SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TRIANGLE BANCORP, INC.
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid:
_____________________________________________________________________________
|_| 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 No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
<PAGE>
Preliminary Copy
TRIANGLE BANCORP, INC.
4300 Glenwood Avenue
Raleigh, North Carolina 27612
(919) 881-0455
----------------------------------------
Notice of Annual Meeting of Shareholders
----------------------------------------
To Be Held April 28, 1998
NOTICE is hereby give that the Annual Meeting of Shareholders of Triangle
Bancorp, Inc. (the "Corporation") will be held as follows:
Place: Raddison Governors Inn
I-40 at Davis Drive, Exit 280
Research Triangle Park, North Carolina 27709
Date: Tuesday, April 28, 1998
Time: 10:00 A.M.
THE PURPOSES OF THE ANNUAL MEETING ARE:
1. To elect 10 members of the Board of Directors.
2. To consider and act upon a proposal to amend Article 2 of the
Corporation's Articles of Incorporation to increase the number of
authorized shares of common stock from 20,000,000 to 30,000,000.
3. To consider and act upon a proposal to approve the Triangle Bancorp,
Inc. 1998 Omnibus Stock Plan.
4. To consider and act upon a proposal to ratify the appointment of
Coopers & Lybrand L.L.P. as independent public accountants of the
Corporation for 1998.
5. To consider and act on any other matters that may properly come before
the Annual Meeting.
The record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting has been set as of the close of business on March
6, 1998.
EVEN IF YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE REQUESTED TO
MARK, DATE AND SIGN THE ENCLOSED APPOINTMENT OF PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR
APPOINTMENT OF PROXY AND VOTE YOUR SHARES IN PERSON.
Sincerely,
Susan C. Gilbert, Secretary
March 20, 1998
<PAGE>
Preliminary Copy
TRIANGLE BANCORP, INC.
4300 Glenwood Avenue
Raleigh, North Carolina 27612
---------------
Proxy Statement
---------------
Mailing Date: On or About March 24, 1998
Annual Meeting of Shareholders
To Be Held April 28, 1998
General
This Proxy Statement is being distributed in connection with the
solicitation by the Board of Directors of Triangle Bancorp, Inc. (the
"Corporation") of appointments of proxy in the form enclosed herewith for the
1998 Annual Meeting of Shareholders of the Corporation and any adjournments
thereof. The meeting will be held Tuesday, April 28, 1998, beginning at 10:00
A.M., at the Radisson Governors Inn, I-40 at Davis Drive, Exit 280, Research
Triangle Park, North Carolina.
Voting of Appointments of Proxies; Revocation
Persons named in the enclosed appointment of proxy as proxies for
shareholders at the Annual Meeting are Steven R. Ogburn, Debra L. Lee and
William V. Leaming, Jr. Shares represented by each appointment of proxy which is
properly executed, returned and not revoked, will be voted in accordance with
the directions contained therein. If no directions are given, those shares will
be voted "FOR" the election of each of the 10 nominees for director named in
Proposal 1 below and "FOR" each of the other proposals described herein. If, at
or before the time of the Annual Meeting, any nominee named in Proposal 1 has
become unavailable for any reason, the proxies will be authorized to vote for a
substitute nominee. On such other matters as may properly come before the
meeting, the proxies will be authorized to vote shares represented by
appointments of proxy in accordance with their best judgment.
A shareholder may revoke an appointment of proxy at any time before the
shares represented by it have been voted by filing with Susan C. Gilbert,
Secretary of the Corporation, an instrument revoking it or a properly executed
appointment of proxy bearing a later date, or by attending the Annual Meeting
and announcing his or her intention to vote in person.
Expenses of Solicitation
The Corporation will pay the cost of preparing, assembling and mailing this
Proxy Statement and other proxy solicitation expenses. In addition to the use of
the mail, appointments of proxy may be solicited in person or by telephone by
officers, directors or employees of the Corporation and its subsidiaries without
additional compensation.
Record Date
The Board of Directors has set March 6, 1998, as the record date (the
"Record Date") for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Only shareholders of record on that date will be
entitled to vote at the Annual Meeting.
1
<PAGE>
Voting Securities
The voting securities of the Corporation are the shares of its no par value
common stock (the "Common Stock"), of which 20,000,000 shares were authorized
and __________ shares were outstanding on the Record Date. As of the Record
Date, there were approximately _____ holders of record of the Corporation's
Common Stock.
Voting Procedures; Votes Required for Approval
At the Annual Meeting, each shareholder will be entitled to cast one vote
for each share of Common Stock held of record on the Record Date for each matter
submitted for voting and, in the election of directors, for each director to be
elected. In accordance with North Carolina law, shareholders are not entitled to
vote cumulatively in the election of directors. In the case of all Proposals,
abstentions and broker nonvotes will have no effect as the vote is determined
only by shares actually voted, not by shares outstanding.
In the case of Proposal 1 below, the 10 directors receiving the greatest
number of votes shall be elected.
In the case of Proposal 2 below, for such proposal to be approved, at least
75% of all shares of Common Stock voted at the Annual Meeting must be voted in
favor of the proposal.
In the case of Proposal 3 below, for such proposal to be approved, the
number of votes cast for approval must exceed the number of votes cast against
the proposal.
In the case of Proposal 4 below, for such proposal to be approved, the
number of votes cast for approval must exceed the number of votes cast against
the proposal.
Beneficial Ownership of Voting Securities
There are no persons who were known to management of the Corporation to
beneficially own more than 5% of the Corporation's Common Stock as of the Record
Date.
Set forth below is information as of February 28, 1997 regarding the
beneficial ownership of the Corporation's Common Stock by its current directors,
and certain named executive officers individually, and by all current directors,
and executive officers of the Corporation as a group.
