amounted to $87.6 million at December 31, 1998, a decrease of
$11.8 million from $99.4 million at December 31, 1997, which was attributed to
the return of deposits by the Bank in 1998 due to the oversubscription of the
stock offering. At December 31, 1997, deposits increased by $5.6 million from
$93.8 million at December 31, 1996. The Bank has focused its marketing efforts
on building depositor relationships and setting its deposit rates in the local
market to compete favorably with rates offered by competitors.
5
<PAGE>
Stockholders' equity decreased by $1.9 million during 1998 due to the full
funding of the $4.2 million note receivable to the ESOP, offset by net income of
$2.2 million. Stockholders' equity increased by $32.6 million during 1997,
primarily due to the proceeds received in the Conversion, less $577,0 00 for for
the issuance of the note receivable to the ESOP. Stockholders' equity increased
for the years ending December 31, 1997 and 1996 due to net incomes of $667,000
and $721,000, respectively. The unrealized gain on securities available for
sale, net of tax, amounted to $46,000, $25,000 and $28,000 at December 31, 1998,
1997 and 1996, respectively.
Market Risk
The Company's net income is dependent on its net interest income. Net
interest income is susceptible to interest rate risk to the degree that
interest-bearing liabilities mature or reprice on a different basis than
interest-earning assets. When interest-bearing liabilities mature or reprice
more quickly than interest-earning assets in a given period, a significant
increase in market rates of interest could adversely affect net income.
Similarly, when interest-earning assets mature or reprice more quickly than
interest-bearing liabilities, falling interest rates could result in a decrease
in net income.
In an attempt to manage its exposure to changes in interest rates, management
monitors the Company's interest rate risk. Management meets on a regular basis
to review the Company's interest rate risk position and profitability and to
recommend adjustments for consideration by the Board of Directors. Management
also reviews the Company's securities portfolio, formulates investment
strategies, and oversees the timing and implementation of transactions to assure
attainment of the Board's objectives in the most effective manner.
Notwithstanding the Company's interest rate risk management activities, the
potential for changing interest rates is an uncertainty that can have adverse
effect on net income.
When adjusting the Company's asset/liability position, the Board and
management attempt to manage the Company's interest rate risk while enhancing
net interest margins. At times, depending on the level of general interest
rates, the relationship between long and short term interest rates, market
conditions and competitive factors, the Board and management may determine to
increase the Company's interest rate risk position somewhat in order to increase
its net interest margin. The Company's results of operations and net portfolio
values remain vulnerable to increase in interest rates to fluctuations in the
difference between long-and short-term interest rates.
Consistent with the asset/liability management philosophy set forth above, the
Company has taken several steps to manage its market rate risk. In order to
mitigate and manage interest rate risk, the Company has adopted the following
policies: (i) investing its excess liquidity in shorter term or adjustable rate
instruments with maturities or repricing periods of three years or less; (ii)
promoting mortgage loans with ten-year balloons, or 15 year amortizations; (iii)
promoting adjustable rate equity line of credit loans; (iv) promoting longer
term certificates of deposit; (v) increasing the level of interest-earning
assets relative to interest-bearing liabilities; and (vi) maintaining a
relatively low level of operating expenses and non-earning assets.
The following tables provide further information about the Company's financial
instruments that are sensitive to changes in interest rates.
6
<PAGE>
<TABLE>
<CAPTION>
Loans Receivable (A)
Expected Maturity Date
Years Ending December 31,
---------------------------------------------------------------------------------------------------
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate $ 2,129 $ 3,768 $ 3,770 $ 3,893 $ 3,791 $ 66,416 $ 83,767 $ 88,540
Average interest rate 9.28 % 9.84 % 10.51 % 8.87 % 8.30 % 7.60 %
Variable Rate $ 27,706 $ - $ - $ - $ - $ - $ 27,706 $ 27,706
Average interest rate 8.17 % - % - % - % - % - %
Investment Securities (B)
Expected Maturity Date
Year Ending December 31,
---------------------------------------------------------------------------------------------------
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing cash $ 7,806 $ - $ - $ - $ - $ - $ 7,806 $ 7,806
Average interest rate 4.90 % - % - % - % - % - %
Certificates of deposit $ 100 $ - $ - $ - $ - $ - $ 100 $ 100
Average interest rate 5.85 % - % - % - % - % - %
Securities available for sale $ 5,689 $ 750 $ 1,390 $ 1,056 $ 1,036 $ 323 $ 10,244 $ 10,244
Average interest rate 5.55 % 5.73 % 6.79 % 5.71 % 5.80 % 6.25 %
Securities held to maturity $ 202 $ - $ - $ 150 $ $ 1,029 $ 1,381 $ 1,430
Average interest rate 5.99 % - % - % 4.80 % - % 4.62 %
Nonmarketable equity securities $ - $ - $ - $ - $ - $ 964 $ 964 $ 964
Average interest rate - % - % - % - % - % 7.50 %
Expected Maturity Date (C)
Years Ending December 31,
---------------------------------------------------------------------------------------------------
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deposits $ 62,336 $ 18,211 $ 2,206 $ 773 $ 1,236 $ 18 $ 84,780 $ 82,499
Average interest rate 4.23 % 6.00 % 5.37 % 5.48 % 5.31 % 6.66 %
</TABLE>
(A) For loans receivable the table presents expected principal cash flows by
fixed and adjustable rate. The table includes contractual maturities including
scheduled principal repayments but excluding estimated prepayments for fixed
rate loans. Loans which have adjustable rates are shown as being due in the
period during which rates are next subject to change. The table presents fair
values at December 31, 1998 and weighted average interest rates by maturity
dates.
(B) For investment securities, including securities available for sale,
securities held to maturity, and nonmarketable equity securities, the table
presents contractual maturities. Interest-bearing cash is a due on demand
financial instrument and is presented as due in the one year category.
Nonmarketable equity securities have no contractual maturity and are placed in
the longest expected maturity date. The table presents fair values for
securities available for sale and amortized costs for all other investment
securities at December 31, 1998 and weighted average interest rates by maturity
dates.
(C) For deposits the table presents principal cash flows and weighted average
interest rates by contractual maturity dates.
<PAGE>
Comparison of Operating Results for the Years Ended December 31, 1998, 1997, and
1996
Net Income. Net income for the years ended December 31, 1998, 1997, and
1996 amounted to $2.2 million, $667,000, and $721,000, respectively. Net income
increased in 1998 primarily due to an increase in interest income as proceeds
received in the Conversion were invested in securities and funded loan growth.
Net income decreased in 1997 from 1996 primarily due to providing additional
provisions for loan losses and recording additional compensation expense as a
result of the termination of the Bank's defined benefit pension plan.
Additionally, total noninterest expense decreased in 1997 due to a one-time
special assessment of $520,000 that occurred in 1996 as a result of the
legislation to recapitalize the Savings Association Insurance Fund ("SAIF").
Net Interest Income. Net interest income amounted to $6.2 million, $4.2
million, and $4.0 million during the years ended December 31, 1998, 1997, and
1996, respectively. The average outstanding balance of interest-earning assets
in excess of interest-bearing liabilities amounted to $44.8 million, $18.2
million, and $14.2 million during 1998, 1997 and 1996, respectively. The Bank's
interest rate spread decreased from 3.08% in 1996 to 2.87% in 1997, but
increased to 3.11% in 1998. The increase in the interest rate spread 1998 was
due to the decrease in the Bank's cost of funds. The average yield on interest-
bearing liabilities dropped from 5.06% in 1997 to 4.69% in 1998. The 24 basis
point increase in interest rate spread in 1998, coupled with a $26.6 million
increase in net average balances of interest-earning assets over interest-
bearing liabilities, increased net interest income by $2.0 million. In 1997,
the increase in the Bank's cost of funds coupled with a slight decrease in the
yield on interest-earning assets caused the decrease in the interest rate
spread. The higher balance of interest-earning assets in 1997 more than offset
the decrease of 21 basis points in spread, resulting in a $156,000 increase over
1996 in net interest income.
Interest Income. Interest income amounted to $10.3 million, $9.0 million,
and $8.7 million for the years ended December 31, 1998, 1997, and 1996,
respectively. The Company's average yield on interest-earning assets decreased
from 8.07% in 1996 to 7.93% in 1997 and 7.80% in 1998. The primary interest-
earning asset is loans receivable, which experienced a slight decrease in
average yield of 6 and 2 basis points during 1998 and 1997, respectively.
However, the average outstanding loan balance increased from $95.5 million in
1996 to $100.5 million in 1997 and to $108.3 million in 1998, which is the
primary reason for the increase in interest income. The other significant
interest-earning asset is investment securities, which experienced a significant
increase in its average outstanding balance of $6.4 million from $7.9 million in
1997 to $14.3 million in 1998. The increase in investment income is due to the
Company utilizing the proceeds from the Conversion to maximize interest income.
Interest Expense. Interest expense amounted to $4.1 million, $4.8 million,
and $4.7 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The modest increase in interest expense in 1997 is due to slight
increases in the average outstanding balances of interest-bearing liabilities,
including Federal Home Loan Bank ("FHLB") advances, during 1996 and 1997. There
were no outstanding FHLB advances during 1998. The $7.9 million decrease in the
average outstanding balance of interest-bearing liabilities, coupled with the 37
basis point decrease in the Bank's cost of funds from 5.06% in 1997 to 4.69% in
1998, is the primary reason for the $724,000 decrease in interest expense in
1998.
8
<PAGE>
Net Interest Income
Net interest income represents the difference between income derived from
interest-earning assets and interest expense incurred on interest-bearing
liabilities. Net interest income is affected by both (i) the difference between
the rates of interest earned on interest-earning assets and the rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest bearing liabilities ("net
earning balance"). The following table sets forth information relating to
average balances of the Company's assets and liabilities for the years ended
December 31, 1998, 1997 and 1996. For the periods indicated, the table reflects
the average yield on interest-earning assets and the average cost of interest-
bearing liabilities (derived by dividing income or expense by the monthly
average balance of interest-earning assets or interest-bearing liabilities,
respectively) as well as the net yield on interest-earning assets (which
reflects the impact of the net earnings balance).
<TABLE>
<CAPTION>
At December 31,
1998 1998
-------------------------------------------------------------
Average Yield/ Average Average
Rate Balance Interest Yield/Rate
<S> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits 4.90% $ 9,646 $ 476 4.93%
Investments (1) 5.41% 14,310 896 6.26%
Loans receivable, net (4) 7.76% 108,255 8,944 8.26%
------- --------
Total interest-earning assets 7.33% 132,211 10,316 7.80%
--------
Other assets 3,487
--------
Total assets $135,698
========
Interest-bearing liabilities:
NOW and Money market 1.50% $ 13,858 $ 329 2.37%
Passbook accounts 2.47% 11,192 298 2.66%
Certificates of deposit 5.47% 62,322 3,469 5.56%
FHLB advances - - - -
-------- ---------
Total interest-bearing liabilities 4.55% 87,372 4,096 4.69%
---------
Other liabilities 4,097
Stockholders' equity 44,229
--------
Total liabilities and stockholders' equity $135,698
Net interest income and interest rate spread (2) 2.78% ======== $ 6,220 3.11%
=========
Net yield on interest-earning assets (3) 4.70%
Ratio of average interest-earning assets to average
interest-bearing liabilities
151.32%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
1997 1996
---------------------------------------------------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
---------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits 5,003 $ 148 2.96% $ 1,900 $ 88 4.63%
Investments (1) 7,879 482 6.12% 10,141 628 6.19%
Loans receivable, net (4) 100,505 8,367 8.32% 95,453 7,963 8.34%
----------- -------- ---------- ---------
Total interest-earning assets 113,387 8,997 7.93% 107,494 8,679 8.07%
-------- ---------- ---------
Other assets 658 1,901
----------- ----------
Total assets $ 114,045 $ 109,395
=========== ==========
Interest-bearing liabilities:
NOW and Money market $ 11,738 $ 241 2.03% $ 11,113 $ 220 1.98%
Passbook accounts 11,644 401 3.44% 11,480 322 2.80%
Certificates of deposit 70,669 4,081 5.77% 69,877 4,082 5.84%
FHLB advances 1,183 97 8.20% 833 34 4.08%
----------- -------- ---------- ---------
Total interest-bearing liabilities 95,234 4,820 5.06% 93,303 4,638 4.99%
-------- ---------
Other liabilities 4,139 2,670
Stockholders' equity 14,672 13,422
----------- ----------
Total liabilities and stockholders' equity $ 114,045 $ 109,395
=========== ==========
Net interest income and interest rate spread (2) $ 4,177 2.87% $ 4,021 3.08%
======== =========
Net yield on interest-earning assets (3) 3.68% 3.74%
Ratio of average interest-earning assets to average
interest-bearing liabilities 119.06% 115.21%
</TABLE>
(1) Includes investment securities and FHLB stock.
(2) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net yield on interest-earning assets represents net interest income
divided by average interest-earning assets.
(4) Loans placed on nonaccruing status have been included in the computation
of average balances.
9
<PAGE>
Rate/Volume Analysis
The following table analyzes the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and interest-
bearing liabilities. The table distinguishes between (i) changes attributable
to volume (changes in volume multiplied by the prior period's rate), (ii)
changes attributable to rates (changes in rate multiplied by the prior period's
volume), and (iii) changes in rate/volume (change in rate times the change in
volume).
