<PAGE>
2
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X] Filed by a Party other than the Registrant []
Check the appropriate box:
[X] Preliminary Proxy Statement [X] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e) (2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CAROLINA FIRST BANCSHARES, INC.
--------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
CAROLINA FIRST BANCSHARES, INC.
236 EAST MAIN STREET
LINCOLNTON, NORTH CAROLINA 28092
March 26, 1999
Dear Shareholders:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of Carolina First BancShares, Inc. which will be held in the
Lincoln Cultural Center, 403 East Main Street, Lincolnton, North Carolina, on
Tuesday, April 20, 1999 at 6:00 P.M. local time.
We hope you can attend the Meeting. At the Meeting, shareholders will
be asked to elect 10 directors to serve one-year terms, and to approve and adopt
a long-term incentive plan. Even if you are planning to attend the Meeting,
please complete the enclosed proxy card and return it to us so that your shares
may be voted. You will still be able to vote your shares in person if you attend
the Meeting.
We look forward to seeing you on April 20.
Sincerely,
L. D. Warlick, Jr.
Chairman
PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ACCOMPANYING FORM OF PROXY IN
THE POSTAGE PAID RETURN ENVELOPE FURNISHED FOR THAT PURPOSE, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
<PAGE>
CAROLINA FIRST BANCSHARES, INC.
236 EAST MAIN STREET
LINCOLNTON, NORTH CAROLINA 28092
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on
April 20, 1999
Notice is hereby given that the 1999 Annual Meeting of Shareholders
(the "Meeting") of Carolina First BancShares, Inc. (the "Company"), will be held
in the Lincoln Cultural Center, 403 East Main Street, Lincolnton, North Carolina
on Tuesday, April 20, 1999 at 6:00 P.M., local time, for the following purposes:
1. To elect Harold D. Alexander, James E. Burt, III, Charles A. James,
Walter M. Jones, Jr., Jack L. Lutz, Samuel C. King, Jr., Harry D.
Ritchie, Thomas M. Robbins, L. D. Warlick, Jr., and Estus B. White to
serve as directors of the Company for a one-year term and until their
successors are elected and qualified;
2. To approve and adopt the Carolina First BancShares, Inc. 1999
Long-Term Incentive Plan; and
3. To transact such other business as may properly come before the
Meeting or any adjournments thereof. The enclosed Proxy Statement
explains these proposals. We urge you to read these materials
carefully.
Only those shareholders of record at the close of business on March 1, 1999
are entitled to notice of, and to vote at, the Meeting or any adjournments or
postponements thereof.
You are cordially invited to attend the Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
RETURN ENVELOPE. IF YOU NEED ASSISTANCE IN COMPLETING YOUR PROXY, PLEASE CALL
THE UNDERSIGNED AT (704) 732-2222.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL OF THE PROPOSALS PRESENTED.
By Order of the Board of Directors,
Jan H. Hollar
Secretary
Lincolnton, North Carolina
March 26, 1999
<PAGE>
CAROLINA FIRST BANCSHARES, INC.
Proxy Statement for the Annual Meeting
of Shareholders to be held on April 20, 1999
INTRODUCTION
This Proxy Statement is furnished to shareholders of Carolina First
BancShares, Inc., a North Carolina corporation (herein, unless the context
otherwise requires, together with its subsidiaries, the "Company"), in
connection with the solicitation of proxies by the Company's Board of Directors
for use at the Annual Meeting of Shareholders to be held at 6:00 P.M. local time
in the Lincoln Cultural Center, 403 East Main Street, Lincolnton, North Carolina
on Tuesday, April 20, 1999, and at any adjournments or postponements thereof
(the "Meeting"). The Meeting will be held for the purposes of (i) electing
Harold D. Alexander, James E. Burt, III, Charles A. James, Walter M. Jones, Jr.,
Samuel C. King, Jr., Jack L. Lutz, Harry D. Ritchie, Thomas M. Robbins, L. D.
Warlick, Jr., and Estus B. White as directors of the Company; (ii) approving and
adopting the Carolina First BancShares, Inc. 1999 Long-Term Incentive Plan (the
"1999 Plan"); and (iii) transacting such other business as may properly come
before the Meeting.
The Company's principal executive offices are located at 236 East Main
Street, Lincolnton, North Carolina 28092, and the mailing address is P.O. Box
657, Lincolnton, North Carolina 28093, and its telephone number is (704)
732-2222. This Proxy Statement is dated March 26, 1999, and was mailed to
shareholders of the Company on or about that date.
SHAREHOLDERS ENTITLED TO VOTE
Only shareholders of record of the Company at the close of business on
March 1, 1999 (the "Record Date") are entitled to notice of, and to vote at, the
Meeting. Each share of the Company's $2.50 par value common stock (collectively,
the "Shares") issued and outstanding on the Record Date is entitled to one vote
on each proposal.
On the Record Date, there were approximately 5,436,837 Shares issued
and outstanding which were held by approximately 4,242 holders of record.
Notwithstanding the Record Date specified above, the Company's stock transfer
books will not be closed, and Shares may be transferred subsequent to the Record
Date. However, all votes must be cast in the names of shareholders of record on
the Record Date. Proxies are being solicited by the Company's Board of Directors
and may be revoked prior to exercise.
VOTES REQUIRED
The approval of each proposal set forth in this Proxy Statement
requires that a quorum be present at the Meeting. The presence, in person or by
properly executed proxy, of the holders of a majority of the Shares entitled to
vote at the Meeting is necessary to constitute a quorum. Abstentions and "broker
non-votes" will be counted as Shares present for purposes of determining the
presence of a quorum. A "broker non-vote" occurs when a nominee does not have
discretionary voting power with respect to that proposal and has not received
instructions from the beneficial owner.
Proposal I, relating to the election of the nominees for director,
requires approval by a plurality of the votes cast in the election. This means
that nominees will be elected only if the holders of more shares voting at the
Meeting vote for a nominee than withhold authority for such nominee.
Proposal II requires approval by the holders of a majority of the
Shares voting on the matter at the Meeting. With respect to such proposal,
abstentions will be counted, but "broker non-votes" will not be counted as
having voted. Abstentions will have the same effect as votes cast against such
proposal for purposes of determining whether such proposal has received
sufficient votes for approval.
<PAGE>
PROXIES
Shares represented by properly executed proxies, if such proxies are
received in time and are not revoked, will be voted in accordance with the
instructions on the proxies. If no instructions are indicated, such proxies will
be voted in favor of (i) the election of all nominees for director, (ii) the
approval and adoption of the 1999 Plan, and (iii) the best judgment of the
persons designated in such proxies as to any other matters which may properly
come before the Meeting. Shareholders who have given a proxy may revoke it at
any time prior to its exercise by (i) giving written notice to Jan H. Hollar at
the Company, or (ii) submitting to the Company a properly executed proxy bearing
a later date, or (iii) voting in person at the Meeting.
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Board of Directors has nominated the persons named below
for election as directors to hold office until the next annual meeting of the
shareholders of the Company and until their successors shall have been elected
and qualified. It is believed that all of the nominees will be available and
able to serve as directors. If for any reason any of these persons should not be
available or able to serve, the proxies may exercise discretionary authority to
vote for substitutes proposed by the Company's Board of Directors.
Under the Company's Bylaws, the Board of Directors of the Company shall
consist of not less than three nor more than 25 members, the number of which
shall be fixed and determined from time to time either by resolution of the
Board of Directors or by resolution of the shareholders. The Board of Directors
has fixed the number of directors at 10. The Company has nominated 10 persons to
serve as directors. All current directors have been nominated for reelection,
except John R. Boger, Jr. who will reach the mandatory retirement age by the
time of the Meeting, and is retiring. Proxies may not be voted for more than 10
nominees at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
NOMINEES FOR DIRECTOR. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
<PAGE>
CERTAIN INFORMATION CONCERNING NOMINEES AND NAMED EXECUTIVE OFFICERS
The following table sets forth the name, age and business experience
during the past five years, of each nominee for election to the Board of
Directors of the Company. It also sets forth information as of February 8, 1999
regarding the beneficial ownership of Company Shares by each nominee for
election as a director, by the Named Executive Officers (as hereinafter
defined), and by all directors and executive officers as a group. The amounts
shown are based upon information furnished by the individuals named.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTORS
NAME, AGE AND YEAR FIRST BENEFICIAL
ELECTED OR APPOINTED AS A OWNERSHIP OF
DIRECTOR Business Experience During the Past Five Years SHARES(1)
<S> <C> <C>
Harold D. Alexander (63) Mr. Alexander is the President and owner of Young & 46,392 (2)
1999 Alexander, Inc. (electrical contractor). He is the *
Chairman of Community Bank & Trust Co. and has served as
a director of Community Bank & Trust Co. since 1987.