AMOUNT AND NATURE
NAME OF OF BENEFICIAL OWNERSHIP PERCENT OF
BENEFICIAL OWNER OF STOCK (1) CLASS (2)
- ---------------- ------------ ---------
Carole S. Anders 33,507
Charles H. Ashford, Jr. 26,344
Cy N. Bahakel 545,354
H. Leigh Ballance, Jr. 34,142
Edwin B. Borden 23,894
Robert E. Bryan, Jr. 17,017
David T. Clancy 83,814
N. Leo Daughtry 50,626
Syd W. Dunn, Jr. 23,522
2
<PAGE>
AMOUNT AND NATURE
NAME OF OF BENEFICIAL OWNERSHIP PERCENT OF
BENEFICIAL OWNER OF STOCK (1) CLASS (2)
- ---------------- ------------ ---------
Willie S. Edwards 28,383
James P. Godwin, Sr. 123,603
Robert L. Guthrie 26,476
John B. Harris, Jr. 31,797
George W. Holt 81,296
Earl Johnson, Jr. 48,419
Debra L. Lee 41,689
J. L. Maxwell, Jr. 114,431
Michael A. Maxwell 15,031
Wendell H. Murphy 39,041
Steven R. Ogburn 30,113
Michael S. Patterson 103,950
Patrick H. Pope 61,636
William R. Pope 36,136
Edythe M. Poyner 28,931
Billy N. Quick, Sr. 53,806
J. Dal Snipes 29,456
N. Johnson Tilghman 82,470
Edward O. Wessell 11,774
Sydnor M. White, Jr. 40,187
J. Blount Williams 36,424
-----------
All Executive Officers and
Directors as a Group (30 persons) 1,903,268
-----------
-----%
- -----------------
(1) Each director and executive officer has sole voting and investment power
over the issued and outstanding shares beneficially owned by such
individual, except for the following shares over which the directors and
executive officers indicated, and the group, share voting and/or investment
power: Ms. Anders - 3,000 shares; Dr. Ashford - 1,976 shares; Mr. Bahakel -
3,000 shares; Mr. Ballance - 3,827 shares; Mr. Clancy - 78,449 shares; Mr.
Daughtry - 400 shares; Mr. Dunn - 5,665 shares; Mr. Edwards - 328 shares;
Mr. Godwin - 105,785 shares; Mr. Guthrie - 10,400 shares; Mr. Harris -
9,194 shares; Mr. Holt - 28,736 shares; Mr. Johnson - 23,289 shares; Ms.
Lee - 1,500 shares; Mr. Michael A. Maxwell - 13,747
3
<PAGE>
shares; Mr. Murphy - 28,490 shares; Mr. Patterson - 3,713 shares; Mr.
Ogburn - 1,520 shares; Mr. Patrick H. Pope - 30,440 shares; Mr. William R.
Pope - 285 shares; Ms. Poyner - 26,433 shares; Mr. Quick - 1,688 shares;
Mr. Snipes - 14,233 shares; Mr. Wessell - 1,081 shares; Mr. White - 20,843
shares; Mr. Williams - 19,891 shares; and members of the group - 437,585
shares.
(2) This column includes certain shares owned by certain related parties of
directors and executive officers as to which shares those directors and
executive officers have disclaimed beneficial ownership, as follows: Dr.
Ashford - 9,400 shares; Mr. Guthrie - 856 shares; Mr. J. L. Maxwell, Jr. -
2,750 shares; Mr. Tilghman - 45,792 shares; and members of the group -
58,796 shares.
This column includes the number of shares for which the director or
executive officer indicated, and the directors and the five current
executive officers of the Corporation as a group, hold options to purchase,
pursuant to the Corporation's 1988 Qualified or Non-Qualified Stock Option
Plans, to the extent such options are vested, and are immediately
exercisable as follows: Ms. Anders - 197 shares; Dr. Ashford - 2,111
shares; Mr. Bahakel - 15,000 shares; Mr. Ballance - 3,000 shares; Mr.
Borden - 3,599 shares; Mr. Bryan - 1,999 shares; Mr. Clancy - 404 shares;
Mr. Daughtry - 39 shares; Mr. Dunn - 2,005 shares; Mr. Edwards - 267
shares; Mr. Godwin - 107 shares; Mr. Guthrie - 362 shares; Mr. Harris -
8,536 shares; Mr. Holt - 5,000 shares; Mr. Johnson - 406 shares; Ms. Lee -
25,596 shares; Mr. J. L. Maxwell, Jr. - 3,766 shares; Mr. Michael A.
Maxwell - 178 shares; Mr. Murphy - 1,792 shares; Mr. Ogburn - 22,470
shares; Mr. Patterson - 67,840 shares; Mr. Patrick H. Pope - 283 shares;
Mr. William R. Pope - 212 shares; Ms. Poyner - 141 shares; Mr. Quick -
26,910 shares; Mr. Snipes -166 shares; Mr. Tilghman - 8,485 shares; Mr.
Wessell - 11,774 shares; Mr. White - 322 shares; Mr. Williams -298 shares;
and members of the group - 213,465 shares.
(2) Based on a total of __________ shares actually outstanding as of March 6,
1998, and with respect to each director or executive officer, the shares
that would be outstanding if the director or executive officer exercised
his or her options to purchase shares of Common Stock of the Corporation
(to the extent vested) or, with respect to directors and the five current
executive officers of the Corporation as a group, the shares that would be
outstanding if each such individual exercised his or her options to
purchase shares of the Common Stock (to the extent vested).
(3) Included in the beneficial ownership of Mr. Patrick H. Pope and Mr.
Tilghman are 25,718 shares held by a trust in which both Mr. Pope and Mr.
Tilghman have an interest. These shares are reflected separately in the
beneficial ownership of each individual, but are included only once in the
beneficial ownership shown for the group.
Section 16(a) Beneficial Ownership Reporting Compliance
Directors and executive officers of the Corporation are required by federal
law to file reports with the Securities and Exchange Commission regarding their
initial ownership and the amount of and changes in their beneficial ownership of
the Corporation's Common Stock. Based on the Corporation's review of reports
furnished to it, all such reports were timely filed except as follows: Willie S.
Edwards inadvertently failed to report the purchase of 328 shares by his spouse
in December 1995 for which the required report was filed in October 1997; Willie
S. Edwards inadvertently failed to report the purchase of 537 shares on July 21,
1997 for which the required report was filed in September 1997; and David T.
Clancy inadvertently failed to report the sale by the Clancey & Theys Profit
Sharing Plan of 1,617 shares on May 16, 1997 for which the required report was
filed in December 1997.
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors previously has set the number of directors of the
Corporation at 26. The Bylaws of the Corporation provide that directors be
divided into three classes, approximately equal in number, elected to staggered
three-year terms. The 10 directors whose terms expire at the Annual Meeting have
been re-nominated to the Board for the following terms, in order to evenly
stagger the terms among each class of directors as required by the Bylaws.