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31, Year Ended December 31,
1998 vs. 1997 1997 vs. 1996 1996 vs. 1995
Increase (Decrease) Due to Increase (Decrease) Due to Increase (Decrease) Due to
----------------------------- ---------------------------- -------------------------------
Rate/ Rate/ Rate/
Volume Rate Volume Net Volume Rate Volume Net Volume Rate Volume Net
------- ----- ------ ----- ------ ---- ------ --- ------ ---- ------ -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest-bearing deposits $ 137 $ 99 $92 $ 328 $ 144 $ (32) $(52) $ 60 $(50) $(30) $ 10 $(70)
Investments 394 11 9 414 (140) (7) 1 (146) (98) 65 (9) (42)
Loans receivable 645 (60) (8) 577 421 (19) 2 404 741 95 9 845
------ ----- --- ------ ------ ----- ---- ----- ---- ---- ---- ----
Total interest income $1,176 $ 50 $93 $1,319 $ 425 $ 58 $(49) $ 318 $593 $130 $ 10 $733
------ ----- --- ------ ------ ----- ---- ----- ---- ---- ---- ----
Interest expense:
NOW and money market
accounts $ 44 $ 38 $ 6 $ 88 $ 12 $ 8 $ 1 $ 21 $(12) $(48) $ 2 $(58)
Passbook accounts (16) (91) 4 (103) 5 73 1 79 16 (57) (2) (43)
Certificates of deposit (482) (148) 18 (612) 46 (49) 2 (1) 246 59 4 309
FHLB advances (97) - - (97) 14 34 15 63 - - 34 34
------ ----- --- ------ ------ ----- ---- ----- ---- ---- ---- ----
Total interest expense $ (551) $(201) $28 $ (724) $ 77 $ 66 $ 19 $ 162 $250 $(46) $ 38 $242
------ ----- --- ------ ------ ----- ---- ----- ---- ---- ---- ----
Net Interest Income $1,727 $ 251 $65 $2,043 $ 348 $(124) $(68) $ 156 $343 $176 $(28) $491
====== ====- === ====== ====== ===== ==== ===== ==== ==== ==== ====
</TABLE>
10
<PAGE>
Provision for Loan Losses and Asset Quality. The Bank's provision for loan
losses amounted to $205,000, $335,000, and $-0- in 1998, 1997 and 1996. The
provision, which is charged to operations, and the resulting loan loss
allowances are amounts Mooresville Savings' management believes will be adequate
to absorb potential losses on existing loans that may become uncollectible.
Loans are charged off against the allowance when management believes that
collectibility is unlikely. The evaluation to increase or decrease the
provision and resulting allowances is based on prior loan loss experience and
other factors, such as changes in the nature and volume of the loan portfolio,
overall portfolio quality, and current economic conditions. During the years
ended December 31, 1998 and 1997, management determined that its allowance for
loan losses should be increased to more closely reflect the credit risk inherent
in the loan portfolio resulting from the increase in the number of mortgage
loans collateralized by lakefront properties. These loans are inherently
riskier, because they are often the borrower's second residence. The Bank has
adopted polices to monitor, and increase when necessary, levels of loan loss
allowances. At December 31, 1998, the Bank's level of general valuation
allowances for loan losses amounted to $895,000, which management believes is
adequate to absorb potential losses in its loan portfolio.
The Bank's level of nonperforming loans, defined as nonaccrual loans and
accruing loans past due 90 days or more, has historically been low as a
percentage of total loans outstanding. Loans outstanding which were delinquent
more than 90 days were approximately $1.0 million and $1.1 million at December
31, 1998 and December 31, 1997, respectively. Real estate acquired in
settlement of loans amounted to $-0- and $81,000 in 1998 and 1997, respectively.
Noninterest Income. Noninterest income amounted to $185,000, $192,000, and
$200,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Noninterest income consists primarily of service charges and fees associated
with the Bank's checking accounts.
Noninterest Expense. Noninterest expense consists primarily of operating
expenses for compensation and employee benefits, occupancy, federal deposit
insurance premiums, data processing charges and other operating expense.
Noninterest expense amounted to $3.0 million for each of the years ended
December 31, 1998 and 1997, and $3.1 million for the year ended December 31,
1996. Compensation and employee benefits decreased by $158,000 in 1998 and
increased $455,000 during 1997, primarily due to recording a $275,000 charge to
compensation expense in 1997 as a result of the termination of the Bank's
defined benefit pension plan. The Bank paid a special one-time SAIF assessment
of $520,000 in 1996. Occupancy expenses and data processing increased nominally
during the years ended December 31, 1998, 1997 and 1996. Federal insurance
premium expense decreased $165,000 during 1997 as the SAIF assessment incurred
in 1996 resulted in lower deposit premiums for the following year.
Income Taxes. The Company's effective income tax rate was 32.0%, 35.9%, and
32.9% for the years ended December 31, 1998, 1997 and 1996, respectively. The
lower effective income rates for 1998 and 1996 were due to permanent differences
of nontaxable interest income. The effective rate for 1997 reflects normal
expected rates on taxable income.
11
<PAGE>
Capital Resources and Liquidity
The objective of the Bank's liquidity management is to ensure the availability
of sufficient cash flows to meet all of its financial commitments. Liquidity
management addresses the Bank's ability to meet deposit withdrawals either on
demand or at contractual maturity, to repay borrowings, if any, as they mature
and to originate new loans and make investments as opportunities arise.
Significant liquidity sources for the Bank are proceeds from the sale of
stock, cash provided by new savings deposits, operating activities, sale or
maturity of investments, principal and interest payments on loans receivable and
advances from the FHLB. Advances from the FHLB have not historically been a
primary source of liquidity for the Bank.
Operating activities provided $1,901,000, $819,000, and $724,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. Historically, in addition
to cash provided by operating activities, financing activities have provided the
Bank with sources of funds for asset growth and liquidity. Financing activities
provided $36.1 million and $3.6 million for the years ended December 31, 1997
and 1996, respectively. The large increase in 1997 was due to $32.5 million in
net proceeds received from the issuance of common stock in connection with the
Conversion. For the year ended December 31, 1998, $12.2 million was used in
financing activities, primarily due to the return of excess deposits from the
Conversion and cash dividends paid.
Cash provided by operating and financing activities is used by the Bank to
originate new loans to customers, to maintain investment portfolios and to meet
liquidity requirements. During 1998, 1997 and 1996, loans outstanding increased
$8.6 million, $4.0 million and $7.4 million, respectively.
As a state chartered savings bank, Mooresville Savings must meet certain
liquidity requirements which are established by the Administrator of the North
Carolina Savings Institutions Division. The Bank's liquidity ratio at December
31, 1998, as computed under such regulations, was in excess of such
requirements. Given its excess liquidity and its ability to borrow from the
FHLB, the Bank believes that it will have sufficient funds available to meet
anticipated future loan commitments, unexpected deposit withdrawals, or other
cash requirements.
Asset/Liability Management
The Bank's asset/liability management, or interest rate risk management, is
focused primarily on evaluating and managing the Bank's net interest income
given various risk criteria. Factors beyond the Bank's control, such as the
effects of changes in market interest rates and competition, may also have an
impact on the management of interest rate risk.
In the absence of other factors, the Bank's overall yield on interest-earning
assets will increase as will its cost of funds on its interest-bearing
liabilities when market rates increase over an extended period of time.
Inversely, the Bank's yields and cost of funds will decrease when market rates
decline. The Bank is able to manage these swings to some extent by attempting
to control the maturity or rate adjustments of its interest-earning assets and
interest-bearing liabilities over given periods of time.
12
<PAGE>
The Bank's "gap" is typically described as the difference between the amounts
of such assets and liabilities which reprice within a period of time. In a
declining interest rate environment, a negative gap, or a situation where the
Bank's interest-bearing liabilities subject to repricing exceed the level of
interest-earning assets which will mature or reprice, will have a favorable
impact on the Bank's net interest income. Conversely, an increase in general
market rates over a sustained period of time will tend to affect the Bank's net
interest income adversely. At December 31, 1998, the Bank had a negative gap
position of 14.26% as it reinvested its large interest-bearing cash balances
into long-term investments and loans which will be adversely impacted during
prolonged periods of rising interest rates and positively affected during
prolonged periods of interest rate declines. The Bank's asset/liability
management program has generally helped to decrease the exposure of its earnings
to interest rate increases
In order to minimize the potential effects of adverse material and prolonged
increases or decreases in market interest rates on the Bank's operations,
management has implemented an asset/liability program designed to stabilize the
Bank's interest rate gap. The program emphasizes the investment of excess cash
in short or intermediate term interest-earning assets, the solicitation of
transaction deposit accounts which are less sensitive to changes in interest
rates and can be repriced rapidly, and to a lesser extent, the origination of
adjustable rate mortgage loans.
In addition to shortening the average repricing period of its assets, the Bank
has sought to be price rate competitive in the marketplace on its maturing
certificates of deposit to encourage depositors to reinvest in certificates with
the Bank. The Bank has approximately $38.4 million in certificates maturing in
1999 and management believes that substantially all of the maturing certificates
will be renewed.
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 1998, which are
projected to reprice or mature in each of the future time periods shown. The
computations were made without using assumptions for loan prepayments or deposit
decline. Except as stated below, the amounts of assets and liabilities shown
which reprice or mature within a given period were determined in accordance with
contractual terms of the assets or liabilities. In making the computations, all
adjustable rate loans were considered to be due at the end of the next upcoming
adjustment period. Fixed rate loans are reflected at their contractual
maturities with consideration given to scheduled payments. Marketable equity
securities and savings accounts with no stated maturities are subject to
immediate repricing and availability and have been classified in the earliest
category. FHLB stock must be maintained at certain regulatory levels and is
classified in the more than ten years category. The interest rate sensitivity
of the Bank's assets and liabilities illustrated in the following table would
vary substantially if different assumptions were used or if actual experience
differs from that indicated by such assumptions.
13
<PAGE>
<TABLE>
<CAPTION>
Terms to Repricing at December 31, 1998
------------------------------------------------------------------
More than More than
1 Year 1 Year to 3 Years to More than
or Less 3 Years 5 Years 5 Years Total
-------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets (1):
Loans Receivable (2):
Adjustable rate residential 1-4 family $ 14,032 $ -- $ -- $ -- $ 14,032
Fixed rate residential 1-4 family 2,009 7,112 7,250 62,667 79,038
Other real estate loans - adjustable 7,847 -- -- -- 7,847
Other real estate loans fixed 63 224 228 1,972 2,487
Construction 4,396 -- -- -- 4,396
Other loans 1,488 202 206 1,777 3,673
-------------------------------------------------------------------
Total loans 29,835 7,538 7,684 66,416 111,473
Interest-bearing deposits 7,806 -- -- -- 7,806
Investments 5,991 3,346 1,036 1,352 11,725
FHLB Stock -- -- -- 964 964
-------------------------------------------------------------------
Total interest-earning assets $ 43,632 $ 10,884 $ 8,720 $ 68,732 $ 131,968
===================================================================
Interest-bearing liabilities:
Deposits:
Certificates of deposit $ 38,399 $ 21,190 $ 1,254 $ -- $ 60,843
Money market deposit accounts 7,715 -- -- -- 7,715
NOW accounts 6,000 -- -- -- 6,000
Passbook savings 10,222 -- -- -- 10,222
-------------------------------------------------------------------
Total interest-bearing liabilities $ 62,336 $ 21,190 $ 1,254 $ -- $ 84,780
===================================================================
Interest sensitivity gap per report $ (18,704) $ (10,306) $ 7,466 $ 68,732 $ 47,188
Cumulative gap as a percentage of (18,704) (29,010) (21,544) 47,188 47,188
total interest-earning assets (14.17)% 21.98% (16.33)% 35.76% 35.76%
Cumulative interest-earning assets
as a percentage of interest-bearing liabilities 69.99% 65.27% 74.59% 155.66% 155.66%
</TABLE>
(1) Interest-earning assets are included in the period in which the balances
are expected to be redeployed and/or repriced as a result of anticipated
prepayments, scheduled rate adjustments and contractual maturities.
(2) Based upon amortization schedules of loan maturities using a weighted
average interest rate for the entire loan portfolio.
14
<PAGE>
Impact of Inflation and Changing Prices
The financial statements and accompanying footnotes have been prepared in
accordance with generally accepted accounting principles ("GAAP"), which require
the measurement of financial position and operating results in terms of
historical dollars without consideration for changes in the relative purchasing
power of money over time due to inflation. The assets and liabilities of the
Company are primarily monetary in nature and changes in market interest rates
have a greater impact on its performance than the effects of inflation, which
has not had a significant impact on the Company during the years ended December
31, 1998, 1997 and 1996.
Impact of New Accounting Standards
The FASB has issued SFAS No. 123, Accounting for Awards of Stock-Based
Compensation to Employees. The Statement defines a fair value-based method of
accounting for an employee stock option or similar equity instrument and
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-
based method of accounting prescribed by APB Opinion No. 25, Accounting for
Stock Issued to Employees ("Opinion 25"). Under the fair value-based 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-based method, compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date or other measurement
date over the amount an employee must pay to acquire the stock. Most fixed
stock option plans - the most common type of stock compensation plan - have no
intrinsic value at grant date, and under Opinion 25 no compensation cost is
recognized for them. Compensation cost is recognized for other types of stock-
based compensation plans under Opinion 25, including plans with variable,
usually performance-based, features. This Statement requires that an employer's
financial statements include certain disclosures about stock-based employee
compensation arrangements regardless of the method used to account for them.