James E. Burt, III (61) Mr. Burt has been President of the Company since 1990 and 56,551 (3)
1990 Chief Executive Officer of the Company since 1998. Mr. 1.05%
Burt has been President and Chief Executive Officer of
Lincoln Bank since 1990. Mr. Burt has also been a
director of Cabarrus Bank since 1992, First Gaston Bank
of North Carolina since 1995 and Community Bank & Trust
Co. since 1999.
Charles A. James (52) Mr. James has served as a director of CK Federal from 7,143
1998 1983 to 1993 and subsequently to 1998 when it was *
acquired by South Trust Bank of North Carolina. Mr.
James is the President of Mt. Pleasant Insurance Agency;
the President of Mt. Pleasant Enterprises, Inc., a land
development company; director of Albemarle Knitting
Corp.; Co-owner of Mt. Pleasant Bonded Warehouse; Partner
of All Secure Storage; Partner of North Branch
Properties, a real estate investment, and Partner of
Earnhardt Interchange Properties, a real estate/land
investment. He has served as a director of Cabarrus Bank
since 1998.
Walter H. Jones, Jr. (57) Mr. Jones is a partner in the law firm of Homesley, 6,919 (4)
1999 Jones, Gaines, Homesley & Dudley; Chairman of the *
Mooresville Board of Elections; and has served as
President of the Mooresville Jaycees, and the Iredell
County Bar Association. Mr. Jones is an elder of First
Presbyterian Church of Mooresville. He has served as a
director of Lincoln Bank since 1995.
Samuel C. King, Jr. (51) Mr. King has been President of King's Office Supply, Inc. 24,980 (5)
1989 since 1977; and President of King Cain, Inc., d/b/a Mail *
Boxes Etc. since 1998. He has served as a director of
Lincoln Bank since 1983 and as Vice Chairman of Lincoln
Bank since 1992.
<PAGE>
Jack L. Lutz (61) Mr. Lutz is President of Lutz Corporation, d/b/a Lutz 9,379 (6)
1999 Petroleum, Spindale, NC, d/b/a Lutz Leasing, Shelby, NC; *
Co-owner of L&L Partnership (commercial real estate);
Owner of J.L. Rentals (apartment rentals); and President
of the Lutz Foundation. Mr. Lutz also serves as a
director of several petroleum and environmental
companies. He has been a director of Community Bank &
Trust Co. since 1987.
Harry D. Ritchie (65) Mr. Ritchie is retired. He has been the owner of Ritchie 19,566 (7)
1989 Brothers Dairy Farm since 1955. He has served as a *
director of Lincoln Bank since 1983.
Thomas M. Robbins (64) Mr. Robbins is the former Secretary & Treasurer of 15,078 (8)
1999 Tri-City Concrete Co., Inc. (ready mix concrete sales); *
former Co-Owner of Rutherfordton Properties(real estate
rentals) and Robbins Leasing (equipment rentals). He is
currently a member of the Economic Development Commission
of Rutherford County. He has served as a director of
Community Bank & Trust Co. since 1987.
L. D. Warlick, Jr. (59) Mr. Warlick was elected Chairman of the Company on March 57,899 (9)
1992 18, 1999. Mr. Warlick is the President of Warlick 1.06%
Funeral Home, Lincolnton, North Carolina. Mr. Warlick is
a past President of the Lincolnton Rotary Club and the
Lincoln County Chapter of the American Red Cross; a past
President of Lincoln Medical Center Board of Directors;
and is a past Chairman of the Lincoln County United Way.
He has served as a director of Lincoln Bank since 1983.
Estus B. White (68) Mr. White is retired. He is the former owner of White's 20,610 (10)
1992 Office Supply and Printing Co. of Kannapolis and *
Concord. He is a former member of the Cabarrus County
Board of Education and a former Cabarrus County
Commissioner. He is the retired Clerk of Superior Court
for Cabarrus County. He has served as a director of
Cabarrus Bank since 1980.
OTHER NAMED EXECUTIVE
OFFICERS
James R. Beam (58) Mr. Beam has served as an executive officer of Lincoln 18,275(11)
Bank since 1984 and as Chief Executive Officer since 1998. *
Stephen S. Robinson (50) Mr. Robinson has served as Executive Vice President of 23,055(12)
Lincoln Bank since 1992 and as a Senior Vice President *
from 1986-1992.
Ronald D. Smith (51) Mr. Smith has served as an executive officer of Cabarrus 10,274(13)
Bank since 1992 and as President and Chief Executive *
Officer since 1994.
DIRECTORS AND EXECUTIVE 285,674(14)
OFFICERS AS A GROUP 5.25%
(13 PERSONS) (15)
</TABLE>
<PAGE>
____________________
* Less than one percent of outstanding Shares.
(1) Information relating to beneficial ownership of Shares is based upon
"beneficial ownership" concepts set forth in rules of the Securities
and Exchange Commission ("SEC") under Section 13(d) of the 1934 Act.
Under such rules a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power," which includes
the power to vote or direct the voting of such security, or "investment
power," which includes the power to dispose or to direct the
disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the right to
acquire beneficial ownership within 60 days. Under these rules, more
than one person may be deemed to be a beneficial owner of the same
securities, and a person may be deemed to be a beneficial owner of
securities as to which he may disclaim beneficial interest.
(2) Includes 5,235 Shares held by a corporation of which Mr. Alexander is
President and owner, and 9,511 Shares held by his wife, as to which
Shares Mr. Alexander may be deemed to share voting and investment
power.
(3) Includes 3,923 Shares owned by Mr. Burt's wife, as to which Shares Mr.
Burt may be deemed to share voting and investment power.
(4) Includes 50 shares owned jointly with his wife, and 4,143 Shares held
by Mr. Jones' wife in her own name, as to which Shares Mr. Jones may be
deemed to share voting and investment power.
(5) Includes 840 Shares held by a corporation of which Mr. King is
President and principal shareholder, 2,113 shares owned jointly with
his wife and 8,756 Shares held by Mr. King's wife and family members,
as to which Shares Mr. King may be deemed to share voting and
investment power.
(6) Includes 3,490 Shares held by Mr. Lutz's wife, as to which Shares Mr.
Lutz may be deemed to share voting and investment power.
(7) Includes 7,624 Shares owned jointly with Mr. Ritchie's wife, and 240
shares held by Mr. Ritchie's wife, as to which Shares Mr. Ritchie may
be deemed to share voting and investment power.
(8) Includes 5,991 Shares owned jointly with Mr. Robbins' wife and 1,744
Shares held by Mr. Robbins' wife and family members, as to which Shares
Mr. Robbins may be deemed to share voting and investment power.
(9) Includes 3,591 Shares held by a corporation of which Mr. Warlick is a
director and President, and 13,469 Shares held by Mr. Warlick's wife
and family members, as to which Shares Mr. Warlick may be deemed to
share voting and investment power.
(10) Includes 11,012 Shares owned jointly with Mr. White's wife, as to which
Shares Mr. White may be deemed to share voting and investment power.
(11) Includes 4,500 Shares which could be purchased within 60 days pursuant
to the exercise of stock options.
(12) Includes 2,298 Shares held by Mr. Robinson's wife and family members,
as to which Shares Mr. Robinson may be deemed to share voting and
investment power.
(13) Includes 114 Shares held by Mr. Smith's wife, as to which Shares Mr.
Smith may be deemed to share voting and investment power.
(14) Mr. Boger's Shares have not been included in this total because he will
have retired as a director by the time of the Meeting.
(15) Excludes shares beneficially owned by D. Mark Boyd, III, who served as
Chairman, Chief Executive Officer and a director of the Company in
1998. See "Legal Proceedings" in the Company's 1998 Annual Report on
Form 10-K incorporated herein by reference.
Meetings of the Boards of Directors and Committees and Compensation of Directors
During 1998, the Company's Board met nine times. Each director attended
at least 75% of the aggregate number of meetings of the Company's Board and each
committee on which he served. Each member of the Company's Board who was not an
employee of the Company or its subsidiaries received $225 for each Board meeting
attended.
The Board of Directors currently has an Executive Committee, a CRA
Committee, a Compensation and Benefits Committee, an Audit Committee and
Nominating Committee. The Executive Committee, which is comprised of Messrs.
Alexander, Boger, Burt, King and Ritchie, acts on behalf of the Board between
meetings of the full Board. The Executive Committee met eight times in 1998, and
each member received $175 for each committee meeting attended.