4
<PAGE>
<TABLE>
<CAPTION>
Name and Age Director Since (1) Business Experience During Past Five Years
- ------------ ------------------ ------------------------------------------
<S> <C> <C>
Two-Year Term
Cy N. Bahakel 1997 President and owner of Bahakel Communications, Ltd.,
(70) Charlotte, North Carolina (television and radio stations);
formerly Chairman of the Board, Bank of Mecklenburg,
Charlotte, North Carolina
George W. Holt 1995 Executive Vice President, Triangle Bank since February 1995;
(67) President, Columbus National Bank from 1973 to February 1995
Three-Year Term:
Carole S. Anders 1988 Civic leader, Raleigh, North Carolina
(53)
Charles H. Ashford, Jr. 1993 Retired physician; formerly Vice President of Medical Affairs,
(62) Craven Regional Medical Authority from 1991 to 1996;
previously surgeon with Coastal Surgical Specialists, P.A.,
New Bern, North Carolina
Edwin B. Borden 1993 President, The Borden Manufacturing Company, Goldsboro, North
(64) Carolina (textile manufacturing); Director of Carolina Power &
Light Company; Director of Jefferson-Pilot Corporation;
Director of Ruddick Corp.; Director of Winston Hotels
Robert E. Bryan, Jr. 1993 Chairman and Partner, Express Stop, Inc., Fayetteville, North
(63) Carolina (convenience stores); President, Bryan Oil Co.
N. Leo Daughtry 1988 Attorney, Daughtry, Woodard, Lawrence & Starling, L.L.P.,
(57) Smithfield, North Carolina
Michael A. Maxwell 1995 Senior Scientist since November 1995, Branch Chief from
(59) December 1974 to November 1995, U.S. Environmental Protection
Agency, Research Triangle Park, North Carolina
Patrick H. Pope 1988 Partner, Pope & Tart (attorneys-at-law), Dunn, North Carolina
(53)
Edythe M. Poyner 1988 President, Capital Land Investment Company, Raleigh, North
(44) Carolina
</TABLE>
- -------------------
(1) Refers to the year in which a person first was elected or became a director
of the Corporation or, if prior to the Corporation's holding company
reorganization in August 1992, the year in which such person first was
elected a director of Triangle Bank, the Corporation's wholly-owned bank
subsidiary.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
10 NOMINEES NAMED ABOVE.
Incumbent Directors
The Corporation's current Board of Directors includes the following
directors whose terms will continue after the Annual Meeting. Certain
information regarding those directors is set forth in the following table:
5
<PAGE>
<TABLE>
<CAPTION>
Director Term
Name and Age Since (1) Business Experience During Past Five Years Expires
- ------------ --------- ------------------------------------------ -------
<S> <C> <C> <C>
David T. Clancy 1988 President, Clancy & Theys Construction Company, Raleigh, 1999
(49) North Carolina
Syd W. Dunn, Jr. 1993 President and Chairman, Hannah & Dunn, Inc., Greenville, 1999
(72) North Carolina (wine and spirits broker)
Willie S. Edwards 1995 Retired; formerly General Partner in L & B Associates, 1999
(65) Rocky Mount, North Carolina (wholesale liquor
distributor)
Robert L. Guthrie 1988 President and Chief Executive Officer, Associated 1999
(62) Insurers, Inc., Raleigh, North Carolina
John B. Harris, Jr. 1991 Retired; formerly President, Winston Hospitality, Inc. 1999
(68) (hotel management) since 1991; formerly Chairman of the
Board, Triangle Bank 1991 to January 1997
Earl Johnson, Jr. 1991 Chairman, Carolina Crane Corp., Raleigh, North Carolina 1999
(66)
J. L. Maxwell, Jr. 1993 Chairman of the Board of Directors, Goldsboro Milling 1999
(71) Co. (turkey and hog producer), Goldsboro, North
Carolina; Director, Atlantic & East Carolina Railway
William R. Pope 1987 President and Chairman of the Board, Pope Enterprises, 1999
(62) Inc. (operator of True-Value Hardware and Variety
Stores), Coats, North Carolina
Billy N. Quick, Sr. 1996 Executive Vice President, Triangle Bank since October 1999
(57) 1996; previously President and Chief Executive Officer,
Granville United Bank, Oxford, North Carolina
James P. Godwin, Sr. 1995 President, Godwin Manufacturing Co., Inc., Dunn, North 2000
(56) Carolina, and Godwin and Gonzalez Specialty Equipment,
Inc., Puerto Rico (truck body manufacturers)
Wendell H. Murphy 1993 President, Murphy Family Farms (swine production) and 2000
(59) Murphy Milling Co. (feed production), Rose Hill, North
Carolina; Director of Smithfield Foods
Michael S. Patterson 1990 Chairman of the Board, Triangle Bancorp, Inc. and 2000
(51) Triangle Bank since February 1997; President since 1990
and Chief Executive Officer since 1991, Triangle Bank;
President and Chief Executive Officer, Triangle Bancorp,
Inc. since August 1992; Director of Bank of Mecklenburg
since October 1997
J. Dal Snipes 1995 President, Snipes Insurance Service, Inc., Dunn, North 2000
(45) Carolina
N. Johnson Tilghman 1988 Partner, Tilghman & Butler, L.L.P. (attorneys-at-law), 2000
(55) Garner, North Carolina since December 1997; formerly
partner in Pope, Tilghman & Tart, Dunn, North Carolina
from 1972 to 1997
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Director Term
Name and Age Since (1) Business Experience During Past Five Years Expires
- ------------ --------- ------------------------------------------ -------
<S> <C> <C> <C>
Sydnor M. White, Jr. 1991 President, CJS, Inc. (automotive parts distributor), 2000
(49) Raleigh, North Carolina
J. Blount Williams 1988 President, Alfred Williams & Co., Raleigh, North 2000
(44) Carolina (office furniture and supplies)
</TABLE>
- -------------------
(1) Refers to the year in which a person first was elected or became a director
of the Corporation or, if prior to the Corporation's holding company
reorganization in August 1992, the year in which such person first was
elected a director of Triangle Bank, the Corporation's wholly-owned bank
subsidiary.
Director Relationships
No director or executive officer is related to another director or executive
officer of the Corporation except for Patrick H. Pope and William R. Pope, who
are third cousins, and Patrick H. Pope and N. Johnson Tilghman who are
brothers-in-law.
Except for Mr. Borden who is a director of Carolina Power & Light Company,
Jefferson-Pilot Corporation, Winston Hotels and Ruddick Corp., and Mr. Murphy
who is a director of Smithfield Foods, no director is a director in any company
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act") or subject to the requirements of
Section 15(d) of the Exchange Act, or any company registered as an investment
company under the Investment Company Act of 1940.