Although under current accounting standards the Company may employ the
intrinsic value method when accounting for stock option grants, recent
deliberations conducted by the FASB concerning Opinion No. 25 indicate that the
fair value of stock options granted after December 15, 1998, to outside
directors, who do not qualify as an employee under the common law definition,
will be required to be expensed as compensation on the vesting date under the
fair value method. On December 4, 1998, the FASB announced that it will issue
an Exposure Draft during the first quarter of 1999 which will include an
interpretation of Opinion No. 25. This interpretation is anticipated to be
final in September, 1999, and if adopted, it will be effective for events that
occur after December 15, 1998. It is expected that the FASB in its new
interpretation will take positions concerning Opinion No. 25 which would have a
material adverse affect on the Company's accounting treatment of stock options
under the stock option plan as approved by the stockholders subsequent to year
end. Specifically, it is anticipated that the FASB will no longer allow members
of the Board of Directors who are not otherwise employees of the Company to be
treated as employees when accounting for their stock based compensation. As a
result, any stock options granted to outside directors after December 15, 1998,
which are not fully vested prior to the effect ive date of the interpretation,
must have a fair value of the option at the measurement date (vesting date)
expensed by the Company under the fair value method. In order to avoid having
to expense the fair value of the options granted to outside directors, the Board
of Directors have elected to amend the stock option plan to provide for the
immediate vesting of options granted to directors. As a result, the Company may
initially account for all grants to directors under the intrinsic value method,
as long as such grants are vested to outside directors prior to the effective
date of the FASB interpretation (currently anticipated to be September, 1999).
After the effective date, any fair value increases in the common stock
underlying an option grant to a director would result in compensation expense
charged to the Company. If any grants are made to
15
<PAGE>
outside directors which are not vested prior to such effective date, or if any
options granted to employees are repriced at any time thereafter, the Company
will incur compensation expense, which may have a material adverse effect on the
net income and earnings per share of the Company. It is currently anticipated
that 25% of the aggregate number of options granted to executive officers and
senior employees of the Company and the Bank will be vested and exercisable on
the date of grant and 25% of the aggregate number of such options granted will
vest and become exercisable on each of the next three annual anniversary dates
thereafter. It is also currently anticipated that all options granted to outside
directors shall vest immediately on the date of grant.
The FASB has issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which the Company has not been required to adopt as of
December 31, 1998. This Statement, which is effective for fiscal years beginning
after June 15, 1998, establishes accounting and reporting standards for
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. This Statement is not expected to have a significant impact on the
Company.
The FASB has issued SFAS No. 134, Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise, an amendment of FASB Statement No. 65, which the Company has
not been required to adopt as of December 31, 1998. Statement No. 65, as
amended by FASB Statements No. 115, Accounting for Certain Investments in Debt
and Equity Securities, and No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, requires that after the
securitization of a mortgage loan held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed security as a trading
security. This Statement further amends Statement No. 65 to require that after
the securitization of mortgage loans held for sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed securities or
other retained interests based on its ability and intent to sell or hold those
investments. This Statement conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a nonmortgage banking enterprise.
This Statement is effective for fiscal years beginning after December 15, 1998,
and is not expected to have a significant impact on the Company.
Deposit Insurance/SAIF Recapitalization
For 1996, SAIF-insured institutions paid deposit insurance assessment rates
of $0.23 to $0.31 per $100 of deposits. In contrast, institutions insured by
the FDIC's Bank Insurance Fund (the "BIF") that were well capitalized and
without any significant supervisory concerns paid the minimum annual assessment
of $2,000, and all other BIF-insured institutions paid deposit insurance
assessment rates of $0.03 to $0.27 per $100 of deposits. In response to the
SAIF/BIF assessment disparity, the Deposit Funds Insurance Act of 1996 (the
"Funds Act") was enacted into law on September 30, 1996.
The Funds Act authorized the FDIC to impose a special assessment on all
institutions with SAIF-assessable deposits in the amount necessary to
recapitalize the SAIF. As implemented by the FDIC, institutions with SAIF-
assessable deposits paid a special assessment, subject to adjustment, of 65.7
basis points per $100 of the SAIF-assessable deposits held at March 31, 1995.
Based on the foregoing, the Bank
16
<PAGE>
charged $520,000 against pretax earnings for the year ended September 30, 1996.
This assessment was deductible in the taxable year paid.
Due to the recapitalization of the SAIF, the FDIC reduced the assessment
rate for SAIF-assessable deposits for periods beginning on October 1, 1996. The
assessment rates range from 18 to 27 basis points per $100 of deposits for t he
last calendar quarter of 1996 and range from -0- to 27 basis points per $100 of
deposits for subsequent assessment periods. However, the Funds Act also
provides that the FDIC cannot assess regular insurance assessments for an
insurance fund unless required to maintain or achieve the designated reserve
ratio of 1.25% per $100 of deposits, except for institutions that are not
classified as "well capitalized" or that have moderately severe or
unsatisfactory financial, operational, or compliance weaknesses as determined by
the FDIC. The Bank has not been so classified.
Accordingly, assuming the designated reserve ratio is maintained by the
SAIF after collection of the special assessment, the Bank will pay lower regular
SAIF assessments compared to those paid by the Bank in recent years, as long as
it maintains its current regulatory status.
In addition, the Funds Act expanded the assessment base for the payment of
interest on Financing Corporation ("FICO") bonds, which were issued in the late
1980's to recapitalize the now defunct Federal Savings and Loan Insurance
Corporation, to include the deposits of both BIF and SAIF insured institutions
beginning January 1, 1997. Until December 31, 1999, or until such earlier date
on which the last savings association ceases to exist, the rate of assessment
for BIF insured deposits will be one-fifth of the rate imposed on SAIF-
assessable deposits. The current estimate of the assessment rate for the
payment of the FICO interest is approximately 1.3 basis points for BIF-
assessable deposits and 6.4 basis points for SAIF-assessable deposits.
The Funds Act also provides for the merger of the BIF and SAIF on January
1, 1999, assuming the prior elimination of the thrift charter. The Secretary of
the Treasury was required to conduct a study of the relevant factors for the
development of a common charter for banks and thrifts and report conclusions and
findings to Congress.
Recapture of Tax Bad Debt Reserves
Prior to the enactment of the Small Business Job Protection Act of 1996
(the "1996 Act") on August 20, 1996, thrift institutions which met certain
definitional tests were permitted to establish tax reserves for bad debts and to
deduct annual additions to such reserves in arriving at taxable income. The
Bank was permitted to compute the annual bad debt deduction based upon an
experience method or a percentage equal to 8.0% of the Bank's taxable income
before such bad debt deduction (the "PTI Method"), subject to certain
limitations. Under the 1996 Act, the PTI Method was repealed and the Bank is
required to use the experience method for computing its annual bad debt
deduction for taxable years beginning on or after December 31, 1995.
The Bank will also have to recapture its excess tax bad debt reserves which
have accumulated since 1988, amounting to approximately $67,000, over a six year
period. The tax associated with the recaptured reserves is approximately
$26,000. The recapture was scheduled to begin with the Bank's 1996 year, but
was delayed two years because the Bank originated a required minimum level of
residential mortgage loans during 1996 and 1997. Deferred income taxes have
been previously established for the taxes associated with the recaptured
reserves and the ultimate payment of the related taxes will not result in a
charge to earnings. The amount of reserve recaptured and associated tax were
$11,000 and $4,000, respectively, for the year ended December 31, 1998.
17
<PAGE>
Impact of the Year 2000
A lot of attention has been given to the impact that the year 2000 date change
will have on businesses, utilities and other organizations that rely on
computerized systems to help run their operations. The year 2000 date change
can affect any system that uses computer software or computer chips including
automated equipment and machinery. For example, many computer programs and
computer chips store the calendar year portion of the date as two digits rather
than four digits. These software programs and chips record the year 1999 as
"99". This approach works until the year 2000 when the "00" may be interpreted
as the year 1900 instead of the year 2000. Banks use computer systems to
perform financial calculations, transfer funds, record deposits and loan
payments, run security systems and vaults and a myriad of other functions.
Because banks rely heavily on their computer systems, the Federal Financial
Institutions Examination Council ("FFIEC") has placed significant emphasis on
the problems surrounding the year 2000 issues and has required financial
institutions to document the assessment, testing and corrections made to ready
their computer systems and programs for the year 2000 date change. The FFIEC
has strict regulations, guidelines, and milestones in place that each FDIC
insured financial institution must follow in order to remain operational. The
Company's board of directors has remained informed of the Company's position and
progress in its year 2000 project.
The Company's year 2000 project remains on schedule according to the guidelines
set forth by the FFIEC. The Company's most critical external exposure to year
2000 system problems is with its data processing provider, Fiserv. Fiserv
renovated its systems in June 1998 and is currently testing its remediation
efforts. Fiserv planned to have all of its systems year 2000 compliant by
December 1998. Fiserv has responded to the Company that renovation of its
program is virtually complete. In the event that Fiserv is unable to make the
necessary corrections to its programs to accommodate the year 2000, the Company
will convert its data to one of the other Fiserv programs that is able to
operate in the 2000 environment. In addition, the Company has contacted its
major customers and vendors to inquire about their progress in addressing the
year 2000 problem and does not believe that the problems of such customers and
vendors will have a material adverse effect on the Company or its operations.
The Company will continue to monitor the progress of these parties in addressing
the year 2000 problem as the new millennium approaches. Management estimated the
cost to replace the computer hardware and software with year 2000 compliment
equipment to be approximately $150,000.
The year 2000 problems can affect the Company's operation in a number of ways
but the mission critical issue is maintaining customers' account information
including tracking deposits, interest accruals and loan payments. The Company
is dependent upon electricity, telephone lines, computer hardware and Fiserv's
data processing capability.
The Company is not aware of any major year 2000 problems that exist with its
electric utility and phone company. The Company is encouraged that both
companies will have all material year 2000 problems addressed well before
December 31, 1999. However, the Company believes that a temporary
unavailability of electrical power will not hinder safe and secure operations.
The Company will rely on manual operations and all of the necessary supplies
will be stored on hand by September 1, 1999 at each location. To prevent
difficulties in the event there is an unforeseen interruption in either
telephone or electrical service when the year changes, the Company will print
hard copies of all account information. In addition, the Company will download
all account information into programs on the Company's hardware that will allow
bank personnel to extract customer information without regard to outside
sources.
18
<PAGE>
[LETTERHEAD OF MCGLADREY & PULLEN, LLP]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Coddle Creek Financial Corp.
Mooresville, North Carolina
We have audited the accompanying consolidated statements of financial condition
of Coddle Creek Financial Corp. and subsidiary as of December 31, 1998 and 1997,
and the related consolidated statements of income and comprehensive income,
stockholders' equity, and cash flows for each of the years in the three year
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Coddle Creek
Financial Corp. and subsidiary as of December 31, 1998 and 1997 and the results
of their operations and their cash flows for each of the years in the three year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ McGladrey & Pullen, LLP
Charlotte, North Carolina
January 20, 1999
19
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash
Interest-bearing deposits (Note 2) $ 7,806,000 $ 36,649,000
Noninterest-bearing deposits 439,000 422,000
Certificates of deposit (Note 2) 100,000 100,000
Securities available for sale (Note 2) 10,244,000 3,054,000
Securities held to maturity (Fair value 1998 $1,430,000;
1997 $2,734,000) (Note 2) 1,381,000 2,708,000
Federal Home Loan Bank stock (Note 2) 964,000 930,000
Loans receivable, net (Note 3) 110,578,000 101,982,000
Office properties and equipment, net (Note 4) 999,000 891,000
Accrued interest receivable:
Investment securities 216,000 95,000
Loans receivable 692,000 660,000
Cash value of life insurance (Note 6) 1,075,000 971,000
Real estate owned - 81,000
Deferred income taxes (Note 8) 1,193,000 1,008,000
Income tax refund claim receivable 36,000 1,000
Prepaid expenses and other assets 88,000 33,000
----------------------------------------
Total assets $ 135,811,000 $ 149,585,000
========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------
Liabilities:
Deposits (Note 5) $ 87,569,000 $ 99,382,000
Advances from borrowers for taxes and insurance 110,000 105,000
Accounts payable and other liabilities 522,000 835,000
Deferred compensation (Note 6) 2,491,000 2,270,000
----------------------------------------
Total liabilities 90,692,000 102,592,000
----------------------------------------
Commitments (Notes 6 and 10)
Stockholders' Equity: (Note 7)
Preferred stock, authorized 5,000,000 shares; none issued - -
Common stock, no par value, authorized 20,000,000 shares;
issued 674,475 shares - -
Additional paid-in capital 32,461,000 32,494,000
Accumulated other comprehensive income, unrealized
gain on securities available for sale (Note 2) 46,000 25,000
Unearned ESOP shares (Note 9) (4,021,000) (577,000)
Retained earnings, substantially restricted (Notes 7 and 8) 16,633,000 15,051,000
----------------------------------------
Total stockholders' equity 45,119,000 46,993,000
----------------------------------------
Total liabilities and stockholders' equity $ 135,811,000 $149,585,000
========================================
</TABLE>
See Notes to Consolidated Financial Statements.