<PAGE>
3
The CRA Committee and its representatives meet with community leaders
and advocacy organizations in areas within our delineated communities. The CRA
Committee solicits opinions from community leaders, community-based
organizations, government agencies, political leaders, religious organizations,
and concerned individuals to assist in ascertaining local credit needs and to
help evaluate the effectiveness of our products, services, and marketing
efforts. In addition to Mr. Warlick and Mr. Lutz, the Committee is comprised of
officers and directors from each bank subsidiary. The CRA Committee met six
times in 1998, and each member received $125 for each meeting attended.
The Compensation and Benefits Committee reviews salary administration
guidelines and incentive compensation plans, and also reviews the Company's
administration of such plans. The Compensation and Benefits Committee, which is
comprised of Messrs. Alexander, King, Ritchie and Warlick, met nine times in
1998, and each member received $125 for each meeting attended.
The Audit Committee reviews all control functions and is comprised of
Messrs. King, Warlick, Robbins and White. The Audit Committee also recommends on
an annual basis to the Board of Directors a public accounting firm to be engaged
as independent auditors for the Company for the next fiscal year, reviews the
plan for the audit engagement, and reviews financial statements, internal audit
plans and reports, financial reporting procedures, and reports of regulatory
authorities. The Audit Committee periodically reports to the Board of Directors.
The Audit Committee met four times in 1998, and each member received $125 for
each meeting attended.
The Nominating Committee nominates directors of the Company and the
members of committees of the Board. While nominees recommended by shareholders
may be considered, provided that the nominations are made in accordance with the
Company's Amended and Restated Articles of Incorporation, the Nominating
Committee has not solicited any such recommendations. The Nominating Committee,
which is comprised of Messrs. Alexander, Boger, Burt, King and Ritchie, met once
in 1998, and each member received $125 for attending the meeting.
The Company's Deferred Compensation Plan allows the directors of the
Company to defer the compensation they earn for attendance at meetings of the
Board or its various committees. Each director elects annually to either receive
that year's compensation currently or to defer receipt until after his death,
disability or retirement as a director. The amount deferred is credited to the
director's account held by Lincoln Bank's Trust Department. Several investment
alternatives are available, including Shares.
<PAGE>
EXECUTIVE OFFICERS
In addition to James E. Burt, III, President and Chief Executive
Officer, the executive officers of the Company are as follows:
Ms. Jan H. Hollar (43), served as a Vice President, Treasurer and
Secretary of the Company from 1990-1999 and has served as a Senior Vice
President, Chief Financial Officer, Treasurer and Secretary of the Company since
1999. Ms. Hollar also serves as a Senior Vice President and Chief Financial
Officer of Lincoln Bank, Cabarrus Bank and Community Bank & Trust Co.
Ms. Joy G. Keever (62), has served as Vice President-Human Resources of
the Company since 1996 and has served as Vice President of Administration for
Lincoln Bank since 1986.
Mr. James H. Mauney, II (51), has served as Vice President-Credit
Administration of the Company since February 1996. Mr. Mauney served as Vice
President, Construction Lending Manager, Credit Policy Officer and Loan Review
Manager of Hibernia National Bank, in New Orleans, Louisiana from February 1988
until February 1996.
The executive officers are appointed by the Company's Board of
Directors.
PRINCIPAL SHAREHOLDERS
As of February 8, 1999, there were no persons known to the Company who
were beneficial owners of more than 5% of the Company's outstanding Shares other
than D. Mark Boyd, III. Based on the limited information available to it, the
Company believes that Mr. Boyd owns approximately the number of Shares set forth
in the table below. Mr. Boyd has agreed with the FDIC to cause all his Shares to
be voted by a person designated by the Company's Board of Directors in
proportion to the votes of all other Shares cast upon such matters. See "Legal
Proceedings" in the Company's 1998 Annual Report on Form 10-K incorporated
herein by reference.
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
D. Mark Boyd, III 395,960(1) 7.28%
P.O. Box 399,
Lincolnton, North Carolina 28093
- -------------------
(1) In addition to the Shares that Mr. Boyd owns beneficially, the Company
believes certain of his family members own approximately 97,273
additional Shares which, together with Mr. Boyd's Shares, represent
approximately 9.07% of the total Shares outstanding.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for each of the last three years,
certain elements of compensation for each person who served as the Chief
Executive Officer during fiscal 1998 and each of the four most
highly-compensated executive officers whose total annual salary and bonus
exceeded $100,000 in fiscal 1998 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION (2) OPTIONS/SARs(3)
$ $ $ (#)
(a) (b) (c) (d) (e) (f)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James E. Burt, III 1998 $153,885 $32,066 $23,190 --
President and 1997 147,966 38,100 27,419 --
Chief Executive Officer, 1996 140,920 30,983 25,483 --
President of Lincoln Bank
James R. Beam 1998 $102,664 $10,552 $16,141 5,000
Chief Executive Officer of 1997 95,163 12,960 15,597 --
Lincoln Bank (since 1996 90,863 10,805 14,925 7,500
November 1998)
Stephen S. Robinson 1998 $100,536 $10,933 $15,232 --
Executive Vice President 1997 95,683 12,960 14,886 --
of Lincoln Bank 1996 91,263 11,519 14,903 7,500
Ronald D. Smith 1998 $101,702 $10,621 $14,244 --
President and Chief 1997 96,526 13,442 14,089 --
Executive Officer of 1996 91,264 8,809 13,358 --
Cabarrus Bank
D. Mark Boyd, III 1998 $17,417(6) -- $2,397 --
Chairman and Chief 1997 18,000 -- 2,316 --
Executive Officer (until 1996 18,000 -- 1,796 --
November 27, 1998) (4)
</TABLE>
- ----------------
(1) Bonus amounts are comprised of cash payments in accordance with
guidelines approved by the Company's Compensation and Benefits
Committee.
(2) Amounts shown consist of the Company's contribution to the Company's
Profit Sharing Plan and the Company's contribution matching the
participant's contributions to such plan, and amounts contributed by
the Company pursuant to the Deferred Compensation Plan for Carolina
First BancShares, Inc. and Subsidiaries on behalf of Messrs. Beam, Burt
and Robinson, with respect to fees paid for attendance at meetings of
the Board of Directors of Lincoln Bank.
(3) Stock options were granted pursuant to the Company's 1990 Stock Option
and Stock Appreciation Rights Plan.
(4) Mr. Boyd resigned as Chairman and Chief Executive Officer and as a
director of the Company, and as a director and Chairman of Lincoln Bank
on November 27, 1998, and he received salary and other compensation
through the related payroll period. See "Legal Proceedings" in the
Company's 1998 Annual Report on Form 10-K incorporated herein by
reference.
<PAGE>
OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
Individual Grants
Percent of
Number of Total Potential Realizable Value
Securities Options/ at Assumed Annual Rates of
Underlying SARs Exercise Stock Price Appreciation
Options/ Granted to or Base for Option Term
SARs Granted Employees Price Expir-
Name (#) in 1998 ($/Sh) ation date 5% 10%
($)
(a) (b) (c) (d) (e) (f) (g)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James R. Beam 5,000 27% $30.00 12/8/08 $82,699 $203,697
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN 1998
AND 1998 YEAR-END OPTION/SAR VALUES
The following table shows stock option exercises by the named executive
officers during 1998, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable options as of December 31, 1998. Also reported
are the values for "in-the-money" options, which represent the positive spread
between the exercise price of any such existing options and the year-end price
of the Company's Common Stock.
<TABLE>
<CAPTION>
Number of
Underlying Value of Unexercised
Securities In-the-Money
Unexercised Options/SARs at
Options/SARs at Fiscal Year End ($)
Fiscal Year End
(#)
Shares
Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James E. Burt, III 55,996(1) $1,045,092(2) 72,708(3)/-0- $1,760,866(3)/$-0-
James R. Beam -- -- 4,500/8,000 $76,500/$51,000
Stephen S. Robinson -- -- 3,000/4,500 $46,800/$70,200
Ronald D. Smith 3,900 $97,032 6,916/-0- $172,070/$-0-
D. Mark Boyd, III(4) -- -- -0-/-0- $-0-/$-0-
</TABLE>
- -----------
(1) Includes 39,283 options and 16,713 SARs. The exercise of the SARs does
not result in the issuance of any Shares.
(2) Includes $431,029 relating to the exercise of the SARs.
(3) Includes 50,139 SARs with a value of $1,217,852.
(4) Mr. Boyd resigned as Chairman and Chief Executive Officer and as a
director of the Company and as a director and Chairman of Lincoln Bank
on November 27, 1998. See "Legal Proceedings" in the Company's 1998
Annual Report on Form 10-K incorporated herein by reference.