Director Compensation
Board Fees. During 1997, directors who are not employees of the Corporation
received an annual retainer of 100 shares of Common Stock of the Corporation, 60
shares for each Board meeting attended, 30 shares for each committee meeting
attended, and each committee chairman received an additional 10 shares for each
meeting attended, and each member of a special committee established by the
Board of Directors during 1997 received 25 shares for each special committee
meeting and each special committee chairman received an additional 5 shares for
each meeting attended. In 1998, the annual retainer amount will be 110 shares,
and directors will receive 35 shares for each Board meeting attended, 15 shares
for each committee meeting attended and each committee chairman will receive an
additional 10 shares for each meeting attended.
Directors' Deferred Compensation Plans. The Corporation maintains two
deferred compensation plans for outside directors. In 1989, the Corporation
adopted a Deferred Compensation Plan (the "1989 Plan") for outside directors for
cash compensation paid to directors; the 1989 Plan was in operation through
1994. Since January 1, 1995, directors of the Corporation are paid in shares of
Common Stock. Only individuals who were members of the Board of Directors but
who were not employees of the Corporation were eligible to participate in the
1989 Plan. Directors who elected to participate in the 1989 Plan could elect to
defer a minimum of $500 of their compensation for their service as such pursuant
to the 1989 Plan during each year they participated and could elect to defer up
to the full amount of directors' compensation they would receive in $100
increments. Deferred compensation was converted into stock units by dividing the
compensation deferred under the 1989 Plan by the then current value of a share
of the Corporation's Common Stock. Dividends paid to holders of the
Corporation's Common Stock are credited to holders of stock units and are
converted into additional stock units on the same basis as compensation deferred
under the 1989 Plan. Within 60 days after the death, disability or retirement of
a director, the director or his or her estate is entitled to be issued one share
of the Corporation's Common Stock for each stock unit and cash for fractional
stock units. As of December 31, 1997, 49,400 stock units were outstanding under
the 1989 Plan.
7
<PAGE>
The Corporation also maintains the 1997 Deferred Compensation Plan (the
"1997 Plan") pursuant to which directors who are not employees of the
Corporation may elect to defer all or a portion of their compensation for their
service as such during each year in which they participate in the 1997 Plan.
Directors of the Corporation are paid in shares of the Corporation's Common
Stock which, if deferred pursuant to the 1997 Plan, are held in trust for the
director. Dividends paid to holders of the Corporation's Common Stock are
credited to the account of each director participating in the 1997 Plan. Within
60 days after the death, disability or retirement of a director, the director or
his or her estate is entitled to be issued the shares of Common Stock held in
his or her account and cash for any fractional shares. As of December 31, 1997,
11,455 shares of Common Stock were outstanding under the 1997 Plan.
1988 Non-Qualified Stock Option Plan. The Corporation has adopted and the
shareholders have approved the 1988 Non-Qualified Stock Option Plan (the
"Non-Qualified Plan") pursuant to which options on 388,002 shares of the
Corporation's Common Stock were available for issuance to members of the
Corporation's Board of Directors and to members of Boards of Directors and
members of advisory boards of directors of any subsidiary of the Corporation.
The duration of the options is ten years from the date of grant. As of January
4, 1998, after giving effect to the exercise and forfeiture of options, options
on 167,027 shares of Common Stock were issued and outstanding. The Non-Qualified
Plan expired on January 4, 1998 and no more options may be issued pursuant to
the Non-Qualified Plan.
Pursuant to the terms of the Non-Qualified Plan: (i) the option price may
not be less than the fair market value of the Corporation's Common Stock on the
date of grant of the options; and (ii) options vest 20% per year from the date
of grant and are exercisable as they vest. If the option holder ceases to
perform services as a director or local director of the Corporation or its
subsidiaries for any reason during the five-year period, he or she has one year
from such cessation to exercise his or her vested options.
1998 Omnibus Stock Plan. The Corporation has adopted, subject to
shareholder approval, the 1998 Omnibus Stock Plan. The 1998 Omnibus Stock Plan
is being presented to the shareholders of the Corporation for approval as
Proposal 3. A full discussion of the 1998 Omnibus Stock Plan is found in this
Proxy Statement under the heading "PROPOSAL 3. APPROVAL OF 1998 OMNIBUS STOCK
PLAN".
Board of Directors' Meetings and Committees
The Board of Directors of the Corporation held six regular meetings and one
special meeting during 1997. All incumbent directors attended more than 75% of
the total number of meetings of the Board of Directors and its committees during
1997 except for Directors Bahakel, Borden, Daughtry, Guthrie, J. Louis Maxwell,
Jr. and Williams due to other business commitments or illness.
The Board of Directors has several standing committees, including an Audit
Committee and a Compensation Committee. The voting members of these committees
are appointed by the Board of Directors annually from among its members.
The current members of the Audit Committee are Directors Ashford, Bahakel,
Michael A. Maxwell, Murphy, Patrick H. Pope (Chairman), Tilghman and Williams.
The Audit Committee serves as the Audit Committee for both the Corporation and
the Bank. The primary functions of the Audit Committee are to give additional
assurance regarding the integrity of financial information used by the Board of
Directors and distributed to the public by the Corporation, and to oversee and
monitor the activities of the Corporation's internal and external audit
processes. The Audit Committee met four times during 1997.
The Compensation Committee administers the Corporation's compensation
program and has responsibility for matters involving the compensation of
executive officers of the Corporation and its subsidiaries. The current members
of the Compensation Committee are Directors Clancy, Godwin, Guthrie (Chairman),
Johnson, Poyner and White. The Compensation Committee met two times during 1997.
8
<PAGE>
The Board of Directors does not have a standing nominating committee.
Executive Officers
The Corporation has the following executive officers:
<TABLE>
<CAPTION>
Officer Positions with the Corporation and Triangle Bank;
Name Age Since Business Experience During Past Five Years
---- --- ----- ------------------------------------------
<S> <C> <C> <C>
Michael S. Patterson 51 1990 Chairman of the Board of Triangle Bancorp, Inc. and Triangle
Bank since February 1997; President since 1990 and Chief
Executive Officer since 1991, Triangle Bank; President and
Chief Executive Officer, Triangle Bancorp, Inc. since August
1992; Director of Bank of Mecklenburg since October 1997
H. Leigh Ballance, Jr. 51 1995 Executive Vice President, Triangle Bancorp, Inc. and Triangle
Bank as of March 1995; President and Chief Executive Officer,
Atlantic Community Bancorp, Inc. and Unity Bank & Trust Company
from September 1989 to March 1995.