20
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans $ 8,944,000 $ 8,367,000 $ 7,963,000
Investment securities 896,000 482,000 628,000
Other 476,000 148,000 88,000
--------------------------------------------------
10,316,000 8,997,000 8,679,000
--------------------------------------------------
Interest expense:
Deposits (Note 5) 4,096,000 4,723,000 4,624,000
Federal Home Loan Bank advances - 97,000 34,000
--------------------------------------------------
4,096,000 4,820,000 4,658,000
--------------------------------------------------
Net interest income 6,220,000 4,177,000 4,021,000
Provision for loan losses (Note 3) 205,000 335,000 -
--------------------------------------------------
Net interest income after
provision for loan losses 6,015,000 3,842,000 4,021,000
--------------------------------------------------
Noninterest income 185,000 192,000 200,000
--------------------------------------------------
Other expenses:
Compensation and employee benefits (Note 6) 1,973,000 2,131,000 1,676,000
Net occupancy 318,000 191,000 162,000
Deposit insurance premiums 59,000 45,000 210,000
Special SAIF assessment (Note 12) - - 520,000
Data processing 186,000 168,000 169,000
Other 421,000 458,000 409,000
--------------------------------------------------
2,957,000 2,993,000 3,146,000
--------------------------------------------------
Income before income taxes 3,243,000 1,041,000 1,075,000
Income taxes (Note 8) 1,039,000 374,000 354,000
--------------------------------------------------
Net income 2,204,000 667,000 721,000
Other comprehensive income, net of tax:
Unrealized gains on securities, net of tax 1998
$10,000; 1997 ($2,000); 1996 ($23,000) 21,000 (3,000) (35,000)
--------------------------------------------------
Comprehensive income $ 2,225,000 $ 664,000 $ 686,000
==================================================
Basic earnings per share (Note 14) $ 3.54 $ - $ -
==================================================
Diluted earnings per share (Note 14) $ 3.54 $ - $ -
==================================================
Cash dividends per share $ 1.00 $ - $ -
==================================================
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Other
Comprehensive
Income,
Unrealized Gain
Additional on Securities Unearned
Paid-in Available ESOP
Capital for Sale Shares
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1995 $ - $ 63,000 $ -
Net income - - -
Net change in unrealized gain on
securities available for sale, net - (35,000) -
---------------------------------------------------------
Balance, December 31, 1996 - 28,000 -
Net proceeds from issuance of
common stock 32,494,000 - -
Purchase of common stock by the ESOP - - (577,000)
Net income - - -
Net change in unrealized gain on
securities available for sale, net - (3,000) -
---------------------------------------------------------
Balance, December 31, 1997 32,494,000 25,000 (577,000)
Purchase of common stock by the ESOP - - (3,639,000)
Principal payment received on note
receivable from ESOP - - 195,000
Cash dividends - - -
Net income - - -
ESOP contribution (33,000) - -
Net change in unrealized gain on
securities available for sale, net - 21,000 -
---------------------------------------------------------
Balance, December 31, 1998 $ 32,461,000 $ 46,000 $ (4,021,000)
=========================================================
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
Retained
Earnings, Total
Substantially Stockholders'
Restricted Equity
- -------------------------------------
<S> <C>
$ 13,663,000 $ 13,726,000
721,000 721,000
- (35,000)
- -------------------------------------
14,384,000 14,412,000
- 32,494,000
- (577,000)
667,000 667,000
- (3,000)
- -------------------------------------
15,051,000 46,993,000
- (3,639,000)
- 195,000
(622,000) (622,000)
2,204,000 2,204,000
- (33,000)
- 21,000
- -------------------------------------
$ 16,633,000 $ 45,119,000
=====================================
</TABLE>
23
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income $ 2,204,000 $ 667,000 $ 721,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 205,000 335,000 -
Provision for depreciation 64,000 72,000 77,000
Provision for deferred income taxes (195,000) (293,000) (72,000)
ESOP contribution (33,000) -
Amortization of deferred loan fees (232,000) (162,000) (142,000)
Loss on sale of real estate owned 10,000 - -
Changes in assets and liabilities:
(Increase) decrease in:
Interest receivable (153000) (41,000) (16,000)
Cash value of life insurance (104,000) (133,000) (106,000)
Income tax refund claim receivable (35,000) 41,000 80,000
Prepaid expenses and other assets (55,000) 28,000 (15,000)
Increase (decrease) in:
Interest payable (91,000) 27,000 28,000
Accounts payable and other liabilities 95,000 13,000 (97,000)
Deferred compensation 221,000 265,000 266,000
---------------------------------------------------
Net cash provided by
operating activities $ 1,901,000 $ 819,000 $ 724,000
---------------------------------------------------
</TABLE>
(Continued)
24
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Investing Activities
Proceeds from maturities of
certificates of deposit $ 100,000 $ 100,000 $ 100,000
Purchases of certificates of deposit (100,000) (100,000) -
Purchases of securities available for sale (16,013,000) - (951,000)
Proceeds from maturities of securities
available for sale 8,854,000 900,000 446,000
Purchases of securities held to maturity - - (498,000)
Proceeds from maturities of securities
held to maturity 1,327,000 1,000,000 3,500,000
Purchase of Federal Home Loan Bank stock (34,000) (61,000) (45,000)
Originations and principal payments on
loans receivable, net (8,501,000) (4,303,000) (7,254,000)
Loan to ESOP for purchase of common stock (4,216,000) - -
Principal payment received on note receivable
from ESOP 195,000 - -
Purchases of office properties and equipment (172,000) (41,000) (39,000)
Proceeds from the sale of real estate owned 3,000 18,000 -
-------------------------------------------------------------
Net cash used in
investing activities (18,557,000) (2,487,000) (4,741,000)
-------------------------------------------------------------
Cash Flows From Financing Activities
Net increase (decrease) in deposits (17,722,000) 5,570,000 1,654,000)
Proceeds from Federal Home
Loan Bank advances - 4,000,000 3,000,000
Payments on Federal Home
Loan Bank advances - (6,000,000) (1,000,000)
Increase (decrease) in advances from
borrowers for taxes and insurance 5,000 - (18,000)
Cash dividends paid (453,000) - -
Net proceeds from issuance of common stock - 32,494,000 -
-------------------------------------------------------------
Net cash provided by (used in)
financing activities (12,170,000) 36,064,000 3,636,000
-------------------------------------------------------------
Increase (decrease) in cash equivalents
and cash equivalents (28,826,000) 34,396,000 (381,000)
Cash and cash equivalents:
Beginning 37,071,000 2,675,000 3,056,000
-------------------------------------------------------------
Ending $ 8,245,000 $ 37,071,000 $ 2,675,000
=============================================================
</TABLE>
(Continued)
25
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Schedule of Cash and
and Cash Equivalents
Interest-bearing $ 7,806,000 $36,649,000 $2,253,000
Noninterest-bearing 439,000 422,000 422,000
-------------------------------------------------------
$ 8,245,000 $37,071,000 $2,675,000
-------------------------------------------------------
Supplemental Schedule of
Cash Flow Information
Cash payments for:
Interest $ 4,187,000 $4,793,000 $4,630,000
Income taxes 1,269,000 624,000 346,000
Supplemental Disclosures of Noncash
Transactions
Change in unrealized gain on available for sale
securities, net of deferred income taxes 21,000 (3,000) (35,000)
Real estate acquired in the settlement of loans 12,000 99,000 -
Loan to ESOP for purchase of stock - 577,000 -
Account payable to ESOP - (577,000) -
Loans originated to finance the sale of real
estate acquired in the settlement of loans 80,000 - -
Dividends accrued 169,000 - -
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Summary of Significant Accounting Policies
Conversion and organization of holding company: On December 30, 1997, pursuant
- ----------------------------------------------
to a Plan of Conversion which was approved by its members and regulators,
Mooresville Savings Bank, S.S.B. ("Mooresville Savings" or the "Bank") converted
from a North Carolina-chartered mutual savings bank to a North Carolina-
chartered stock savings bank (the "Conversion"), and became a wholly-owned
subsidiary of Coddle Creek Financial Corp. (the "Company"). The Company was
formed to acquire all of the common stock of the Bank upon its conversion to
stock form. The Company has no operations and conducts no business of its own
other than owning the Bank, investing its portion of the net proceeds received
in the Conversion, and lending funds to the Employee Stock Ownership Plan (the
"ESOP") which was formed in connection with the Conversion.
Nature of business: The Bank is primarily engaged in the business of obtaining
- ------------------
savings deposits and originating single-family residential loans within its
primary lending area of Northern Mecklenburg and Southern Iredell Counties. The
Bank's underwriting policies require such loans to be made at 80% loan to value
based upon appraised values unless private mortgage insurance is obtained.
These loans are secured by the underlying properties. The Bank's primary
regulators are the Federal Deposit Insurance Company ("FDIC") and the
Administrator of the North Carolina Savings Institutions Division (the "NC
Administrator"). The Bank's deposits are insured by the Savings Association
Insurance Fund ("SAIF") of the FDIC.
The following is a description of the significant accounting policies used in
the preparation of the accompanying financial statements.
Principles of consolidation: The consolidated financial statements include the
- ---------------------------
accounts of Coddle Creek Financial Corp. and its wholly-owned subsidiary,
Mooresville Savings Bank, S.S.B., for the year ended December 31, 1998. The
Company was capitalized on December 30, 1997, therefore, the consolidated
financial statements for the years ended December 31, 1997 and 1996 include the
operations of the Bank only. All significant intercompany transactions and
balances have been eliminated in consolidation.
Basis of financial statement presentation: The accounting and reporting
- -----------------------------------------
policies of the Company conform to generally accepted accounting principles and
general practices within the financial services industry. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the statement of financial
condition and revenues and expenses for the period. Actual results could differ
from those estimates.
Cash and cash equivalents: For purposes of reporting the statements of cash
- -------------------------
flows, the Company includes all interest and noninterest-bearing cash accounts,
which are not subject to withdrawal restrictions or penalties, as cash
equivalent and considers all highly liquid debt instruments with original
maturities when purchased of three months or less to be cash equivalents. The
Company also maintains deposits with financial institutions which are in excess
of the federally-insured amounts.
27
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)
Investment in debt securities: The Company and the Bank have investments in
- -----------------------------
debt securities, which consist of obligations of the U. S. Government and
federal agencies and municipal obligations.
SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities,
requires that management classify all securities as trading, available for sale,
or held to maturity as individual investment securities are acquired, and that
the appropriateness of such classification be reassessed at each statement of
financial condition date.
Since the Company and the Bank do not buy investment securities in anticipation
of short-term fluctuations in market prices, none of the investment securities
are classified as trading in accordance with Statement No. 115. All investment
securities have been classified as either held to maturity or available for
sale.
Securities available for sale: Securities classified as available for sale are
- -----------------------------
those securities that the Company and the Bank intend to hold for an indefinite
period of time but not necessarily to maturity. Any decision to sell a security
classified as available for sale could be based on various factors, including
significant movements in interest rates, changes in the maturity mix of the
Company and the Bank's assets and liabilities, liquidity needs, regulatory
capital considerations, and other similar factors. Securities available for
sale are carried at their fair (market) value. Premium and discounts are
amortized using a method that approximates the interest method over the
contractual lives. Unrealized gains or losses are reported as increases or
decreases in equity, net of the related deferred tax effect. Realized gains or
losses, determined on the basis of the cost of specific securities sold, are
included in income.
Securities held to maturity: Securities classified as held to maturity are
- ---------------------------
those securities the Company has both the intent and ability to hold to maturity
regardless of changes in market conditions, liquidity needs or changes in
general economic conditions. These securities are carried at cost adjusted for
amortization of premium and accretion of discount, computed by a method that
approximates the interest method over their contractual lives. Based on the
Company and the Bank's financial position and liquidity, management believes the
Company and the Bank have the ability to hold these securities to maturity.
Investment in Federal Home Loan Bank stock: The Bank, as a member of the
- ------------------------------------------
Federal Home Loan Bank ("FHLB") system, is required to maintain an investment in
capital stock of the Federal Home Loan Bank in an amount equal to the greater of
1% of its outstanding home loans or 5% of advances from the FHLB. No ready
market exists for the Federal Home Loan Bank stock, and it has no quoted market
value.
Loans receivable: Loans receivable are stated at unpaid principal balances,
- ----------------
less undisbursed loan funds, the allowance for loan losses, and net deferred
loan-origination fees and discounts. The Bank's loan portfolio consists
principally of long-term conventional loans collateralized by first deeds of
trust on single-family residences, other residential property, nonresidential
property and land. Interest income is accrued and credited to interest income
as it is earned, using the interest method.
28
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)
Allowance for loan losses: The allowance for loan losses is increased by
- -------------------------
charges to income and decreased by charge-offs (net of recoveries).
Management's periodic evaluation of the adequacy of the allowance is based on
the Bank's past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to pay, the estimated
value of any underlying collateral, and current economic conditions. While
management uses the best information to make evaluations, future adjustments may
be necessary if economic or other conditions differ substantially from the
assumptions used.
Impaired loans: SFAS No. 114, Accounting by Creditors for Impairment of a Loan,
- --------------
requires that the Bank establish specific loan loss allowances on impaired loans
if it is doubtful that all principal and interest due, according to the loan
terms, will be collected. An allowance on an impaired loan is required if the
present value of the future cash flows discounted using the loan's effective
interest rate is less than the carrying value of the loan. An impaired loan can
also be valued based upon its fair value in the market place or on the basis of
its underlying collateral if the loan is collateral dependent. If foreclosure
is imminent, and the loan is collateral dependent, the loan must be valued based
upon the fair value of the underlying collateral. Since the Bank had no loans
outstanding during the years ended December 31, 1998 and 1997 which it
considered to be impaired, there is no SFAS No. 114 allowance for unpaid loans
at December 31, 1998 and 1997.
Real estate owned: Real estate owned is initially recorded at the estimated
- -----------------
fair value at the date of foreclosure, establishing a new cost basis. Based on
periodic evaluations by management, the carrying values are reduced where they
exceed fair value minus estimated costs to sell. Costs relating to the
development and improvement of the property are capitalized, while holding costs
of the property are charged to expense in the period incurred.