<PAGE>
EMPLOYMENT AGREEMENTS
As of December 31, 1996, the Company entered into a new employment
contract with James E. Burt, III. The contract provides that Mr. Burt shall
remain employed by the Company through January 31, 2000, unless sooner
terminated under the terms thereof.
Either the Company or Mr. Burt may terminate the employment contract at
any time upon 60 days' prior written notice. The contract may also be terminated
by the Company for cause, or by reason of Mr. Burt's disability. In the event
his employment is terminated without cause by the Company prior to January 31,
2000, the Company shall continue to pay Mr. Burt's annual salary and provide
certain benefits (except for the annual bonus) for a period of 12 months after
such termination (or until January 31, 2000, whichever occurs earlier), as
severance pay.
In the event the Company experiences a "change in control," as defined
in his employment contract, Mr. Burt shall receive a lump-sum payment equal to
his annual salary and maximum bonus potential for the year in which the change
in control occurs (in addition to his regular compensation if he remains in the
Company's employ after the change in control). In certain circumstances, if Mr.
Burt's employment is terminated after a change in control, he may be entitled to
receive various benefits and compensation for a period of up to 24 months.
As of December 31, 1996, the Company also entered into a Deferred
Compensation Agreement with Mr. Burt that replaced a similar agreement dated
July 2, 1992. This agreement provides that if Mr. Burt retires from the Company
at age 62, or if his employment is terminated without cause upon, or within 12
months of, a change in control involving the Company, Mr. Burt shall receive
certain payments for up to 120 months.
As of November 10, 1998, Lincoln Bank entered into an employment
contract with Stephen S. Robinson, Executive Vice President of Lincoln Bank. The
contract provides that Mr. Robinson shall remain employed by Lincoln Bank as an
Executive Vice President through December 31, 2003, unless sooner terminated
under the terms thereof. Either party may terminate the employment contract for
cause or with proper notification. In the event Mr. Robinson is terminated
without cause by Lincoln Bank prior to the expiration date of the contract, he
is entitled to continue to receive his salary for a period of 24 months
following the date of termination, as severance pay. In the event that Lincoln
Bank experiences a "change in control," as defined in the contract, Mr. Robinson
is entitled to receive various benefits and compensation.
As of October 21, 1996, Cabarrus Bank entered into an employment
contract with Ronald D. Smith, the President and Chief Executive Officer of
Cabarrus Bank. The contract provides that Mr. Smith shall remain employed by
Cabarrus Bank through October 21, 2002, unless sooner terminated under the terms
thereof. Either party may terminate the employment contract for cause or with
proper notification. In the event Mr. Smith is terminated without cause by
Cabarrus Bank prior to the expiration date of the contract, he is entitled to
continue to receive his salary for a period of 12 months following the date of
termination, as severance pay. In the event that Cabarrus Bank experiences a
"change in control," as defined in the contract, Mr. Smith is entitled to
receive various benefits and compensation. As of February 18, 1993, Cabarrus
Bank also entered into a Deferred Compensation Agreement with Mr. Smith. This
agreement provides that if Mr. Smith retires from the Company at age 65, Mr.
Smith shall receive certain payments for up to 120 months.
<PAGE>
In connection with the Company's acquisition of Community Bank & Trust
Co., that bank entered into an employment agreement dated as of June 4, 1998,
with Ronnie D. Blanton, which became effective on December 23, 1998 when the
acquisition was completed. The contract provides that Mr. Blanton shall remain
employed by Community Bank & Trust Co. through December 23, 2001, unless sooner
terminated under the terms thereof. The contract provides for the payment of
certain transition bonuses in connection with the acquisition of Community Bank
& Trust Co., in addition to Mr. Blanton's salary and other benefits. Either
party may terminate the employment contract for cause or with proper
notification. In the event Mr. Blanton is terminated without cause by Community
Bank & Trust Co. prior to January 31, 2002, he is entitled to receive his salary
and other benefits until January 31, 2002, or 12 months' pay, whichever is the
greater, as severance pay. In the event that Community Bank & Trust Co.
experiences a "change in control," as defined in the contract, Mr. Blanton is
entitled to receive various benefits and compensation.
As of February 1, 1999, the Company entered into an employment contract
with Janet H. Hollar, the Senior Vice President, Chief Financial Officer,
Treasurer and Secretary of the Company. The contract provides that Ms. Hollar
shall remain employed by the Company through December 31, 2003, unless sooner
terminated under the terms thereof. Either party may terminate the employment
contract for cause or with proper notification. In the event Ms. Hollar is
terminated without cause by the Company prior to the expiration date of the
contract, he is entitled to continue to receive his salary for a period of 12
months following the date of termination, as severance pay. In the event that
the Company experiences a "change in control," as defined in the contract, Ms.
Hollar is entitled to receive various benefits and compensation.
BOARD AND EXECUTIVE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee is composed of non-employee,
independent members of the Board of Directors. It is the Committee's
responsibility to review, recommend and approve changes to the Company's
compensation policies and programs. It is also the Committee's responsibility to
review and approve all compensation actions for the Chief Executive Officer and
all other officers of the Company.
The Company's primary objective is to maximize shareholder value over
time. To accomplish this objective, the Company utilizes four primary components
of executive compensation: base salary, annual incentives, long-term incentives
and benefits. Each component is offered to key executives in various
combinations, structured in each case to meet varying business objectives, and
to cumulatively provide a level of total compensation equivalent to companies of
comparable size and with similar geographical location and performance results.
Base salary is the largest component of executive compensation.
Salaries are determined by assigning job grades based on an assessment of the
level of responsibilities. For each of the 33 job grades used by the Company, a
salary range is assigned utilizing an entry level, midpoint and maximum level.
Officers are evaluated at least annually, and a performance rating is determined
by valuing performance against certain pre-determined job responsibilities and
of standard performance criteria. This evaluation produces a numerical rating,
which is factored into a salary matrix to suggest the amount of compensation
increase that the officer should receive. The salary matrix is reviewed
periodically by an outside consultant who specializes in compensation plans for
financial institutions. The Compensation and Benefits Committee approve the
salary matrix and salary adjustments for all officers annually.
Base salary for Mr. Burt was increased in 1999 by 2% for his
performance in 1998. This increase was less than that commiserate with a
performance evaluation signifying that he exceeded the expectations of the
Committee. The base salary for executive officers generally falls within the
midpoint of the salary range and Mr. Burt's base pay falls in the third quartile
of his salary range.
Annual incentives are based upon a cash incentive compensation plan for
all officers. This plan is based in part on Company performance and in part on
individual performance. The Compensation and Benefits Committee makes the final
determination of incentive potential awards. Mr. Burt achieved 72% of his 1998
maximum potential cash incentive. Cash incentive awards for other executive
officers ranged from 70%-75% of the maximum potential cash incentives.
<PAGE>
Long-term incentives are comprised of incentive stock options and stock
appreciation rights under the 1990 Stock Option and Stock Appreciation Rights
Plan. Mr. Burt was not granted any stock options or stock appreciation rights
during 1998. Executive officers were granted options on the basis of additional
duties assumed.
Benefits offered to executive officers are generally the same as those
offered to other officers and employees. Generally, they are designed to provide
assistance to the employee and/or their dependants in times of illness,
disability or death. Also, the Company's retirement plan provides a portion of
retirement income based on profit sharing and matching funds for a 401(k) plan.
Compensation and Benefits Committee
Harry D. Ritchie
Harold D. Alexander
Samuel C. King, Jr.
L. D. Warlick, Jr.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock, with the
cumulative return on Standard & Poor's 500 Stock Index ("S&P 500") and The
Carson Medlin Company's Southeastern Independent Bank Index ("Independent Bank
Index").
The Independent Bank Index is the compilation of the total return to
shareholders over the past five years of a group of 23 independent community
banks located in the southeastern states of Florida, Georgia, North Carolina,
South Carolina, Tennessee, and Virginia. The banks included are:
NAME CITY STATE
TIB Financial Corp. Key Largo FL
Seacoast Banking Corp. Stuart FL
Capital City Bank Group, Inc. Tallahassee FL
Fidelity National Corp. Atlanta GA
Southwest Georgia Financial Corp. Moultrie GA
First Banking Company of Southeast Georgia Statesboro GA
PAB Bankshares, Inc. Valdosta GA
Bank of Granite Corp. Granite Falls NC
Carolina First BancShares, Inc. Lincolnton NC
FNB Financial Services Corp. Reidsville NC
First Bancorp Troy NC
CNB Corporation Conway SC
Palmetto Bancshares, Inc. Laurens SC
Carolina Southern Bank Spartanburg SC
First Pulaski National Corporation Pulaski TN
National Bankshares Inc. Blacksburg VA
FNB Corporation Christiansburg VA
Virginia Commonwealth Financial Corp. Culpepper VA
American National Bankshares, Inc. Danville VA
Central Virginia Bankshares, Inc. Powhatan VA
Virginia Financial Corp. Staunton VA
C&F Financial Corporation West Point VA
Pocahontas Bankshares Corporation Bluefield VA
<PAGE>
CAROLINA FIRST BANCSHARES, INC.