Steven R. Ogburn 47 1993 Executive Vice President, Triangle Bancorp, Inc. and Triangle
Bank since 1996; Senior Vice President, Triangle Bancorp, Inc.
and Senior Vice President - Credit Administration, Triangle
Bank, 1993 to 1996; Senior Vice President, Centura Bank,
1986-1993
Debra L. Lee 41 1991 Executive Vice President and Chief Financial Officer, Triangle
Bancorp, Inc. and Triangle Bank since 1996; Senior Vice
President and Chief Financial Officer, Triangle Bancorp, Inc.
and Triangle Bank, 1992 to 1996; Director of Bank of
Mecklenburg since October 1997
Edward O. Wessell 56 1988 Executive Vice President, Triangle Bancorp, Inc. and Triangle
Bank since 1997; Senior Vice President, Triangle Bank 1988-1997
</TABLE>
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee in January 1997 were Charles H.
Ashford, Jr., Edwin B. Borden (Chairman), John B. Harris, Jr., N. Johnson
Tilghman, and Sydnor M. White, Jr. For the remainder of 1997, the Compensation
Committee was comprised of Edwin B. Borden (Chairman), David T. Clancy, James P.
Godwin, Sr., Earl Johnson, Edythe M. Poyner and Patrick H. Pope.
John B. Harris, Jr. is a director of the Corporation, and in 1996 served as
the Chairman of the Board of Triangle Bank and an employee of Triangle Bank.
Effective January 1, 1997, Mr. Harris ceased being an employee of Triangle Bank
and effective February 1, 1997, Mr. Harris ceased being the Chairman of Triangle
Bank. Michael S. Patterson, President and Chief Executive Officer of the
Corporation, though not a member of the Compensation Committee, advised the
Compensation Committee during 1997 on the compensation to be paid to executive
officers, other than himself, and to employees of the Corporation.
Compensation Committee Report
It is the policy of the Compensation Committee to provide a fully
competitive, performance-based compensation program such as will enable the
Corporation and its subsidiaries to attract, motivate and retain qualified
senior officers. With regard to all senior officers' compensation, the
Compensation Committee's policy is
9
<PAGE>
that salary levels will be established and increases will be given commensurate
with the individual officer's levels of responsibility and performance and with
the general status of the local economy, and the overall profit performance of
the Corporation and its subsidiaries as it relates to attainment of budgeted
goals for profitability and return on average assets. The Corporation's
executive compensation program includes (a) annual compensation consisting of
base salaries, (b) the potential for cash incentive bonuses based on the
Corporation's financial performance, (c) long-term incentive compensation
consisting of periodic stock options, and (d) contributions to the individual
accounts of all participating employees (including executive officers) under the
Corporation's subsidiaries' Section 401(k) salary deferral plans. In addition,
the Corporation provides other employee benefits and welfare plans customary for
companies of its size.
The basis for the executive officer compensation reported in 1997 was the
salary range of various positions set in conjunction with an outside consultant
during the fall of 1994 which reviewed comparable salaries being paid within
North Carolina and the southeastern United States based upon comparable sized
banking institutions. The cash incentive compensation for 1997 was based upon
the formula within the management incentive compensation plan which plan was
approved by the Board during January 1994. A bonus pool is established in which
an executive officer will be eligible to participate if the Corporation meets at
least 80% of its defined short-term goals, which goals are set by the Board.
In 1997 long-term incentive compensation was based upon a formula
established within the long-term incentive plan which plan was approved by the
Board during January 1995. In November 1997, the Compensation Committee revised
certain of the methods for calculating long-term incentive compensation,
including those for 1997, after consultation with an independent compensation
consultant. Compensation under the plan consists of stock options. A pool of
stock options is established in which an executive officer will be eligible to
participate if the Corporation meets at least 80% of its defined long-term
goals, which goals are set by the Board.
During January 1997 the Compensation Committee made recommendations to the
Board of Directors (and the Board of Directors made final decisions) regarding
the amounts of the 1997 salaries for Michael S. Patterson and the Corporation's
other executive officers, and the parameters for cash incentive bonuses and
long-term compensation. During January 1998 the Compensation Committee and the
full Board of Directors ratified the amounts of the 1997 bonuses for Michael S.
Patterson and the Corporation's other executive officers. The amount of bonus
compensation in 1997 was directly tied to the attainment of the Corporation's
financial plan for 1997.
Executive Compensation
Summary of Cash and Certain Other Compensation. The table below indicates
the cash compensation paid by the Corporation as well as other compensation paid
or accrued to the President and Chief Executive Officer and the four other
executive officers of the Corporation (the "Named Executive Officers") for
services rendered in all capacities during fiscal years 1997, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation(1) Awards Payouts
---------------------- ------ -------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Principal Position Year ($) ($) ($)(2) ($) (#) ($) ($)(3)
- ------------------ ---- --- --- ------ --- --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael S. Patterson, 1997 220,000 188,408 -0- -0- 16,044 -0- 9,500
President and 1996 199,799 132,440 -0- -0- 14,483 -0- 9,500
Chief Executive Officer 1995 178,230 98,900 -0- -0- 17,500 -0- 10,041
H. Leigh Ballance, Jr., 1997 122,000 83,585 -0- -0- 8,931 -0- 10,940
Executive Vice President 1996 121,504 58,982 -0- -0- 9,256 -0- 10,629
1995 116,000 50,600 -0- -0- 15,000 -0- 5,853
-
Steven R. Ogburn, 1997 99,000 67,827 -0- -0- 7,190 -0- 8,904
Executive Vice President 1996 98,857 47,481 -0- -0- 10,000 -0- 5,553
1995 96,957 42,400 -0- -0- 10,000 -0- 4,889
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation(1) Awards Payouts
---------------------- ------ -------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Principal Position Year ($) ($) ($)(2) ($) (#) ($) ($)(3)
- ------------------ ---- --- --- ------ --- --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debra L. Lee, 1997 103,800 67,827 -0- -0- 7,190 -0- 9,111
Executive Vice 1996 102,925 47.481 -0- -0- 7,062 -0- 7,148
President and 1995 92,425 38,600 -0- -0- 10,000 -0- 4,706
Chief Financial Officer
Edward O. Wessell, 1997 97,990 50,655 -0- -0- 4,321 -0- 7,895
Executive Vice President 1996 85,000 28,899 -0- -0- -0-
1995 82,400 17,304 -0- -0- -0-
</TABLE>
- -------------------
(1) Amounts shown in the table include amounts paid to the Named Executive
Officers as executive officers of Triangle Bank. Triangle Bank was
reorganized as a wholly-owned subsidiary of the Corporation in August 1992.