Interest Income: SFAS No. 118, Accounting by Creditors for Impairment of a
- ---------------
Loan-Income Recognition and Disclosures, requires the disclosure of the Bank's
method of accounting for interest income on impaired loans. The Bank continues
to accrue interest on loans, including loans delinquent 90 days or more, when
collectibility of interest is not in doubt. At the time a loan becomes
nonperforming and collectibility of principal is in doubt, the loan is placed on
nonaccrual status by establishing an allowance for uncollected interest. When a
loan is on nonaccrual status interest income is recognized only to the extent
cash payments are received. If and when management determines that the
collectibility of principal and interest is no longer in doubt, the loan is
returned to performing status and the reserve for uncollected interest is
reversed. The Bank anticipates that it will account for interest on impaired
loans in a similar fashion in the future if and when it has impaired loans.
Loan-origination fees and related costs: Loan fees and certain direct loan
- ---------------------------------------
origination costs are deferred, and the net fee or cost is recognized as an
adjustment to interest income using the interest method over the contractual
life of the loans, adjusted for actual prepayments.
Office properties and equipment: Office properties and equipment are stated at
- -------------------------------
cost less accumulated depreciation which is computed principally by the
straight-line method.
29
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)
Benefit plans: The Bank had a noncontributory defined benefit pension plan
- -------------
covering all employees who met the eligibility requirements, which was
terminated during 1997. To have been eligible, an employee must have been 21
years of age and have completed one year of continuous service. The plan
provided benefits based on the career earnings of each participant which were
subject to certain reductions if the employee retires before reaching age 62.
The Bank's funding policy was to make the maximum annual contribution that was
deductible for income tax purposes.
The Bank has a 401(k) plan covering substantially all of its employees. The
Bank matches 50% of the qualified employees contributions, limited to 6% of the
employee's salary.
The Bank has deferred compensation and retirement agreements for the benefit of
the Board of Directors and several key employees. The plans are unfunded and
the liabilities are being accrued over the term of active service of the
participants. The Bank has also purchased life insurance policies in amounts
sufficient to discharge its obligation under the agreements in the event of
death.
The Bank has an ESOP which covers substantially all of its employees.
Contributions to the plan are based upon the amortization requirement of the
ESOP's debt to the Company, subject to compensation limitations, and are
expensed in accordance with the AICPA's Statement of Position 93-6, Employer's
Accounting for Employee Stock Ownership Plans.
Income taxes: Deferred taxes are provided on a liability method whereby
- ------------
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
Earnings per share: The FASB has issued Statement No. 128, Earnings Per Share,
- ------------------
which supersedes APB Opinion No. 15. Statement No. 128 requires the
presentation of earnings per share by all entities that have common stock or
potential common stock, such as options, warrants and convertible securities,
outstanding that trade in a public market. Those entities that have only common
stock outstanding are required to present basic earnings per share amounts.
Basic per share amounts are computed by dividing net income (the numerator) by
the weighted-average number of common shares outstanding (the denominator). All
other entities are required to present basic and diluted per share amounts.
Diluted per share amounts assume the conversion, exercise or issuance of all
potential common stock instruments unless the effect is to reduce the loss or
increase the income per common share from continuing operations. For purposes
of this computation, the number of shares of common stock purchased by the
Bank's employee stock ownership plan which have not been allocated to
participant accounts are not assumed to be outstanding. The activity from the
date of Conversion, December 30, 1997, to the end of the 1997 fiscal year is
insufficient to compute a per share amount for the that fiscal year. See Note
14 for further information.
30
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)
Fair value of financial instruments: The estimated fair values required under
- -----------------------------------
SFAS No. 107, Disclosures About Fair Value of Financial Instruments, have been
determined by the Company using available market information and appropriate
valuation methodologies. However, considerable judgment is required to develop
the estimates of fair value. Accordingly, the estimates presented for the fair
value of the Company's financial instruments are not necessarily indicative of
the amounts the Company could realize in a current market exchange. The use of
different market assumptions or estimation methodologies may have a material
effect on the estimated fair market value amounts.
The fair value estimates presented are based on pertinent information available
to management as of December 31, 1998 and 1997. Although management is not
aware of any factors that would significantly affect the estimated fair value
amount, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date and therefore, current estimates of
fair value may differ significantly from the amounts presented here.
Off-statement of financial condition risk: The Company is a party to financial
- -----------------------------------------
instruments with off-statement of financial condition risk such as commitments
to extend credit and lines of credit. Management assesses the risk related to
these instruments for potential losses on an ongoing basis.
31
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. Securities
The amortized cost and fair values of securities as of December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1998
-------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Government and federal
agencies obligations $ 9,130,000 $56,000 $ - $ 9,186,000
Municipal Obligations 1042000 16,000 - 1,058,000
-------------------------------------------------------------------------
$10,172,000 $72,000 $ - $10,244,000
=========================================================================
Securities held to maturity:
U.S. Government and federal
agencies obligations $ 100,000 $ 1,000 $ - $ 101,000
Municipal obligations 1,281,000 48,000 - 1,329,000
-------------------------------------------------------------------------
$ 1,381,000 $49,000 $ - $ 1,430,000
=========================================================================
Other investments:
Interest-earning deposits $ 7,806,000 $ - $ - $ 7,806,000
Certificates of deposit 100,000 - - 100,000
Federal Home Loan Bank stock 964,000 - - 964,000
-------------------------------------------------------------------------
$ 8,870,000 $ - $ - $ 8,870,000
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
1997
-------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Government and federal
agencies obligations $ 3,013,000 $43,000 $(2,000) $ 3,054,000
=========================================================================
Securities held to maturity:
U.S. Government and federal
agencies obligations $ 1,435,000 $ 4,000 $ - $ 1,439,000
Municipal obligations 1,273,000 22,000 1,295,000
-------------------------------------------------------------------------
$ 2,708,000 $ 26,000 $ - $ 2,734,000
=========================================================================
</TABLE>
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. Securities (Continued)
<TABLE>
<S> <C> <C> <C> <C>
Other investments:
Interest-earning deposits $36,649,000.00 $ - $ - $36,649,000.00
Certificates of deposit 100,000.00 - - 100,000.00
Federal Home Loan Bank stock 930,000.00 - - 930,000.00
-------------- -------------- -------------- --------------
$37,679,000.00 $ - $ - $37,679,000.00
============== ============== ============== ==============
</TABLE>
The amortized cost and fair value of securities at December 31, 1998 by
contractual maturity are shown below:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------ --------------
<S> <C> <C>
Securities available for sale:
Due in one year or less $ 5,305,000.00 $ 5,689,000.00
Due after one year through five years 4,547,000.00 4,232,000.00
Due after ten years 320,000.00 323,000.00
-------------- --------------
$10,172,000.00 $10,244,000.00
============== ==============
Securities held to maturity:
Due in one year or less $ 202,000.00 $ 204,000.00
Due after one year through five years 150,000.00 155,000.00
Due after five years through ten years 1,019,000.00 1,061,000.00
Due after ten years 10,000.00 10,000.00
-------------- --------------
$ 1,381,000.00 $ 1,430,000.00
============== ==============
</TABLE>
There were no sales of investment securities for the years ended December 31,
1998, 1997 and 1996.
The change in accumulated comprehensive income, which consists of unrealized
gains on securities available for sale, for the years ended December 31, 1998
and 1997 is as shown below:
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Balance, beginning $ 25,000.00 $ 28,000.00
Change in unrealized holding gains (losses) 31,000.00 (5,000.00)
Change in deferred income taxes (10,000.00) 2,000.00
---------------- -------------
Balance, ending $ 46,000.00 $ 25,000.00
================ =============
</TABLE>
33
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. Securities (Continued)
The following table sets forth certain information regarding the carrying value
and contractual maturities of the Company's investment portfolio at December 31,
1998:
<TABLE>
<CAPTION>
Carrying Value
---------------------------------------------------------------------------------------------
After One After Five
Year Years
Through Through After
One Year Five Years Ten Years Ten Years Total
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Securities available for
sale:
U.S. government and
agency $ 3,112,000 $ 1,281,000 $ - $ - $ 4,393,000
Federal Home Loan Bank
bonds 2,203,000 2,590,000 - - 4,793,000
Municipal bonds 374,000 361,000 - 323,000 1,058,000
Securities held to
maturity:
U.S. government and
agency 100,000 - - - 100,000
Municipal bonds 102,000 150,000 1,019,000 10,000 1,281,000
Other investments:
Interest-earning
deposits 7,806,000 - - - 7,806,000
Certificates of Deposit 100,000 - - - 100,000
Federal Home Loan Bank
stock - - - 964,000 964,000
--------------------------------------------------------------------------------------------
$ 13,797,000 $ 4,382,000 $ 1,019,000 $ 1,297,000 $ 20,495,000
============================================================================================
</TABLE>
The following table sets forth the weighted average yield by maturity of the
Company's investment portfolio at December 31, 1998:
<TABLE>
<CAPTION>
After One After Five
Year Years
Through Through After
One Year Five Years Ten Years Ten Years Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Securities available for
sale:
U.S. government and
agency 5.67% 6.57% - - 5.93%
Federal Home Loan Bank bonds 5.60% 5.62% - - 5.61%
Municipal bonds 4.29% 4.50% - 6.25% 4.96%
Securities held to maturity:
U.S. government and agency 6.38% - - - 6.38%
Municipal bonds 5.60% 4.80% 4.62% 4.80% 4.72%
Other investments:
Interest-earning deposits 4.90% - - - 4.90%
Certificates of Deposit 5.85% - - - 5.85%
Federal Home Loan Bank stock - - - 7.50% 7.50%
--------------------------------------------------------------------------------------------
5.19% 5.78% 4.62% 7.17 5.41%
============================================================================================
</TABLE>
34
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 3. Loans Receivable
Loans receivable at December 31 consist of the following:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------
Percentage Percentage
Amount of Total Amount of Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Real estate loans:
One-to-four family residential $ 93,063,000 84.16% $ 84,647,000 83.00 %
Multi-family residential 894,000 0.81% 856,000 0.84 %
Nonresidential 3,980,000 3.60% 3,156,000 3.09 %
Construction 7,356,000 6.65% 7,529,000 7.38 %
Equity line 7,567,000 6.84% 6,909,000 6.79 %
-----------------------------------------------------------
Total real estate loans 112,860,000 102.06% 103,097,000 101.10 %
-----------------------------------------------------------
Consumer Loans:
Installment loans 1,618,000 1.46% 2,446,000 2.40 %
Other 735,000 0.67% 995,000 0.97 %
-----------------------------------------------------------
Total consumer loans 2,353,000 2.13% 3,441,000 3.37 %
-----------------------------------------------------------
Total gross loans 115,213,000 104.19% 106,538,000 104.47 %
-----------------------------------------------------------
Less:
Construction loans in process (2,960,000) (2.68)% (3,252,000) (3.19)%
Net deferred loan fees (780,000) (0.70)% (611,000) (0.60)%
Allowance for loan losses (895,000) (0.81)% (693,000) (0.68)%
-----------------------------------------------------------
(4,635,000) (4.19)% (4,556,000) (4.47)%
-----------------------------------------------------------
$110,578,000 100.00% $101,982,000 100.00%
===========================================================
</TABLE>
The following table sets forth the time to contractual maturity of the Bank's
loan portfolio at December 31, 1998. Loans which have adjustable rates are
shown as being due in the period during which rates are next subject to change,
while fixed rate and other loans include scheduled principal repayments over the
terms of the loans but exclude estimated prepayments. Demand loans, loans
having no stated maturity and overdrafts are reported as due in one year or
less. Amounts in the table are net of loans in process and are net of
unamortized loan fees.