FIVE YEAR PERFORMANCE INDEX
[GRAPH OF FIVE YEAR PERFORMANCE INDEX]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Carolina First BancShares, Inc. 100 136 197 317 525 550
Independent Bank Index - Weighted 100 119 151 191 280 296
S&P 500 Index 100 101 139 171 228 294
</TABLE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
Certain Company directors, officers and principal shareholders, and
their associates, were customers of, or had banking and financial transactions
with, the Company or its subsidiaries in the ordinary course of business during
1998. Some of the directors of the Company or its subsidiaries are directors,
officers, trustees or principal securities holders of corporations or other
organizations which also were customers of, or had banking and financial
transactions with, the Company or its subsidiaries in the ordinary course of
business during 1998.
All outstanding loans and other transactions with the directors,
officers and principal shareholders of the Company and its subsidiaries were
made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and, when made, did not involve more
than the normal risk of collectibility or present other unfavorable features.
The aggregate amount of credit extended to directors, executive officers and
principal shareholders as of December 31, 1998 was $4,817,455 or 7.8% of the
Company's shareholders' equity. In addition to banking and financial
transactions, the Company or its subsidiaries may have had additional
transactions with, or used products or services of, various organizations of
which directors of the Company and its subsidiaries are associated. The Company
provided data processing and other services to First Gaston Bank of North
Carolina ("First Gaston"), during 1998, for which First Gaston paid $161,895.
The Company is the largest shareholder of First Gaston, and James E. Burt, III,
the Company's President and Chief Executive Officer is a director of First
Gaston. D. Mark Boyd, III, the Company's former Chairman and Chief Executive
Officer was a director of First Gaston until his resignation on November 27,
1998. Except for the transactions with First Gaston, the amounts involved in
such noncredit transactions have in no case been material in relation to the
business of the Company, its subsidiaries or such other organizations. It is
expected that the Company and its subsidiaries will continue to have similar
transactions in the ordinary course of its business with such individuals and
their associates in the future.
Mr. Jones, a director of the Company, is a partner in the law firm of
Homesley, Jones, Gaines, Homesley & Dudley, which performed certain legal
services on the Company's behalf during 1998.
<PAGE>
Lincoln Bank of North Carolina, a wholly owned subsidiary of the
Company ("Lincoln Bank"), currently leases an office building in Lincolnton,
North Carolina from D. Mark Boyd, III, the Company's former Chairman and Chief
Executive Officer, and the holder of more than 5% of the Company's Shares, and
his wife Diane Boyd. This property is leased under a five-year lease which
commenced in September 1997 at a current monthly rental of $3,098.67, subject to
annual adjustments as provided in the lease agreement. The Bank has the option
to renew the lease for one additional five-year term. The Company believes that
the terms of this lease, including the rent, are comparable to the terms
available from unrelated third parties.
PROPOSAL II
APPROVAL OF CAROLINA FIRST BANCSHARES, INC.
1999 LONG-TERM INCENTIVE PLAN
The Company currently maintains the Carolina First BancShares, Inc.
1990 Stock Option and Stock Appreciation Rights Plan (the "1990 Plan"). The 1990
Plan provides for the granting of stock appreciation rights and options to
purchase shares of the Company's Common Stock to key employees of the Company
and its subsidiaries. As of December 31, 1998, there were 52,110 shares of
Common Stock remaining available for the grant of awards under the 1990 Plan.
On January 22, 1999, the Board of Directors adopted the 1999 Plan,
subject to approval of the 1999 Plan by the shareholders at the Annual Meeting.
The 1999 Plan will be effective as of its approval by the shareholders at the
Annual Meeting, and no awards will be made under the 1999 Plan prior to such
approval. Whether or not the shareholders approve the 1999 Plan, the Company may
continue to grant options or other awards under the 1990 Plan until the shares
authorized thereunder are depleted or until the 1990 Plan expires on September
6, 2000.
The Company has reserved 500,000 shares of the authorized but unissued
shares of Common Stock for issuance upon the grant or exercise of awards
pursuant to the 1999 Plan.
SUMMARY OF THE 1999 PLAN
A summary of the 1999 Plan is set forth below. The summary is qualified
in its entirety by reference to the full text of the 1999 Plan, which is
attached to this Proxy Statement as Appendix A.
GENERAL
The purpose of the 1999 Plan is to promote the success, and enhance the
value, of the Company by linking the personal interests of employees, officers
and directors to those of the shareholders, and by providing such persons with
an incentive for outstanding performance. As of March 1, 1999, there were
approximately 61 employees (including all current executive officers) and
directors eligible to participate in the 1999 Plan.
The 1999 Plan authorizes the granting of awards ("Awards") to
employees, officers, and directors of the Company or its subsidiaries in the
following forms: (i) options to purchase shares of Common Stock ("Options"),
which may be Incentive Stock Options or Nonqualified Stock Options, or (ii)
stock appreciation rights ("SARs"). The maximum number of shares of Common Stock
with respect to one or more Options and/or SARs that may be granted during any
one calendar year under the 1999 Plan to any one participant is 100,000.
Pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company may not deduct compensation in excess of $1
million paid to the Chief Executive Officer and the four next most highly
compensated executive officers of the Company. The 1999 Plan is designed to
comply with Code Section 162(m) so that the grant of Options and SARs under the
1999 Plan will be excluded from the calculation of annual compensation for
purposes of Code Section 162(m) and will be fully deductible by the Company. The
Board has approved the 1999 Plan for submission to the shareholders in order to
permit the grant of Awards thereunder that will constitute deductible
performance-based compensation for purposes of Code Section 162(m).
<PAGE>
ADMINISTRATION
The 1999 Plan will be administered by the Compensation and Benefits
Committee of the Board of Directors of the Company (the "Committee"). The
Committee will have the power, authority and discretion to designate
participants; determine the type or types of Awards to be granted to each
participant and the number, terms and conditions thereof; establish, adopt or
revise any rules and regulations as it may deem necessary or advisable to
administer the 1999 Plan; and make all other decisions and determinations that
may be required under, or as the Committee deems necessary or advisable to
administer, the 1999 Plan.
Awards
Stock Options. The Committee is authorized to grant Options under the
1999 Plan, which may be Incentive Stock Options or Nonqualified Stock Options.
All Options will be evidenced by a written Award Agreement between the Company
and the participant, which will include such provisions as may be specified by
the Committee; provided, however that the exercise price may not be less than
the fair market value of a share of Common Stock on the date the Option is
granted. The terms of an Incentive Stock Option must meet the requirements of
Section 422 of the Code.
Upon exercise of any Option, payment for shares of Common Stock as to
which the Option is exercised shall be made in such manner and at such time or
times as shall be provided in the Option Agreement, including cash, shares of
Common Stock previously acquired by the optionee, or any combination thereof. If
all or part of the exercise price is paid in shares of Common Stock, the value
of such shares will be equal to the fair market value of such shares as of the
date of exercise.
Stock Appreciation Rights. The Committee may grant SARs to
participants. Upon the exercise of a SAR, the participant has the right to
receive the excess, if any, of the fair market value of one share of Common
Stock on the date of exercise, over the grant price of the SAR as determined by
the Committee, which will not be less than the fair market value of one share of
Common Stock on the date of grant. All awards of SARs will be evidenced by an
Award Agreement, reflecting the terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other terms and
conditions of the SAR, as determined by the Committee at the time of grant.
Performance Goals. The Committee may determine that any Award will be
determined solely on the basis of (a) the achievement by the Company or a parent
or subsidiary of a specified target return, or target growth in return, on
equity or assets, (b) the Company's, parent's or subsidiary's stock price, (c)
the achievement by an individual or a business unit of the Company, parent or
subsidiary of a specified target, or target growth in, revenues, net income or
earnings per share, (d) the achievement of objectively determinable goals with
respect to service or product delivery, service or product quality, customer
satisfaction, meeting budgets and/or retention of employees, or (e) any
combination of the goals set forth in (a) through (d) above. Furthermore, the
Committee reserves the right for any reason to reduce (but not increase) any
such Award, notwithstanding the achievement of a specified goal. If an Award is
made on such basis, the Committee must establish goals not later than 90 days
after the beginning of the period for which such performance goal relates (or
such other date as may be permitted or required under Code Section 162(m)). Any
payment of an Award granted with performance goals will be conditioned on the
written certification of the Committee in each case that the performance goals
and any other material conditions were satisfied.