Also includes amounts deferred at the election of the Named Executive
Officers under Section 401(k) of the Internal Revenue Code and under
existing deferred compensation agreements between the Named Executive
Officer and the Corporation. The amount of that compensation for the Named
Executive Officers for 1995, 1996 and 1997 under the 401(k) plan was based
on a formula contained in the terms of that plan and was not related to the
Corporation's or the officer's performance for the year.
(2) Perquisites and personal benefits awarded to the Named Executive Officers
did not exceed 10% of the total annual salary and bonus in any year
reported.
(3) The amounts disclosed represent the Corporation's annual contribution on
behalf of the Named Executive Officers to match pre-tax elective deferral
contributions (included under Salary) made by the Named Executive Officers
under Section 401(k) of the Internal Revenue Code, and insurance premiums
paid on behalf of the Named Executive Officer.
Stock Options. The following table sets forth information with regard to
grants of stock options during the fiscal year ended December 31, 1997 to the
Named Executive Officers. All such grants were made under the 1988 Incentive
Stock Option Plan.
STOCK OPTION GRANTS IN 1997
Individual Grants
<TABLE>
<CAPTION>
% of Total Potential Realizable Value
Number of Options (2) at Assumed Annual
Securities Granted to Exercise or Rates of Stock Price
Underlying Employees in Base Price Appreciation for Option
Options Fiscal ($) Per Expiration Term ($)(at)
Name Granted (#)(1) Year Share Date 5% 10%
---- -------------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Michael S. Patterson 16,044 17.5 18.38 2/18/07 185,403 469,849
H. Leigh Ballance, Jr. 8,931 9.7 18.38 2/18/07 103,206 261,544
Steven R. Ogburn 7,190 7.8 18.38 2/18/07 83,087 210,559
Debra L. Lee 7,190 7.8 18.38 2/18/07 83,087 210,559
Edward O. Wessell 4,321 4.7 18.38 2/18/07 49,933 126,541
</TABLE>
- ------------------
(2) One-fifth of the options vest and become exercisable in each of the five
years beginning January 1, 1998, assuming the Named Executive Officer
remains employed by Triangle Bank. If the Named Executive Officer's
employment terminates before the end of the vesting period, the Named
Executive Officer may exercise vested options for varying periods after
termination (depending on the manner of termination) in accordance with the
plan.
(3) Potential Realizable Value represents the difference between an assumed
stock price and the exercise price for the number of options granted. The
assumed stock price equals the market value of the stock on the grant date
appreciating at the indicated rate over the term of the options.
The following table sets forth information with regard to exercises of
stock options during the fiscal year ended December 31, 1997, by the Named
Executive Officers and the 1997 fiscal year-end value of all unexercised options
held by them.
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options at
Options at FY-End (#) FY-End ($) (1)
Shares Acquired Value Realized ---------------------------- ----------------------------
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Patterson -0- -0- 58,237 42,130 1,654,405 909,449
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options at
Options at FY-End (#) FY-End ($) (1)
Shares Acquired Value Realized ---------------------------- ----------------------------
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. Leigh Ballance, Jr. -0- -0- 7,851 25,336 196,114 547,073
Steven R. Ogburn -0- -0- 15,516 24,255 412,401 547,303
Debra L. Lee -0- -0- 20,146 21,440 553,955 472,885
Edward O. Wessell -0- -0- 8,406 11,743 229,820 251,210
</TABLE>
- -------------------
(1) Closing price of the Corporation's Common Stock at December 31, 1997 was
$35.88
Executive Deferred Compensation Agreements. Michael S. Patterson, President
and Chief Executive Officer of the Corporation, entered into a Deferred
Compensation Agreement dated March 1, 1992, with the Corporation's subsidiary,
Triangle Bank, pursuant to which Mr. Patterson may elect annually to defer up to
$30,000 of compensation, to be recorded in an interest-bearing deferred
compensation account maintained in his name. Such account shall be paid to Mr.
Patterson in approximately equal installments over a ten-year period, with the
first installment to be made on or before 30 days following June 30, 2002. Under
certain circumstances, Mr. Patterson may elect to postpone such first
installment payment until a subsequent date. Triangle Bank may terminate such
deferred compensation plan for Mr. Patterson at any time.
Debra L. Lee, Executive Vice President of the Corporation, entered into a
Deferred Compensation Agreement dated June 9, 1994, with the Corporation's
subsidiary, Triangle Bank, pursuant to which Ms. Lee may elect annually to defer
up to $30,000 of compensation, to be recorded in an interest-bearing deferred
compensation account maintained in her name. Such account shall be paid to Ms.
Lee, at her discretion, upon her voluntary termination of employment or her
retirement either in one lump sum after such termination or retirement or in
approximately equal installments over a ten-year period, with the first
installment to be made on or before 30 days following June 30, 2012. Under
certain circumstances, Ms. Lee may elect to postpone such first installment
payment until a subsequent date, provided the Triangle Bank concurs in such
postponement. Triangle Bank may terminate such deferred compensation plan for
Ms. Lee at any time.
Triangle Bank has established a trust to administer and fund the deferred
compensation plans for Mr. Patterson and Ms. Lee, and, accordingly, contributes
periodically to the trust to fund the plans.
Supplemental Early Retirement Plans. In January 1996, a Supplemental Early
Retirement Plan (the "1996 SERP") was approved by the Board of Directors of the
Corporation for the benefit of Michael S. Patterson, President and Chief
Executive Officer of the Corporation. The 1996 SERP is a benefit plan which will
provide retirement income for Mr. Patterson, in conjunction with the Triangle
Bank's 401(k) Plan and Social Security benefits, at an amount equal to 60% of
his projected final pay at retirement. The 1996 SERP provides for payment by the
Corporation of the premiums on a life insurance policy insuring Mr. Patterson's
life, which policy will be owned by Mr. Patterson, subject to a collateral
assignment to the Corporation to secure repayment of its interest in the cash
value of the policy. The 1996 SERP includes a deferred compensation arrangement,
by which Mr. Patterson will receive a vested interest in 10% of the policy's
cash value for each year of service with the Corporation. The 1996 SERP took
into consideration the five years of service completed by Mr. Patterson on the
date of the 1996 SERP's implementation, so upon implementation Mr. Patterson
immediately was vested in 50% of the policy's cash value. If Mr. Patterson
completes four additional years of service with the Corporation, he will be
eligible to receive all of the cash value, even if his employment is terminated
prior to his retirement. If Mr. Patterson's employment is terminated before
completion of four additional years of service due to a change in control of the
Corporation, he automatically will become fully vested in 100% of the policy's
cash value. The 1996 SERP also has the benefit of providing key man coverage on
Mr. Patterson.