35
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 3. Loans Receivable (Continued)
<TABLE>
<CAPTION>
At December 31, 1998
------------------------------------------------------------
More than Greater
One Year 1 Year to than
or Less 5 Years 5 Years Total
------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable rate residential 1-4 family $ 14,032,000 $ -- $ -- $ 14,032,000
Fixed rate residential 1-4 family 2,009,000 14,362,000 63,987,000 80,358,000
Other real estate loans - adjustable 7,847,000 -- -- 7,847,000
Other real estate loans - fixed 63,000 452,000 1,972,000 2,487,000
Construction 4,396,000 -- -- 4,396,000
Other loans 1,488,000 408,000 457,000 2,353,000
Allowance for loan losses (895,000) -- -- (895,000)
------------------------------------------------------------
Totals $ 28,940,000 $ 15,222,000 $ 66,416,000 $110,578,000
============================================================
</TABLE>
The following table sets forth the dollar amount at December 31, 1998 of all
loans maturing or repricing on or after December 31, 1999 which have fixed or
adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Adjustable
Rates Rates
---------------------------
<S> <C> <C>
Residential 1 - 4 family $ 77,029,000 $ --
Other 4,609,000 --
---------------------------
$ 81,638,000 $ --
===========================
</TABLE>
The following is an analysis of the allowance for loan losses for the year ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 693,000 $ 388,000 $ 396,000
----------------------------------------
Loans charged off:
Real Estate (5,000) (32,000) (13,000)
Consumer -- -- --
----------------------------------------
Total loans charged off (5,000) (32,000) (13,000)
----------------------------------------
Recoveries:
Real Estate 2,000 2,000 --
Consumer -- -- 5,000
----------------------------------------
Total recoveries 2,000 2,000 5,000
----------------------------------------
Provision for loan losses 205,000 335,000 --
----------------------------------------
Balance at end of year $ 895,000 $ 693,000 $ 388,000
========================================
Ratio of net charge-offs to average loans outstanding 0.00% 0.03% 0.01%
========================================
</TABLE>
36
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 3. Loans Receivable (Continued)
The allocation of the allowance for loan losses applicable to each category of
loans at December 31 is as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------- ---------------------------------------------
Percent of Percent of Percent of Percent of
Amount of Allowance to Loans to Gross Amount of Allowance to Loans to Gross
Allowance Total Allowance Loans Allowance Total Allowance Loans
----------- --------------- ------------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
One-to-four family residential $297,000.00 33.18% 80.78% $315,000.00 45.45% 79.45%
Multi-family residential - - 0.78% - - 0.80%
Nonresidential - - 3.45% - - 2.96%
Construction - - 6.38% _ - 7.07%
Equity line 21,000.00 2.35% 6.57% 18,000.00 2.60% 6.49%
----------------------------------------------------------------------------------------------
Total real estate loans 318,000.00 35.53% 97.96% 333,000.00 48.05% 96.77%
----------------------------------------------------------------------------------------------
Consumer loans:
Installment loans 9,000.00 1.01% 1.40% 40,000.00 5.77% 2.30%
Other 3,000.00 0.33% 0.64% 3,000.00 0.43% 0.93%
----------------------------------------------------------------------------------------------
Total consumer loans 12,000.00 1.34% 2.04% 43,000.00 6.20% 3.23%
----------------------------------------------------------------------------------------------
Unallocated 565,000.00 63.13% - 317,000.00 45.75% -
$895,000.00 100.00% 100.00% $693,000.00 100.00% 100.00%
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
1996
--------------------------------------------------------
Percent of Percent of
Amount of Allowance to Loans to Gross
Allowance Total Allowance Loans
----------- --------------- --------------
<S> <C> <C> <C>
Real estate loans:
One-to-four family residential $258,000.00 66.49% 84.34%
Multi-family residential - - 0.75%
Nonresidential - - 2.68%
Construction - - 4.04%
Equity line 19,000.00 4.90% 4.89%
-------------------------------------------------------
Total real estate loans 277,000.00 71.39% 96.70%
-------------------------------------------------------
Consumer loans:
Installment loans 27,000.00 6.96% 2.37%
Other 4,000.00 1.03% 0.93%
-------------------------------------------------------
Total consumer loans 31,000.00 7.99% 3.30%
-------------------------------------------------------
Unallocated 80,000.00 20.62% -
-------------------------------------------------------
$388,000.00 100.00% 100.00%
========================================================
</TABLE>
37
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 3. Loans Receivable (Continued)
SFAS No. 114, Accounting by Creditors for Impairment of a Loan, as amended by
SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures, requires that the Bank establish a specific
allowance on impaired loans and disclosure of the Bank's method of accounting
for interest income on impaired loans. The Bank assesses loans delinquent more
than 90 days for impairment. Such loans amounted to approximately $1,386,000
and $1,449,000 at December 31, 1998 and 1997, respectively. These loans are
primarily collateral dependent and management has determined that the underlying
collateral value is in excess of the carrying amounts. As a result, the Bank
has determined that specific allowances on these loans is not required.
Nonperforming loans for which interest has been reduced totaled approximately
$996,000 and $1,076,000 at December 31, 1998 and 1997, respectively. The
differences between interest income that would have been recorded under the
original terms of such loans and the interest income actually recognized totaled
$30,000, $58,000 and $54,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
The following table sets forth information with respect to nonperforming assets
identified by the Bank, including nonaccrual loans and accruing loans past due
90 days or more at the date indicated:
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------
1998 1997 1996
---------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans $ 996,000 $ 1,076,000 $ 1,104,000
Accruing loans past due 90 days or more 390,000 373,000 143,000
Troubled debt restructuring - - -
Foreclosed real estate - 81,000 -
---------------------------------------------------------
Total nonperforming assets $ 1,386,000 $ 1,530,000 $ 1,247,000
=========================================================
Nonperforming loans to total gross loans 1.20% 1.36% 1.23%
=========================================================
Nonperforming assets to total assets 1.02% 1.02% 1.11%
=========================================================
Total assets $ 135,811,000 $ 149,585,000 $ 112,552,000
Total gross loans $ 115,213,000 $ 106,538,000 $ 101,184,000
</TABLE>
38
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 4. Office Properties and Equipment
Office properties and equipment at December 31 consist of the following:
<TABLE>
<CAPTION>
1998 1997
------------------------------------
<S> <C> <C>
Cost:
Land $ 364,000 $ 364,000
Buildings 879,000 879,000
Building improvements 175,000 175,000
Furniture and fixtures 743,000 578,000
Automobiles 47,000 47,000
-------------------------------------
2,208,000 2,043,000
Less accumulated depreciation 1,209,000 1,152,000
-------------------------------------
$ 999,000 $ 891,000
=====================================
</TABLE>
39
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 5. Deposits
Deposits at December 31 consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Amount Rate Percent Amount Rate Percent
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits $ 2,440,000.00 - 2.8 % $ 4,539,000 - 4.5 %
NOW accounts 6,000,000.00 0.89% 6.9 6,428,000 3.00% 6.5
Money market 7,715,000.00 4.40% 8.90 4,823,000 3.67% 4.9
Passbook savings 10,222,000.00 2.47% 11.7 17,771,000 3.00% 18.0
----------------------------------------------------------------------------------------
26,377,000.00 30.3 33,561,000 33.9
----------------------------------------------------------------------------------------
Certificates of deposit:
2.00% to 3.99% 634,000 0.7 310,000 0.3
4.00% to 5.99% 45,959,000 52.7 46,477,000 47.0
6.00% to 7.99% 14,250,000 16.3 18,538,000 18.7
8.00% to 9.99% - - 56,000 0.1
10.00% to 11.99% - - - -
----------------------------------------------------------------------------------------
60,843,000 5.46% 69.7 65,381,000 5.65% 66.1
----------------------------------------------------------------------------------------
87,220,000 100.0 % 98,942,000 100.0 %
============== ==============
Accrued interest payable 349,000 440,000
-------------------------------- ---------------------------------
$ 87,569,000 4.55% $ 99,382,000 5.10%
================================ =================================
</TABLE>
<TABLE>
<CAPTION>
1996
-------------------------------------------------------
Weighted
Average
Amount Rate Percent
-------------------------------------------------------
<S> <C> <C> <C>
Noninterest-bearing deposits $ 1,319,000 - 1.4 %
NOW accounts 5,644,000 1.08% 6.0
Money market 4,180,000 2.91% 4.5
Passbook savings 11,487,000 3.00% 12.3
-------------------------------------------------------
22,630,000 24.2
-------------------------------------------------------
Certificates of deposit:
2.00% to 3.99% 477,000 0.5
4.00% to 5.99% 48,151,000 51.6
6.00% to 7.99% 21,971,000 23.5
8.00% to 9.99% 92,000 0.1
10.00% to 11.99% 51,000 0.1
-------------------------------------------------------
70,742,000 5.78% 75.8
-------------------------------------------------------
93,372,000 100.0 %
Accrued interest payable 413,000 =====================
-----------------------------------
$ 93,785,000 4.92%
===================================
</TABLE>
40
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 5. Deposits (Continued)
The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was approximately $11,500,000 and $10,982,000 at December 31, 1998 and
December 31, 1997, respectively.
The aggregate amount of certificates of deposit by maturity with a minimum
denomination of $100,000 at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Maturity Period:
<S> <C>
Within 3 months or less $ 2,542,000
Over 3 months through 6 months 1,280,000
Over 6 months through 12 months 3,099,000
Over 12 months 4,579,000
-----------
$11,500,000
===========
</TABLE>
At December 31, 1998, the scheduled maturities of certificates of deposits are
as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amount
- ------------------------ ------------
<S> <C>
1999 $38,399,000
2000 18,211,000
2001 2,206,000
2002 773,000
2003 and thereafter 1,254,000
-----------
$60,843,000
===========
</TABLE>
Interest expense on deposits for the years ended December 31, 1998, 1997 and
1996 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C>
NOW and money market $ 329,000 $ 241,000 $ 220,000
Passbook savings 298,000 401,000 322,000
Certificates of deposit 3,469,000 4,081,000 4,082,000
----------------------------------------------------
$4,096,000 $4,723,000 $4,624,000
====================================================
</TABLE>
Eligible savings accounts are insured up to $100,000 by the SAIF which is
administered by the FDIC.
The Bank has $100,000 of U. S. Government and federal agency obligations pledged
as security for public deposits at December 31, 1998.
41
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 6. Employee Benefit Plans
The Bank had a defined benefit pension plan covering substantially all of its
employees, which was terminated during 1997. Upon termination, the Bank made
contributions to the plan so that it was fully funded, and the participants were
then paid out of the plan assets. All participants were paid by December 31,
1997, therefore there is no prepaid or accrued pension cost at December 31,
1997. Pension expense was $-0-, $378,000, and $109,000 for the years ended
December 31, 1998, 1997 and 1996, respectively. The expense for 1997 is net of
a curtailment gain of $297,000. The Company adopted FASB Statement No. 132,
Employers' Disclosures about Pensions and Other Postretirement Benefits, during
1998. The Statement revises employers' disclosures about pensions, but does not
change the measurement or recognition criteria.
The following table sets forth the Plan's funded status and amounts recognized
in the statement of financial condition as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation, beginning $ - $ 2,021,000
Service cost - 61,000
Interest cost - 139,000
Actuarial gain - (297,000)
Benefits paid - (1,924,000)
----------------------------------
Benefit obligation, ending - -
----------------------------------
Change in plan assets:
Fair value of plan assets, beginning - 1,464,000
Actual return on plan assets - 109,000
Employer contribution - 275,000
Benefits paid - (1,848,000)
----------------------------------
Fair value of plan assets, ending $ - $ -
==================================
</TABLE>
42
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 6. Employee Benefit Plans (Continued)
The components of net periodic benefit cost for the years ended December 31,
1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------
<S> <C> <C> <C>
Service cost $ - $ 61,000 $ 66,000
Interest cost - 139,000 131,000
Expected return on plan assets - (109,000) (95,000)
Amortization of prior service cost - 12,000 7,000
Additional cost to fully fund the plan upon
termination - 275,000 -
---------------------------------------------------------
Net periodic benefit cost $ - $ 378,000 $ 109,000
=========================================================
</TABLE>
Weighted-average assumptions used to develop the net periodic pension cost as of
December 31, 1998, 1997 and 1996 were:
<TABLE>
<S> <C>
Discount rate 7.0%
Expected rate of return on plan assets 7.0
Rate of compensation increase 5.0
</TABLE>
The Bank has adopted a savings plan under Section 401(k) of the Internal Revenue
Code. This plan allows employees, who meet certain service and age
requirements, to defer a percentage of their income through contributions to the
plan. In accordance with provisions of the plan, the Bank matches 50% of the
employee's contribution, limited to 6.0% of the employee's salary. The expense
for the plan was $72,000, $79,000 and $70,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
The Bank has also entered into unfunded deferred compensation agreements and a
salary continuation agreement providing retirement and death benefits for the
directors and several key employees. Vested benefits under the agreements are
payable in installments upon death or retirement. The Bank has insured the
lives of the directors and employees for amounts sufficient to discharge its
obligation under such agreements in the event of death. The cash surrender
value of these policies is $1,075,000 and $971,000 at December 31, 1998 and
1997, respectively. The present value of the liability for the benefits is
being accrued over the expected term of active service of the directors and
employees. The amount accrued is $2,491,000 and $2,270,000 at December 31, 1998
and 1997, respectively. The expense related to the agreements for the years
ended December 31, 1998, 1997 and 1996 amounted to $391,000, $350,000 and
$333,000, respectively. The discount rate of 7% was used in determining the
present value of the future obligation at December 31, 1998 and 1997,
respectively.
43
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 7. Stockholders' Equity
On December 30, 1997, the Company completed and closed its stock offering.
Gross proceeds from the sale of 674,475 shares amounted to $33,724,000 and were
reduced by conversion costs of $1,230,000. $4,216,000 of these net proceeds
were loaned to the ESOP to purchase 53,958 shares in the open market. The
Company transferred $14,134,000 of the net proceeds to the Bank for the purchase
of its common stock and retained the remaining net proceeds.
Concurrent with the Conversion, the Bank established a liquidation account in an
amount equal to its net worth as reflected in its latest statement of financial
condition contained in the definitive prospectus used in connection with the
Company's initial public offering. The liquidation account will be maintained
for the benefit of eligible deposit account holders and supplemental eligible
deposit account holders who continue to maintain their deposit accounts in the
Bank after the Conversion. Only in the event of a complete liquidation will
eligible deposit account holders and supplemental eligible deposit account
holders be entitled to receive a liquidation distribution from the liquidation
account in the amount of the then current adjusted sub-account balance for
deposit accounts then held before any liquidation distribution may be made with
respect to common stockholders. Dividends paid by the Bank subsequent to the
Conversion cannot be paid from this liquidation account.
Subject to applicable law, the Board of Directors of the Company or the Bank may
each provide for the payment of dividends. Future declarations of cash
dividends, if any, by the Company may depend upon dividend payments by the Bank
to the Company. Subject to regulations promulgated by the NC Administrator, the
Bank will not be permitted to pay dividends on its common stock if its
stockholders' equity would be reduced below the amount required for the
liquidation account or its capital requirement. The Company converted to stock
form on December 30, 1997 and has declared dividends of $622,000 and $-0- for
the years ended December 31, 1998 and December 31, 1997, respectively.