Limitations on Transfer; Beneficiaries. No Award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an Incentive Stock Option, pursuant to a
qualified domestic relations order. The Committee however may (but need not)
permit other transfers where the Committee concludes that such transferability
(i) does not result in accelerated taxation, (ii) does not cause any Option
intended to be an Incentive Stock Option to fail to be described in Code Section
422(b), and (iii) is otherwise appropriate and desirable, taking into account
any factors deemed relevant, including without limitation, any state or federal
tax or securities laws or regulations applicable to transferable Awards. A
participant may, in the manner determined by the Committee, designate a
beneficiary to exercise the rights of the participant and to receive any
distribution with respect to any Award upon the participant's death.
<PAGE>
Acceleration Upon Certain Events. In the event of a Change in Control
of the Company (as defined in the 1999 Plan), all outstanding Options and SARs
will become fully vested, and all restrictions on all outstanding Awards will
lapse; provided such acceleration will not occur if, in the opinion of the
Company's accountants, such acceleration would preclude the use of "pooling of
interest" accounting treatment for a Change in Control transaction that would
otherwise qualify for such accounting treatment and is contingent upon
qualifying for such accounting treatment. Regardless of whether an event
described above shall have occurred, the Committee may in its sole discretion
declare all outstanding Options and SARs to become fully vested, and/or all
restrictions on all outstanding Awards to lapse, in each case as of such date as
the Committee may, in its sole discretion, declare. The Committee may
discriminate among participants or among Awards in exercising such discretion.
Termination and Amendment
The Board or the Committee may, at any time and from time to time,
terminate, amend or modify the 1999 Plan without shareholder approval, but the
Committee may condition any amendment on the approval of the Company's
shareholders, if such approval is necessary or deemed advisable with respect to
tax, securities or other applicable laws, policies or regulations. The Committee
may amend any outstanding Award, but such amendment shall not, without the
participant's consent, reduce or diminish the value of such Award determined as
if it had been exercised, vested, cashed in or otherwise settled on the date of
such amendment. Also, the exercise price of any Option generally may not be
reduced and the original term of any Option may not be extended, except as
provided in the 1999 Plan. No termination, amendment, or modification of the
1999 Plan may adversely affect any Award previously granted under the 1999 Plan,
without the written consent of the participant.
CERTAIN FEDERAL INCOME TAX EFFECTS
Nonqualified Stock Options. Under present federal income tax
regulations, there will be no federal income tax consequences to either the
Company or the participant upon the grant of a non-discounted Nonqualified Stock
Option. However, the participant will realize ordinary income on the exercise of
the Nonqualified Stock Option in an amount equal to the excess of the fair
market value of the Common Stock acquired upon the exercise of such Option over
the exercise price, and the Company will be entitled to a corresponding
deduction (subject to Code Section 162(m) limitations). The gain, if any,
realized upon the subsequent disposition by the participant of the Common Stock
will constitute short-term or long-term capital gain, depending on the
participant's holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of an Incentive Stock Option. Although the
participant will not realize ordinary income upon his exercise of an Incentive
Stock Option, the difference between the exercise price and the fair market
value of the shares at the time of exercise of the Incentive Stock Option will
be treated as an item of tax preference for alternative minimum tax purposes. If
the participant holds the shares of Common Stock for the greater of two years
after the date the Incentive Stock Option was granted or one year after the
acquisition of such shares of Common Stock (the "required holding period"), the
difference between the aggregate exercise price and the amount realized upon
disposition of the shares of Common Stock will constitute long-term capital gain
or loss, and the Company will not be entitled to a federal income tax deduction.
If the shares of Common Stock are disposed of in a sale, exchange or other
"disqualifying disposition" during the required holding period, the participant
will realize taxable ordinary income in an amount equal to the lesser of (i) the
gain realized by the participant upon such disposition, or (ii) the excess of
the fair market value of the Common Stock purchased at the time of exercise over
the aggregate exercise price, and the Company will be entitled to a federal
income tax deduction equal to such amount (subject to Code Section 162(m)
limitations). The gain in excess of such amount realized by the participant as
ordinary income would be taxed as a capital gain (subject to the holding period
requirements for long-term or short-term capital gain treatment).
<PAGE>
SARs. Under present federal income tax regulations, a participant
receiving a SAR will not recognize income, and the Company will not be allowed a
tax deduction, at the time the Award is granted. When a participant exercises
the SAR, the amount of cash and the fair market value of any shares of Common
Stock received will be ordinary income to the participant and will be allowed as
a deduction for federal income tax purposes to the Company (subject to Code
Section 162(m) limitations).
BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
No Awards will be granted or approved for grant under the 1999 Plan
prior to the Annual Meeting. Any Awards under the 1999 Plan will be made in the
discretion of the Committee. Consequently, it is not presently possible to
determine, with respect to (i) the executive officers named in the Summary
Compensation Table, (ii) all current executive officers as a group, (iii) all
non-executive directors, as a group, or (iv) all eligible participants,
including all current officers who are not executive officers, as a group,
either the benefits or amounts that will be received by such persons or groups
pursuant to the 1999 Plan or the benefits or amounts that would have been
received by such persons or groups under the 1999 Plan if it had been in effect
during the last fiscal year.
ADDITIONAL INFORMATION
The Common Stock is traded in the over-the-counter market and is quoted
in the "pink sheets." As of March 24, 1999, the bid and ask prices for the
Shares, as reported by The Charlotte Observer, were $27.30 and $30.00,
respectively. The Company's application to Nasdaq to permit the Company's Shares
to be traded on the Nasdaq Stock Market is pending.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1999
PLAN.
MISCELLANEOUS
SECTION 16(a) COMPLIANCE
The Company is required to identify each director or officer who failed
to file timely with the Securities and Exchange Commission a required report
relating to ownership and changes in ownership of the Company's securities.
Based on material provided to the Company, the Company believes that all such
filing requirements with respect to the Company's fiscal year ended December 31,
1998 were complied with.
SHAREHOLDER PROPOSALS
Any proposal which a Company shareholder intends to be presented at the
Company's annual meeting of shareholders to be held in 2000 (the "2000 Meeting")
must be received by the Company on or before November 20, 1999. Furthermore, the
Company's Amended and Restated Articles of Incorporation provide that any
shareholder may make proposals for a shareholder vote at the 2000 Meeting,
provided that advance notice of such proposal is received by the Secretary of
the Company not less than 60, nor more than 90, days prior to April 20, 2000.
Only proper proposals which are received on or before November 20, 1999 (or such
later date) will be eligible for inclusion in the proxy statement and form of
proxy for the 2000 Meeting.
<PAGE>
OTHER MATTERS
Management does not know of any matters to be brought before the
Meeting other than as described in this proxy statement. Should any other
matters properly come before the Meeting, the persons designated as proxies will
vote in accordance with their best judgment on such matters.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accounting firm selected by the Board of
Directors for the calendar year 1999 is KPMG LLP. Representatives of KPMG LLP
are expected to be present at the Annual Meeting and will have the opportunity
to make a statement and to respond to appropriate questions.
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne
by the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of the Company or its subsidiaries,
personally, by telephone, telegraph or facsimile or other electronic means. The
Company may retain Regan & Associates, or another proxy solicitation firm, and
pay its reasonable charges, presently estimated to be less than $10,000, for the
solicitation of proxies. No agreement has been entered into with any proxy
solicitation firm as of March 26, 1999. The Company may reimburse brokers,
custodians or other persons holding stock in their names or in the names of
nominees for their expenses in sending proxy materials and the 1998 Annual
Report to principals and obtaining their instructions.
AVAILABILITY OF ANNUAL REPORT
THIS PROXY STATEMENT INCORPORATES CERTAIN INFORMATION FROM THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, WHICH IS BEING DELIVERED HEREWITH. THE
COMPANY, UPON REQUEST, ALSO WILL PROVIDE TO SHAREHOLDERS, FREE OF CHARGE, COPIES
OF ITS ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED DECEMBER
31, 1998, AS FILED WITH THE SEC. SHAREHOLDERS SHOULD DIRECT THEIR REQUESTS TO:
CAROLINA FIRST BANCSHARES, INC., P.O. BOX 657, LINCOLNTON, NORTH CAROLINA 28093,
ATTENTION: MS. JAN H. HOLLAR, SECRETARY.