Effective January 1, 1998, the Corporation implemented a Supplemental Early
Retirement Plan for certain of the Corporation's executive officers (each plan
collectively referred to herein as the "1998 SERP"), Michael S. Patterson,
Steven R. Ogburn, Debra L. Lee, and Edward O. Wessell. Each 1998 SERP is an
unfunded obligation of the Corporation to pay each individual $50,000 ($66,666
in the case of Mr. Patterson) annually for 15 years after the officer's
retirement at age 65, his or her disability or upon a change of control of the
12
<PAGE>
Corporation. In the event of the officer's early retirement after age 55 but
before age 65, the Corporation will be obligated to pay the officer a percentage
(beginning at __%) of the retirement benefit for 15 years, depending on the
officer's age at early retirement. Retirement benefits, vest 10% per year such
that each officer shall be fully vested on December 31, 2007, or upon attainment
of age 65, whichever date is earlier. In the event of the officer's disability
or a change in control of the Corporation, the officer shall be fully vested. In
the event of an officer's death, the retirement benefit shall be paid to the
officer's spouse, if living.
Executive Employment Agreements and Change in Control Agreements. Mr.
Patterson, the Corporation's President and Chief Executive Officer, entered into
an employment agreement with the Corporation and Triangle Bank in December 1993.
The agreement continues until December 31, 1996, and provides for a base monthly
salary as is determined from time to time by Triangle Bank but not less than
$10,479, together with certain fringe benefits. In the event of the involuntary
termination of his employment by the Corporation without cause, Mr. Patterson is
entitled to continue to receive, on a monthly basis for the remainder of the
term of the Agreement or 12 months after the date of such termination, whichever
is longer, his base monthly salary, all fringe benefits, and an amount equal to
the average bonus paid to Mr. Patterson over the prior three years. Triangle
Bank's obligation to make such salary payments and to provide such fringe
benefits terminates upon Mr. Patterson's death or disability. Mr. Patterson's
employment agreement provides for certain payments to him in the event there is
a change in control of the Corporation. Specifically, upon a change in control,
the term of the agreement is set at three years from the date of the change in
control. Further, Mr. Patterson may terminate the agreement upon a change in
control of the Corporation if, after one year from the date of such change in
control, he determines that he has not been assigned duties commensurate with
his duties prior to the change in control under terms or conditions satisfactory
to him. If Mr. Patterson so terminates the agreement, the agreement provides
that the Corporation will pay to him for the remainder of the term of the
agreement an amount equal to 100% of his then base monthly salary, fringe
benefits, and an annual amount equal to the average of the bonus paid to Mr.
Patterson over the prior three years. The agreement further provides that,
unless terminated by the other party, the term automatically is extended for an
additional year on the same terms and conditions set forth in the agreement.
Consequently, the agreement's term automatically was extended to December 31,
1998.
H. Leigh Ballance, Jr., an Executive Vice President of the Corporation,
entered into an employment agreement with the Corporation and Triangle Bank on
April 1, 1995. The agreement continues until April 1, 1998, and provides for a
base annual salary as is determined from time to time by Triangle Bank but not
less than $116,000, together with certain fringe benefits. In the event of the
involuntary termination of his employment by the Corporation without cause, Mr.
Ballance is entitled to continue to receive, on a monthly basis for the
remainder of the term of the Agreement, his base salary and health and
disability insurance coverage. Triangle Bank's obligation to make such salary
payments and to provide such fringe benefits terminates upon Mr. Ballance's
death or disability. Mr. Ballance's employment agreement provides for certain
payments to him in the event there is a change in control of the Corporation.
Specifically, upon a change in control, the term of the agreement is set at
three years from the date of the change in control. Further, Mr. Ballance may
terminate the agreement upon a change in control of the Corporation if, after
one year from the date of such change in control, he determines that he has not
been assigned duties commensurate with his duties prior to the change in control
under terms or conditions satisfactory to him. If Mr. Ballance so terminates the
agreement, the agreement provides that the Corporation will pay to him for the
remainder of the term of the agreement an amount equal to 100% of his then base
monthly salary, fringe benefits, and an annual amount equal to the average of
the bonus paid to Mr. Ballance over the prior three years. The agreement further
provides that, unless terminated by the other party, the term automatically is
extended for an additional year on the same terms and conditions set forth in
the agreement. Effective May 1, 1998, at his election, Mr. Ballance will no
longer serve as an Executive Vice President of the Corporation and Triangle. Mr.
Ballance's current agreement will be terminated and Mr. Ballance and Triangle
Bank will enter into a new employment agreement, effective May 1, 1998.
Steven R. Ogburn, an Executive Vice President of the Corporation, and Debra
L. Lee, Executive Vice President and Chief Financial Officer of the Corporation,
each entered into a Change of Control Agreement with the Corporation and the
Bank on June 18, 1996; Edward O. Wessell, Executive Vice President of the
Corporation,
13
<PAGE>
entered into a Change of Control Agreement with the Corporation and the Bank on
January 1, 1998. Mr. Ogburn's and Ms. Lee's agreements continue until June 18,
1998, and Mr. Wessell's agreement continues until January 1, 2000. Each
agreement provides that in the event of a termination of the officer's
employment in connection with, or within 24 months after, a change of control of
the Corporation or Triangle Bank, for reasons other than cause, the officer
shall receive an amount equal to two times (i) his or her then current salary
plus (ii) the average of the cash bonus paid to the officer by Triangle Bank
under Triangle Bank's cash bonus plan during the immediately preceding two
years. Further, in such event, the officer shall continue to receive for a
period of two years after his or her termination all benefits the officer was
receiving and entitled to on his or her termination date, or the officer may
elect to receive the dollar equivalent of such benefits. The officer may elect
to receive all such payments either in one lump sum or in 24 equal monthly
payments. In addition, the officer may terminate the agreement upon a change of
control of the Corporation if, within 24 months of such change of control, the
officer is assigned duties inconsistent with his or her duties at the time of
the change of control, his or her annual base salary is reduced below the amount
in effect prior to the change of control, the officer's benefits are reduced
below the level prior to the change of control (unless benefits are reduced for
all employees), or the officer is transferred to a location more than 50 miles
from Raleigh without the officer's consent. Each agreement further provides
that, unless terminated by the Corporation and Triangle Bank, notice of which
must be given at least 13 months prior to the next anniversary date, the term
automatically is extended for an additional two years on the same terms and
conditions set forth in the agreement.