For a period of five years after its conversion from mutual to stock form, the
Bank must obtain the written approval from the NC Administrator before declaring
or paying a cash dividend to the Company on its capital stock in an amount in
excess of one-half of the greater of (i) the Bank's net income for the most
recent fiscal year end or (ii) the average of the Bank's net income after
dividends for the most recent fiscal year end and not more than two of the
immediately preceding fiscal year ends. During 1998, the Bank paid $675,000 in
regular dividends to the Company.
In connection with the Conversion, the Bank has agreed with the FDIC that,
within the first three years after completion of the Conversion, neither the
Company nor the Bank will pay any taxable dividend or make any taxable
distribution in excess of their current earnings and retained earnings. The
Company and the Bank have agreed to notify the FDIC before making a return of
capital during the first three years following the Conversion.
44
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 7. Stockholders' Equity (Continued)
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory -- and possibly additional discretionary -- actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative regulatory accounting practices.
The Bank's capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
The FDIC requires the Bank to have a minimum leverage ratio of Tier I Capital
(principally consisting of retained earnings and any other common stockholders'
equity, less any intangible assets) to all assets of at least 3%, provided that
it receives the highest rating during the examination process. For institutions
that receive less than the highest rating, the Tier I capital requirement is 1%
to 2% above the stated minimum. The FDIC also requires the Bank to have a ratio
of total capital to risk-weighted assets of 8%, of which at least 4% must be in
the form of Tier I capital. The NC Administrator requires a net worth equal to
at least 5% of total assets. The Bank complied with all of the capital
requirements at December 31, 1998 and 1997.
The following is a reconciliation of the Bank's capital in accordance with
generally accepted accounting principles (GAAP) to the components of regulatory
capital at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1998 - Bank Only
--------------------------------------------------------------------------------
Leverage Tier I N.C.
Ratio of Risk-Adjusted Risk-Based Savings Bank
Tier I Capital Capital Capital Capital
--------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Equity (GAAP) $ 30,305 $ 30,305 $ 30,305 $ 30,305
Unrealized gain on securities
available for sale (33) (33) (33) (33)
Supplemental capital items:
General valuation allowance -- -- 895 895
--------------------------------------------------------------------------------
Regulatory capital 30,272 30,272 31,167 31,167
Minimum capital requirement 3,924 2,089 5,570 6,540
--------------------------------------------------------------------------------
Excess regulatory capital $ 26,348 $ 28,183 $ 25,597 $ 24,627
================================================================================
Total assets at December 31, 1998 $ 130,808 $ 130,808
================== ================
Risk-weighted assets at
December 31, 1998 $ 69,623 $ 69,623
===========================================
Capital as a percentage of assets:
Actual 23.14% 43.48% 44.77% 23.83%
Required 3.00 3.00 8.00 5.00
-------------------------------------------------------------------------------------
Excess 20.14% 40.48% 36.77% 18.83%
=====================================================================================
</TABLE>
45
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 7. Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1997 - Bank Only
--------------------------------------------------------------------------------
Leverage Tier I N.C.
Ratio of Risk-Adjusted Risk-Based Savings Bank
Tier I Capital Capital Capital Capital
--------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Equity (GAAP) $ 29,210 $ 29,210 $ 29,210 $ 29,210
Unrealized gain on securities
available for sale (25) (25) (25) (25)
Supplemental capital items:
General valuation allowance - - 693 693
--------------------------------------------------------------------------------
Regulatory capital 29,185 29,185 29,878 29,878
Minimum capital requirement 5,983 2,783 5,565 7,479
--------------------------------------------------------------------------------
Excess regulatory capital $ 23,202 $ 26,402 $ 24 313 $ 22,399
================================================================================
Total assets at December 31, 1997 $ 149,585 $149,585
============ =============
Risk-weighted assets at
December 31, 1997 $ 69,566 $ 69,566
=========================================
Capital as a percentage of assets:
Actual 19.51% 41.95% 42.95% 19.97%
Required 4.00 4.00 8.00 5.00
-------------------------------------------------------------------------------------
Excess 15.51% 37.95% 34.95% 14.97%
======================================================================================
</TABLE>
A ratio of 4% of total assets was used for purposes of computing the minimum
required leverage ratio of Tier I Capital.
As of December 31, 1998, the most recent notification from the FDIC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must
maintain total capital to risk weighted assets of 10%, Tier I Capital to risk
weighted assets of 6% and Tier I Capital to total assets of 5% or $6,962,000,
$4,177,000 and $6,540,000 respectively. There are no conditions or events since
the notification that management believes have changed the Bank's category.
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 8. Income Tax Matters
Under the Internal Revenue Code, the Bank is allowed a special bad debt
deduction related to additions to the tax bad debt reserve established for the
purpose of absorbing losses. Through 1995, the provisions of the Code permitted
the Bank to deduct from taxable income an allowance for bad debts based on 8% of
taxable income before such deduction or actual loss experience. Legislation was
passed in 1996 that eliminated this percentage of taxable income method as an
option for computing bad debt deductions for 1996 and all future years. The
Bank is still permitted to take deductions for bad debts, but is required to
compute such deductions using an experience method. The Bank's tax bad debt
deduction was $31,000, $30,000 and $8,000 in 1998, 1997 and 1996, respectively.
In conjunction with the change in computing the tax bad debt deduction, the Bank
will also have to recapture its excess tax bad debt reserves which have
accumulated since 1988, amounting to approximately $67,000, over a six year
period. The tax associated with the recaptured reserve is approximately
$26,000. The recapture was scheduled to begin with the Bank's 1996 year, but
was delayed two years because the Bank originated a required minimum level of
residential mortgage loans during 1996 and 1997. Deferred income taxes have
been previously established for the taxes associated with the recaptured
reserves and the ultimate payment of the related taxes will not result in a
charge to earnings. The amount of reserve recaptured and associated tax were
$11,000 and $4,000, respectively, for the year ended December 31, 1998.
Deferred taxes have been provided for certain increases in the Bank's tax bad
debt reserves subsequent to 1987 which are in excess of recorded book loan loss
allowances. At December 31, 1998 and 1997, retained earnings contain certain
historical additions to the bad debt reserve for income tax purposes of
approximately $3,816,000, the balance prior to 1988, for which no deferred taxes
have been provided because the Bank does not intend to use these reserves for
purposes other than to absorb losses. If this pre-1988 reserve is used for
purposes other than to absorb losses or adjustments arising from the carryback
of net operating losses, income taxes may be imposed at the then existing rates.
The unrecorded deferred income tax liability on the above amount was
approximately $1,493,000 as of December 31, 1998 and 1997.
47
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 8. Income Tax Matters (Continued)
The tax effects of temporary differences that gave rise to significant portions
of the net deferred tax asset in the statement of financial condition were as
follows at December 31:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Deferred tax assets:
Interest income on non performing assets $ 15,000 $ 18,000
Deferred compensation 966,000 884,000
Allowance for loan losses 347,000 270,000
Pension plan contribution 158,000 149,000
Accrued expenses 42,000 -
-------------------------------
1,528,000 1,321,000
-------------------------------
Deferred tax liabilities:
Property and equipment 109,000 105,000
FHLB stock dividends 136,000 136,000
Section 401 (k) contribution - 6,000
Deferred loan fees 35,000 17,000
Tax bad debt reserves 22,000 26,000
Unrealized gains on securities 26,000 16,000
FHLB accrued dividend 7,000 7,000
-------------------------------
335,000 313,000
-------------------------------
Net deferred tax asset $1,193,000 $1,008,000
===============================
</TABLE>
At December 31, 1998 and 1997, no valuation allowance was recorded for deferred
tax assets.
Income tax expense (credits) for the year ended December 31, 1998, 1997 and 1996
consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------
<S> <C> <C> <C>
Current $ 1,234,000 $ 667,000 $ 426,000
Deferred (195,000) (293,000) (72,000)
---------------------------------------------------------
$ 1,039,000 $ 374,000 $ 354,000
=========================================================
</TABLE>
48
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 8. Income Tax Matters (Continued)
A reconciliation of the federal income tax rate to the effective tax rate for
the year ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 34.0%
Increases (decreases) in taxes resulting from:
Nontaxable income (4.5) (2.1) (2.50)
Nondeductible expense 1.2 -
State income tax, net of federal benefit 2.3 1.6 1.20
Underaccrual 0.2 1.1 -
Other - 0.1 0.20
-----------------------------------------------------------
Effective tax rate 32.0% 35.9% 32.9%
===========================================================
</TABLE>
Note 9. Employee Stock Ownership Plan
The Bank has established an employee stock ownership plan (ESOP) to benefit all
qualified employees. The ESOP purchased 53,958 shares of common stock in the
open market subsequent to the Conversion with proceeds received from a loan from
the Company.
The Company's note receivable is to be repaid based upon 15 annual installments
of principal and interest on December 31 of each year through December 31, 2012.
Interest is based upon the prime rate, which will be adjusted and paid annually.
The note may be prepaid without penalty. The unallocated shares of stock held
by the ESOP are pledged as collateral for the debt. The ESOP is funded by
contributions made by the Bank in amounts sufficient to retire the debt. The
note receivable is presented as a reduction of stockholders' equity and had an
outstanding balance of $4,021,000 and $577,000 at December 31, 1998 and December
31, 1997, respectively.
Shares are released as the debt is repaid and earnings from the common stock
held by the ESOP are allocated among participants on the basis of compensation
in the year of allocation. Benefits become 100% vested after five years of
credited service. Forfeitures of nonvested benefits will be reallocated among
remaining participating employees in the same proportion as contributions.
Dividends on unallocated shares may be used by the ESOP to repay the debt to the
Company and are not reported as dividends but as additional compensation expense
in the financial statements. The amount allocated to compensation expense in
1998 was $40,000. Dividends on allocated or committed to be allocated shares
may also be used to repay the debt to the Company and are reported as dividends
in the financial statements.
At December 31, 1998, 3,887 shares held by the ESOP have been released or
committed to be released to the plan's participants for purposes of computing
earnings per share. The fair value of the unallocated shares amounted to
approximately $3,100,000 at December 31, 1998.
49
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 9. Employee Stock Ownership Plan (Continued)
The ESOP has a put option which requires the Company to repurchase its common
stock from participants in the ESOP who are eligible to receive benefits under
the terms of the plan and elect to receive cash in exchange for their common
stock. The potential commitment for the put option is $241,000 at December 31,
1998 based on the fair value of the shares released of $62.00 per share. This
commitment will fluctuate based on the fair value of the shares.
Note 10. Commitments, Contingencies and Related Party Transactions
In addition to undisbursed loan funds outstanding, the Bank has mortgage loan
commitments and unused home equity loans and lines of credit outstanding at
December 31, 1998. Commitments, which are disbursed subject to certain
limitations, extend over varying periods of time with the majority subject to
disbursement over a 6-month period. A summary of these commitments, except for
undisbursed loan funds is as follows:
<TABLE>
<CAPTION>
Fixed Rate Variable Rate Total
------------------------------------------------------------
<S> <C> <C> <C>
Commitments to extend credit, mortgage loans $ 4,401,000 $ - $ 4,401,000
Unused home equity loans and lines of credit - 4,958,000 4,958,000
</TABLE>
The Bank has made loans to its officers and directors in the normal course of
business. The following is an analysis of the loans to officers and directors
for the year ended December 31, 1998:
<TABLE>
<S> <C>
Balance, beginning $ 664,000
Originations 57,000
Payments (247,000)
-----------------
Balance, ending $ 474,000
=================
</TABLE>
Additionally, officers and directors maintain deposits with the Bank in the
normal course of business. Such deposits amounted to approximately $1,448,000
at December 31, 1998.
The Bank has entered into employment agreements with certain key employees in
order to establish their duties and compensation and to provide for their
continued employment with the Bank. The agreements will provide 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, each agreement may be extended for an additional
year so that the remaining term shall be three years, unless written notice of
non-renewal is given by the Board of Directors.
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue and is
developing a remediation plan to resolve the Year 2000 Issue.
50
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 10. Commitments, Contingencies and Related Party Transactions (Continued)
The Year 2000 Issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Company is heavily dependent on computer processing in the
conduct of business activities.
Based on the review of the computer systems, management believes the cost of the
remediation effort to make the systems Year 2000 ready is approximately
$150,000. Management expects the cost will be incurred primarily in 1999. Such
costs are primarily related to the purchase of new equipment, which will be
capitalized.
Note 11. Fair Value of Financial Instruments
The following table reflects a comparison of carrying amounts and the fair
values of the financial instruments as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financial assets:
Cash
Interest-bearing deposits $ 7,806,000 $ 7,806,000 $ 3,6649,000 $ 3,6649,000
Noninterest-bearing deposits 439,000 439,000 422,000 422,000
Certificates of deposit 100,000 100,000 100,000 100,000
Investments 11,625,000 11,674,000 5,762,000 5,788,000
Loans receivable 110,578,000 115,351,000 101,982,000 104,571,000
Accrued interest receivable 908,000 908,000 755,000 755,000
FHLB stock 964,000 964,000 930,000 930,000
Financial liabilities:
Deposits 87,569,000 85,238,000 99,382,000 99,251,000
Advances from borrowers for
taxes and insurance 110,000 110,000 105,000 105,000
</TABLE>
The fair values utilized in the table were derived using the information
described below for the group of instruments listed. It should be noted that
the fair values disclosed in this table do not represent market values of all
assets and liabilities of the Company and, thus, should not be interpreted to
represent the market or liquidation value of the Company.