<PAGE>
A-12
- -
A-1
APPENDIX A
CAROLINA FIRST BANCSHARES, INC.
1999 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
1.1 GENERAL. The purpose of the Carolina First BancShares, Inc. 1999
Long-Term Incentive Plan (the "Plan") is to promote the success, and enhance the
value, of Carolina First BancShares, Inc. (the "Company"), by linking the
personal interests of its employees, officers and directors to those of Company
shareholders and by providing such persons with an incentive for outstanding
performance. The Plan is further intended to provide flexibility to the Company
in its ability to motivate, attract, and retain the services of employees,
officers and directors upon whose judgment, interest, and special effort the
successful conduct of the Company's operation is largely dependent. Accordingly,
the Plan permits the grant of incentive awards from time to time to selected
employees, officers and directors.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date
upon which it shall be approved by the shareholders of the Company.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:
(a) "Award" means any Option or Stock Appreciation Right, or
any other right or interest relating to Stock or cash, granted to a
Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means and includes each of the
following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 25%
or more of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by a
Person who is on the Effective Date the beneficial owner of
25% or more of the Outstanding Company Voting Securities, (ii)
any acquisition directly from the Company, (iii) any
acquisition by the Company, (iv) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the
Company, or (v) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii)
of subsection (3) of this definition; or
<PAGE>
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination
for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election
of directors of the corporation resulting from such Business
Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Voting
Securities, and (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 25% or more of the
combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, and (iii)
at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(4) Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means the committee of the Board described in
Article 4.
(g) "Company" means Carolina First BancShares, Inc., a North
Carolina corporation.
(h) "Covered Employee" means a covered employee as defined in
Code Section 162(m)(3).
(i) "Disability" shall mean any illness or other physical or
mental condition of a Participant that renders the Participant
incapable of performing his customary and usual duties for the Company,
or any medically determinable illness or other physical or mental
condition resulting from a bodily injury, disease or mental disorder
which, in the judgment of the Committee, is permanent and continuous in
nature. The Committee may require such medical or other evidence as it
deems necessary to judge the nature and permanency of the Participant's
condition.
<PAGE>
(j) "Effective Date" has the meaning assigned such term in
Section 2.1.
(k) "Fair Market Value", on any date, means (i) if the Stock
is listed on a securities exchange or is traded over the Nasdaq
National Market, the closing sales price on such exchange or over such
system on such date or, in the absence of reported sales on such date,
the closing sales price on the immediately preceding date on which
sales were reported, or (ii) if the Stock is not listed on a securities
exchange or traded over the Nasdaq National Market, the mean between
the bid and offered prices as quoted by Nasdaq for such date, provided
that if it is determined that the fair market value is not properly
reflected by such Nasdaq quotations, Fair Market Value will be
determined by such other method as the Committee determines in good
faith to be reasonable.
(l) "Incentive Stock Option" means an Option that is
intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
(m) "Non-Qualified Stock Option" means an Option that is not
an Incentive Stock Option.
(n) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(o) "Parent" means a corporation which owns or beneficially
owns a majority of the outstanding voting stock or voting power of the
Company. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).
(p) "Participant" means a person who, as an employee, officer
or director of the Company or any Subsidiary, has been granted an Award
under the Plan.
(q) "Plan" means the Carolina First BancShares, Inc.1999 Long-
Term Incentive Plan, as amended from time to time.
(r) "Stock" means the $2.50 par value common stock of the
Company and such other securities of the Company as may be substituted
for Stock pursuant to Article 14.
(s) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(t) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Company. For Incentive Stock Options, the term
shall have the meaning set forth in Code Section 424(f).
(u) "1933 Act" means the Securities Act of 1933, as amended
from time to time.
(v) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
<PAGE>
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Compensation and
Benefits Committee of the Board or, at the discretion of the Board from time to
time, by the Board. The Committee shall consist of two or more members of the
Board. It is intended that the directors appointed to serve on the Committee
shall be "non-employee directors" (within the meaning of Rule 16b-3 promulgated
under the 1934 Act) and "outside directors" (within the meaning of Code Section
162(m) and the regulations thereunder) to the extent that Rule 16b-3 and, if
necessary for relief from the limitation under Code Section 162(m) and such
relief is sought by the Company, Code Section 162(m), respectively, are
applicable. However, the mere fact that a Committee member shall fail to qualify
under either of the foregoing requirements shall not invalidate any Award made
by the Committee which Award is otherwise validly made under the Plan. The
members of the Committee shall be appointed by, and may be changed at any time
and from time to time in the discretion of, the Board. During any time that the
Board is acting as administrator of the Plan, it shall have all the powers of
the Committee hereunder, and any reference herein to the Committee (other than
in this Section 4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan,
the following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Company or any
Parent or Subsidiary, the Company's independent certified public accountants, or
any executive compensation consultant or other professional retained by the
Company to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted
to each Participant;
(c) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
under the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on
the exercisability of an Award, and accelerations or waivers thereof,
based in each case on such considerations as the Committee in its sole
discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
<PAGE>
(g) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(h) Decide all other matters that must be determined in
connection with an Award;
(i) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided herein.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
10.1, the aggregate number of shares of Stock reserved and available for Awards
or which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right) shall be 500,000.
5.2. LAPSED AWARDS. To the extent that an Award is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan and
shares subject to SARs or other Awards settled in cash will be available for the
grant of an Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to
the contrary (but subject to adjustment as provided in Section 10.1), the
maximum number of shares of Stock with respect to one or more Options and/or
SARs that may be granted during any one calendar year under the Plan to any one
Participant shall be 100,000.
<PAGE>
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are
employees, officers or directors of the Company or a Parent or Subsidiary.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee, provided that the
exercise price for any Option shall not be less than the Fair Market
Value as of the date of the grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of
an Option may be exercised. The Committee may waive any exercise
provisions at any time in whole or in part based upon factors as the
Committee may determine in its sole discretion so that the Option
becomes exerciseable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants; provided that if shares of Stock surrendered in payment
of the exercise price were themselves acquired otherwise than on the
open market, such shares shall have been held by the Participant for at
least six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The
Award Agreement shall include such provisions, not inconsistent with
the Plan, as may be specified by the Committee.
(e) ADDITIONAL OPTIONS UPON EXERCISE. The Committee may, in
its sole discretion, provide in an Award Agreement, or in an amendment
thereto, for the automatic grant of a new Option to any Participant who
delivers shares of Stock as full or partial payment of the exercise
price of the original Option. Any new Option granted in such a case (i)
shall be for the same number of shares of Stock as the Participant
delivered in exercising the original Option, (ii) shall have an
exercise price of 100% of the Fair Market Value of the surrendered
shares of Stock on the date of exercise of the original Option (the
grant date for the new Option), and (iii) shall have a term equal to
the unexpired term of the original Option.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock
Options granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option shall not be less than the Fair Market Value as
of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the earliest of the following circumstances; provided, however,
that the Committee may, prior to the lapse of the Incentive Stock
Option under the circumstances described in paragraphs (3), (4) and (5)
below, provide in writing that the Option will extend until a later
date, but if Option is exercised after the dates specified in
paragraphs (3), (4) and (5) below, it will automatically become a
Non-Qualified Stock Option:
<PAGE>
(1) The Incentive Stock Option shall lapse as of the
option expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years
after it is granted, unless an earlier time is set in the
Award Agreement.
(3) If the Participant terminates employment for any
reason other than as provided in paragraph (4) or (5) below,
the Incentive Stock Option shall lapse, unless it is
previously exercised, three months after the Participant's
termination of employment; provided, however, that if the
Participant's employment is terminated by the Company for
cause or by the Participant without the consent of the
Company, the Incentive Stock Option shall (to the extent not
previously exercised) lapse immediately.
(4) If the Participant terminates employment by
reason of his Disability, the Incentive Stock Option shall
lapse, unless it is previously exercised, one year after the
Participant's termination of employment.
(5) If the Participant dies while employed, or during
the three-month period described in paragraph (3) or during
the one-year period described in paragraph (4) and before the
Option otherwise lapses, the Option shall lapse one year after
the Participant's death. Upon the Participant's death, any
exercisable Incentive Stock Options may be exercised by the
Participant's beneficiary, determined in accordance with
Section 9.6.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an
Option after termination of employment, the Option may be exercised
only with respect to the shares that were otherwise vested on the
Participant's termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary unless
the exercise price per share of such Option is at least 110% of the
Fair Market Value per share of Stock at the date of grant and the
Option expires no later than five years after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative.
(h) DIRECTORS. The Committee may not grant an Incentive Stock
Option to a non-employee director. The Committee may grant an Incentive
Stock Option to a director who is also an employee of the Company or
Parent or Subsidiary but only in that individual's position as an
employee and not as a director.
<PAGE>
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock App-
reciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock
on the date of exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the
Fair Market Value of one share of Stock on the date of grant.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall
be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Committee at the time of the grant of the Award and
shall be reflected in the Award Agreement.
ARTICLE 9
PROVISIONS APPLICABLE TO AWARDS
9.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
9.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 10.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made, and after taking into account the tax, securities and accounting
effects of such an exchange.
9.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
9.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Parent or Subsidiary on the grant or exercise of an Award may be
made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
<PAGE>
9.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Company or a Parent or Subsidiary, or
shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Company or a Parent or Subsidiary. No unexercised
or restricted Award shall be assignable or transferable by a Participant other
than by will or the laws of descent and distribution or, except in the case of
an Incentive Stock Option, pursuant to a domestic relations order that would
satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award
under the Plan; provided, however, that the Committee may (but need not) permit
other transfers where the Committee concludes that such transferability (i) does
not result in accelerated taxation, (ii) does not cause any Option intended to
be an Incentive Stock Option to fail to be described in Code Section 422(b), and
(iii) is otherwise appropriate and desirable, taking into account any factors
deemed relevant, including without limitation, any state or federal tax or
securities laws or regulations applicable to transferable Awards.
9.6 BENEFICIARIES. Notwithstanding Section 9.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
9.7. STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
9.8. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise
provided in the Award Agreement, upon the occurrence of a Change in Control, all
outstanding Options and Stock Appreciation Rights shall become fully exercisable
and all restrictions on outstanding Awards shall lapse; provided, however that
such acceleration will not occur if, in the opinion of the Company's
accountants, such acceleration would preclude the use of "pooling of interest"
accounting treatment for a Change in Control transaction that (a) would
otherwise qualify for such accounting treatment, and (b) is contingent upon
qualifying for such accounting treatment. To the extent that this provision
causes Incentive Stock Options to exceed the dollar limitation set forth in
Section 7.2(d), the excess Options shall be deemed to be Non-Qualified Stock
Options.
<PAGE>
9.9. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
CONTROL. In the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the
Committee may in its sole discretion declare all outstanding Options and Stock
Appreciation Rights to be fully exercisable, and/or all restrictions on all
outstanding Awards to have lapsed, in each case, as of such date as the
Committee may, in its sole discretion, declare, which may be on or before the
consummation of such transaction or event. To the extent that this provision
causes Incentive Stock Options to exceed the dollar limitation set forth in
Section 7.2(d), the excess Options shall be deemed to be Non-Qualified Stock
Options.
9.10. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event
has occurred as described in Section 9.8 or 9.9 above, the Committee may in its
sole discretion at any time determine that all or a portion of a Participant's
Options and Stock Appreciation Rights shall become fully or partially
exercisable, and/or that all or a part of the restrictions on all or a portion
of the outstanding Awards shall lapse, in each case, as of such date as the
Committee may, in its sole discretion, declare. The Committee may discriminate
among Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 9.10.
9.11 EFFECT OF ACCELERATION. If an Award is accelerated under Section
9.8 or 9.9, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period of time after such acceleration to
the extent not then exercised, (ii) that the Award will be settled in cash
rather than Stock, (iii) that the Award will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The Committee's determination need not be uniform and may be different for
different Participants, whether or not such Participants are similarly situated.
9.12. PERFORMANCE GOALS. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Company or a Parent or Subsidiary of a specified
target return, or target growth in return, on equity or assets, (b) the
Company's, Parent's or Subsidiary's stock price, (c) the achievement by an
individual or a business unit of the Company, Parent or Subsidiary of a
specified target, or target growth in, revenues, net income or earnings per
share, (d) the achievement of objectively determinable goals with respect to
service or product delivery, service or product quality, customer satisfaction,
meeting budgets and/or retention of employees, or (e) any combination of the
goals set forth in (a) through (d) above. If an Award is made on such basis, the
Committee shall establish goals prior to the beginning of the period for which
such performance goal relates (or such later date as may be permitted under Code
Section 162(m) or the regulations thereunder) and the Committee may for any
reason reduce (but not increase) any Award, notwithstanding the achievement of a
specified goal. Any payment of an Award granted with performance goals shall be
conditioned on the written certification of the Committee in each case that the
performance goals and any other material conditions were satisfied.
9.13. TERMINATION OF EMPLOYMENT. Whether military, government or other
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur in a circumstance in which a Participant transfers
from the Company to one of its Parents or Subsidiaries, transfers from a Parent
or Subsidiary to the Company, or transfers from one Parent or Subsidiary to
another Parent or Subsidiary.
<PAGE>
ARTICLE 10
CHANGES IN CAPITAL STRUCTURE
10.1. GENERAL. In the event a stock dividend is declared upon the
Stock, the authorization limits under Section 5.1 and 5.4 shall be increased
proportionately, and the shares of Stock then subject to each Award shall be
increased proportionately without any change in the aggregate purchase price
therefor. In the event the Stock shall be changed into or exchanged for a
different number or class of shares of stock or securities of the Company or of
another corporation, whether through reorganization, recapitalization,
reclassification, share exchange, stock split-up, combination of shares, merger
or consolidation, the authorization limits under Section 5.1 and 5.4 shall be
adjusted proportionately, and there shall be substituted for each such share of
Stock then subject to each Award the number and class of shares into which each
outstanding share of Stock shall be so exchanged, all without any change in the
aggregate purchase price for the shares then subject to each Award, or, subject
to Section 11.2, there shall be made such other equitable adjustment as the
Committee shall approve.
ARTICLE 11AMENDMENT, MODIFICATION AND TERMINATION
11.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the
Committee may, at any time and from time to time, amend, modify or terminate the
Plan without shareholder approval; provided, however, that the Board or
Committee may condition any amendment or modification on the approval of
shareholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations.
11.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that, subject to the terms of the
applicable Award Agreement, such amendment, modification or termination shall
not, without the Participant's consent, reduce or diminish the value of such
Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination, and provided
further that, except as otherwise permitted in the Plan, the exercise price of
any Option may not be reduced and the original term of any Option may not be
extended. No termination, amendment, or modification of the Plan shall adversely
affect any Award previously granted under the Plan, without the written consent
of the Participant.
ARTICLE 12
GENERAL PROVISIONS
12.1. NO RIGHTS TO AWARDS. No Participant or eligible participant shall
have any claim to be granted any Award under the Plan, and neither the Company
nor the Committee is obligated to treat Participants or eligible participants
uniformly.
12.2. NO SHAREHOLDER RIGHTS. No Award gives the Participant any of the
rights of a shareholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
12.3. WITHHOLDING. The Company or any Parent or Subsidiary shall have
the authority and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy federal, state, and local
taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan. With
respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require that any
such withholding requirement be satisfied, in whole or in part, by withholding
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount required to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
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12.4. NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Parent or Subsidiary to terminate any Participant's employment or status as
an officer or director at any time, nor confer upon any Participant any right to
continue as an employee, officer or director of the Company or any Parent or
Subsidiary.
l2.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Parent or
Subsidiary.
12.6. INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee shall be indemnified and held harmless by the
Company from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which such member may be a party or in
which he may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by such member in
satisfaction of judgment in such action, suit, or proceeding against him
provided he gives the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
12.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the Company
or any Parent or Subsidiary unless provided otherwise in such other plan.
12.8. EXPENSES. The expenses of administering the Plan shall be
borne by the Company and its Parents or Subsidiaries.
12.9. TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
12.10. GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine, the
plural shall include the singular, and the singular shall include the plural.
12.11. FRACTIONAL SHARES. No fractional shares of Stock shall be
issued, and the Committee shall determine, in its discretion, whether cash shall
be given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
12.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of Awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock paid under the Plan. The shares paid under the Plan may in certain
circumstances be exempt from registration under the 1933 Act, and the Company
may restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
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12.13. GOVERNING LAW. To the extent not governed by federal law, the
Plan and all Award Agreements shall be construed in accordance with and governed
by the laws of the State of North Carolina.
12.14 ADDITIONAL PROVISIONS. Each Award Agreement may contain such
other terms and conditions as the Committee may determine; provided that such
other terms and conditions are not inconsistent with the provisions of this
Plan.