51
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 11. Fair Value of Financial Instruments (Continued)
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:
Cash and Certificates of Deposits: The carrying amounts for cash and short-term
- ----------------------------------
instruments approximate their fair values.
Investment securities: Fair values for securities are based on quoted market
- ----------------------
prices, where available. If quoted market prices are not available, fair values
are based on quoted market prices of similar securities.
Loans receivable: The fair value of fixed rate loans is estimated by
- -----------------
discounting the future cash flows, adjusted for prepayments, using the current
rates at which similar loans would be made to borrowers with similar credit
ratings and for the s ame remaining maturities. For variable rate loans that
reprice frequently and with no significant change in credit risk, fair values
are equal to carrying amounts. Management believes that the allowance for loan
losses is an appropriate indication of the applicable credit risk associated
with determining the fair value of its loan portfolio and has been deducted from
the estimated fair value of loans.
Accrued interest receivable and advances from borrowers for taxes and insurance:
- -------------------------------------------------------------------------------
The fair value of accrued interest receivable and advances from borrowers for
taxes and insurance is the amount receivable on demand at the statement of
financial condition date.
Deposits: The fair value of demand deposits, savings accounts, and certain
- ---------
money market deposits is the amount payable on demand at the statement of
financial condition. The fair value of fixed maturity certificates of deposit
are estimated based upon the discounted value of contractual cash flows using
rates currently offered for deposits with similar remaining maturities.
Off-statement of financial condition instruments: Fair values for the Bank's
- -------------------------------------------------
off-statement of financial condition instruments (loan commitments) are based on
fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties' credit standings. The
fair value for such commitments is nominal.
Note 12. Special SAIF Assessment
On September 30, 1996, the "Deposit Insurance Funds Act of 1996" was signed into
law. The legislation included a special assessment to recapitalize the SAIF
insurance fund up to its statutory goal of 1.25% of insured deposits. The
assessment was equal to approximately 65 basis points of the SAIF assessable
deposit base as of March 31, 1995. The expense recorded for the special
assessment for the year ended December 31, 1996 amounted to $520,000.
52
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 13. Parent Company Financial Data
The following are condensed financial statements for Coddle Creek Financial
Corp. as of December 31, 1998 and 1997 and for the year ended December 31, 1998.
The Company had no operations during the period from December 30, 1997 through
December 31, 1997.
Condensed Statement of Financial Condition
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------------------------------------
<S> <C> <C>
Assets:
Cash $ 9,976,000 $ 9,371,000
Investment in Mooresville Savings Bank, S.S.B. 30,305,000 29,210,000
Securities available for sale 4,929,000 -
Due from Mooresville Savings Bank, S.S.B. - 8,989,000
Other assets 101,000 -
--------------------------------
Total assets $ 45,311,000 $ 47,570,000
================================
Accounts payable and other liabilities $ 192,000 $ 577,000
--------------------------------
Stockholders' Equity:
Additional paid-in capital 32,461,000 32,494,000
Unrealized gain on securities available for sale, net of tax 46,000 25,000
Unearned ESOP shares (4,021,000) (577,000)
Retained earnings 16,633,000 15,051,000
--------------------------------
Total stockholders' equity 45,119,000 46,993,000
--------------------------------
Total liabilities and stockholders' equity $ 45,311,000 $ 47,570,000
================================
</TABLE>
Condensed Statement of Income
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Equity in earnings of Mooresville Savings Bank, S.S.B. $ 1,790,000
Interest income 657,000
Other expense (66,000)
Income tax expense (177,000)
------------
Net income $ 2,204,000
============
</TABLE>
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 13. Parent Company Financial Data (Continued)
Condensed Statements of Cash Flows
Year Ended December 31, 1998 and the Period from December 30, 1997 through
December 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 2,204,000 $ -
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of Mooresville Savings Bank, S.S.B. (1,790,000) -
Changes in assets and liabilities:
Increase in:
Other assets (101,000) -
Accounts payable and other liabilities 11,000 -
------------- ------------
Net cash provided by operating activities 324,000 -
------------- ------------
Cash Flows from Investing Activities:
Initial investment in Mooresville Savings Bank, S.S.B. - (14,134,000)
Due from Mooresville Savings Bank, S.S.B. 8,989,000 (8,989,000)
Upstream dividend from Mooresville Savings Bank, S.S.B. 675,000 -
Purchases of securities available for sale (9,459,000) -
Proceeds from maturities of securities available for sale 4,550,000 -
Loan to ESOP for purchase of common stock (4,216,000) -
Principal payment received on note receivable from ESOP 195,000 -
------------- ------------
Net cash provided by (used in) investing activities 734,000 (23,123,000)
------------- ------------
Cash Flows from Financing Activities:
Net proceeds from issuance of common stock - 32,494,000
Cash dividends paid (453,000) -
------------- ------------
Net cash provided by (used in) financing activities (453,000) 32,494,000
------------- ------------
Net increase in cash 605,000 9,371,000
Cash - beginning 9,371,000 -
------------- ------------
Cash - ending $ 9,976,000 $ 9,371,000
------------- ------------
Supplemental Disclosures of Noncash Transactions
Loan to ESOP for purchase of stock $ - $ 577,000
Account payable to ESOP - (577,000)
Dividends accrued 169,000 -
</TABLE>
54
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 14. Earnings Per Share
Earnings per share has been calculated in accordance with FASB Statement No.
128, Earnings Per Share. For purposes of this computation, the number of shares
of common stock purchased by the Bank's employee stock ownership plan which have
not been allocated to participant accounts are not assumed to be outstanding.
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
--------------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
--------------------------------------------------------------------------
<S> <C> <C> <C>
Basic and Diluted EPS $ 2,204,000 $ 622,839 $ 3.54
==========================================================================
</TABLE>
Note 15. Future Reporting Requirements
The FASB has issued SFAS No. 123, Accounting for Awards of Stock-Based
Compensation to Employees. The Statement defines a fair value-based method of
accounting for an employee stock option or similar equity instrument and
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-
based method of accounting prescribed by APB Opinion No. 25, Accounting for
Stock Issued to Employees ("Opinion 25"). Under the fair value-based 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-based method, compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date or other measurement
date over the amount an employee must pay to acquire the stock. Most fixed
stock option plans - the most common type of stock compensation plan - have no
intrinsic value at grant date, and under Opinion 25 no compensation cost is
recognized for them. Compensation cost is recognized for other types of stock-
based compensation plans under Opinion 25, including plans with variable,
usually performance-based, features. This Statement requires that an employer's
financial statements include certain disclosures about stock-based employee
compensation arrangements regardless of the method used to account for them.
On December 4, 1998, the FASB announced that it will issue an Exposure Draft
during the first quarter of 1999 which will include an interpretation of APB
Opinion No. 25. This interpretation is anticipated to be final in September,
1999, and if adopted, it will be effective for events that occur after December
15, 1998. Under the interpretation, certain transactions should they occur
would cause an entity to adopt fair value accounting for stock options.
55
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 15. Future Reporting Requirements (Continued)
The FASB has issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which the Company has not been required to adopt as of
December 31, 1998. This Statement, which is effective for fiscal years beginning
after June 15, 1998, establishes accounting and reporting standards for
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. This Statement is not expected to have a significant impact on the
Company.
The FASB has issued SFAS No. 134, Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise, an amendment of FASB Statement No. 65, which the Company has
not been required to adopt as of December 31, 1998. Statement No. 65, as
amended by FASB Statements No. 115, Accounting for Certain Investments in Debt
and Equity Securities, and No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, requires that after the
securitization of a mortgage loan held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed security as a trading
security. This Statement further amends Statement No. 65 to require that after
the securitization of mortgage loans held for sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed securities or
other retained interests based on its ability and intent to sell or hold those
investments. This Statement conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a nonmortgage banking enterprise.
This Statement is effective for fiscal years beginning after December 15, 1998,
and is not expected to have a significant impact on the Company.
56
<PAGE>
CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 16. Subsequent Event
The Company's stockholders approved the Company's Stock Option Plan and the
Bank's Management Recognition Plan (the "MRP") on January 26, 1999. The Stock
Option Plan reserves for issuance up to 67,447 stock options to officers,
directors, and employees at the time of the adoption either in the form of
incentive stock options or non-incentive stock options. The exercise price of
the stock options may not be less than the fair value of the Company's common
stock at date of grant. As permitted under the generally accepted accounting
principles, grants under the plan will be accounted for following the provisions
of APB Opinion No. 25 and its related interpretations. See Note 15 for further
information.
The MRP reserved for issuance 26,979 shares of common stock to officers,
directors, and employees at the time of the adoption. The Bank issued shares to
fund the MRP on January 26, 1999. The restricted common stock under the MRP
vests 25% immediately at the date of grant and 25% annually beginning on the one
year anniversary of the date of grant.
57
<PAGE>
CORPORATE INFORMATION
<TABLE>
<S> <C> <C>
EXECUTIVE OFFICERS:
George W. Brawley, Jr. Dale W. Brawley Billy R. Williams
President and CEO Executive Vice President Secretary/Controller
DIRECTORS:
George W. Brawley, Jr. Dale W. Brawley Claude U. Voils, Jr.
Chairman of the Board, President and Executive Vice President of Moorseville Retired Chemist
CEO of Moorseville Savings Bank Savings Bank of National Starch
Jack G. Lawler Willis Barnette Donald R. Belk
Retired President of President of Custom Products, Inc. President of E.F. Belk & Son
Taltronics Electrical Contractors
</TABLE>
<TABLE>
<S> <C>
Stock Transfer Agent Annual Meeting
Registrar and Transfer Company The 1999 annual meeting of stockholders of
10 Commerce Drive Coddle Creek Financial Corp. will be held at
Cranford, NJ 07016 11:00 A.M. on April 21, 1999 at the Company's
corporate office at 347 North Main Street,
Mooresville, NC.
Special Legal Counsel Form 10-K
Brooks, Pierce, McLendon, A copy of Form 10-K, including the financial statements
Humphrey & Leonard, LLP for the year ended December 31, 1998, as filed with
2000 Renaissance Plaza the Securities and Exchange Commission will be
230 North Elm Street furnished without charge to the Company's stockholders
Greensboro, NC 27420 upon written request to Coddle Creek Financial Corp., 347
Main Street, P.O. Box 117, Mooresville, NC 28115
Attn: George Brawley, President
Independent Auditors
McGladrey & Pullen, LLP Corporate Office
One Morrocroft Centre 347 North Main Street
6805 Morrison Boulevard, Suite 200 P.O. Box 117
Charlotte, NC 28211 Mooresville, NC 28115
</TABLE>
58
<PAGE>
Common Stock Information
On December 30, 1997, the Company issued 674,475 shares of common stock. The
Company's common stock began trading on December 31, 1997 and is traded on the
over the counter market with quotations available through the OTC Electronic
Bulletin Board under the symbol "CDLC". At December 31, 1998, there were
approximately 462 shareholders of record, not including the number of persons or
entities where stock is held in nominee or "street" name through various
brokerage firms or banks. The following table reflects the stock trading and
dividend payment frequency of the Company for the years ended December 31, 1998
and 1997.
<TABLE>
<CAPTION>
Stock Price
----------------------------------------
Dividends High Low
------------------------------------------------------------
<S> <C> <C> <C>
1998
First Quarter $ 0.25 $ 82.75 $ 70.00
Second Quarter 0.25 89.00 74.25
Third Quarter 0.25 73.25 42.00
Fourth Quarter 0.25 62.00 52.00
1997
First Quarter $ N/A $ N/A $ N/A
Second Quarter N/A N/A N/A
Third Quarter N/A N/A N/A
Fourth Quarter - 70.00 50.00
</TABLE>
59
<PAGE>
[LETTERHEAD OF MCGLADREY & PULLEN, LLP]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report, dated January 20, 1999,
included in this Form 10-K in the previously filed Registration Statements of
Coddle Creek Financial Corp. on Form S-8 (No. 333-42003).
/s/ McGladrey & Pullen, LLP
Charlotte, North Carolina
March 23, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CODDLE CREEK
FINANCIAL CORP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-31-1998 JAN-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 439 422
<INT-BEARING-DEPOSITS> 7,806 36,649
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 10,244 3,054
<INVESTMENTS-CARRYING> 2,445 3,738
<INVESTMENTS-MARKET> 2,494 3,764
<LOANS> 111,473 102,675
<ALLOWANCE> 895 693
<TOTAL-ASSETS> 135,811 149,585
<DEPOSITS> 87,569 99,382
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 3,123 3,210
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 45,119 46,993
<TOTAL-LIABILITIES-AND-EQUITY> 135,811 149,585
<INTEREST-LOAN> 8,944 8,367
<INTEREST-INVEST> 896 482
<INTEREST-OTHER> 476 148
<INTEREST-TOTAL> 10,316 8,987
<INTEREST-DEPOSIT> 4,096 4,723
<INTEREST-EXPENSE> 4,096 4,820
<INTEREST-INCOME-NET> 6,220 4,177
<LOAN-LOSSES> 205 335
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 2,957 2,993
<INCOME-PRETAX> 3,243 1,041
<INCOME-PRE-EXTRAORDINARY> 3,243 1,041
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,204 667
<EPS-PRIMARY> 3.54 0
<EPS-DILUTED> 3.54 0
<YIELD-ACTUAL> 7.80 7.93
<LOANS-NON> 996 1,076
<LOANS-PAST> 390 373
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 693 388
<CHARGE-OFFS> 5 32
<RECOVERIES> 2 2
<ALLOWANCE-CLOSE> 895 693
<ALLOWANCE-DOMESTIC> 330 376
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 565 317
</TABLE>