Performance Graph
The following line graph illustrates the cumulative total shareholder
return on the Corporation's Common Stock over the five-year period ending
December 31, 1997 and the cumulative total return over the same period of the
indexes listed below. Each graph assumes $100 originally invested on December
31, 1992. No dividends were paid by the Bank prior to its holding company
reorganization. The Corporation paid a quarterly cash dividend of $.04 per share
from the third quarter of 1994 through the second quarter of 1995, a quarterly
cash dividend of $.06 per share in the third and fourth quarter of 1995, a
quarterly cash dividend of $.07 in the first quarter of 1996, a quarterly cash
dividend of $.08 in the second and third quarters of 1996, a quarterly cash
dividend of $.10 in the fourth quarter of 1996 and the first quarter of 1997, a
quarterly cash dividend of $.11 in the second quarter of 1997, and a quarterly
cash dividend of $.12 in the third and fourth quarters of 1997. The numbers in
the graph assume that all cash dividends were reinvested.
The graph reflects the Nasdaq U.S. Index, the Standard & Poors 500 Index
and a regional peer group index based on the common equity securities of a group
of financial institutions in the southeastern United States, which index was
prepared by an entity not affiliated with the Corporation.
14
<PAGE>
TRIANGLE BANCORP, INC.
PERFORMANCE GRAPH
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Triangle Bancorp, Inc. 100 110 139 201 236 519
Nasdaq Index 100 107 101 160 218 329
S & P 500 Index 100 110 112 153 189 252
Regional Peer Group 100 115 130 179 222 332
Index(1)
</TABLE>
- ----------------
(1) Includes the following financial institutions: Bank of Granite Corporation,
Carolina First Corporation, CCB Financial Corporation, Centura Banks, Inc.,
Century South Banks, Inc., F & M National Corporation, First Bancorp, First
Charter Corporation, Jefferson Bankshares, Inc., LSB Bancshares, Inc., and
MainStreet BankGroup, Inc. Jefferson Bankshares, Inc. has been removed from
the group as it has acquired. Sources: FactSet Data Systems, Inc.,
15
<PAGE>
Indebtedness of Management
The Corporation has had, and expects to have in the future, banking
transactions, including loans, in the ordinary course of business with its and
its bank subsidiaries' directors, executive officers and their associates. In
the opinion of management of the Corporation, the outstanding indebtedness and
commitments to such individuals were made in the ordinary course of business and
on substantially the same terms, including interest rates, collateral, and
payment terms, as those prevailing at the same time for comparable transactions
with other persons, and do not involve more than the normal risk of
collectability or present other unfavorable features. At December 31, 1997,
indebtedness of directors and executive officers of the Corporation to its bank
subsidiaries, Triangle Bank and Bank of Mecklenburg, totaled an aggregate of
$10,840,000 or 9.1% of shareholders' equity.
Transactions with Management
In 1997, the Corporation purchased insurance through Associated Insurers,
Inc. ("Associated") as an agent. Robert L. Guthrie, a director of the
Corporation, is the President and Chief Executive Officer of Associated. The
Corporation paid premiums to Associated in 1997 in the amount of $_______. Also
in 1997, the Corporation paid Clancy & Theys Construction Company $1,747,793 for
construction projects for the Corporation's headquarters building and various
branch offices. David T. Clancy, a director of the Corporation, is President of
Clancy & Theys Construction Company. Office furniture for various of the Bank's
offices and the Corporation's headquarters building were purchased from Alfred
Williams & Co. for an aggregate price of $117,000 in 1997. J. Blount Williams, a
director of the Corporation, is President of Alfred Williams & Co.
Management of the Corporation believes that the terms of these transactions
were at least as favorable to the Corporation as those available from other
sources.
PROPOSAL 2. AMENDMENT OF THE CORPORATION'S AMENDED AND RESTATED ARTICLES
OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES
The Board of Directors of the Corporation has voted unanimously to
recommend to the shareholders a proposed amendment to Article II of Triangle's
Amended and Restated Articles of Incorporation to increase the authorized number
of shares of the Corporation's Common Stock from 20,000,000 to 30,000,000. The
relative rights and limitations of the Corporation's Common Stock would remain
unchanged under the amendment. The Corporation's Common Stock does not have any
preemptive rights.
At the Record Date, the Corporation had ______ shares of the Corporation's
Common Stock issued and outstanding. In addition, 1,321,463 shares of the
Corporation's Common Stock are reserved for issuance under the Corporation's
compensation and stock option plans and stock option plans of companies the
Corporation has acquired, which were assumed by the Corporation as part of each
acquisition. Further, an aggregate of 4,200 shares of the Corporation's Common
Stock is reserved for issuance pursuant to warrants that were assumed by the
Corporation upon the merger of Atlantic Community Bancorp, Inc. into the
Corporation on March 31, 1995. Thus, there were ______ authorized shares of the
Corporation's Common Stock unissued and not reserved for issuance. The
Corporation increased its authorized shares in December 1993 from 6,000,000 to
10,000,000 shares upon the acquisition of New East Bancorp, which resulted in
the issuance of 1,374,507 shares of Common Stock. In February and March 1995, an
aggregate of 4,494,111 shares of the Corporation's Common Stock were issued to
fund the acquisitions of Columbus National Bank, Standard Bank and Trust Company
and Atlantic Community Bancorp, Inc. The Corporation increased its authorized
shares in May 1995 from 10,000,000 to 20,000,000 shares in anticipation of
additional acquisitions. Since then, the Corporation has issued a total
3,195,734 shares and assumed options covering a total of 382,456 shares of
Common Stock in three acquisitions in 1996 and 1997 and expects to issue an
additional 3,435,352 shares and assume options covering an additional 208,744
shares of Common Stock in 1998 for the proposed acquisitions of Guaranty State
Bancorp and United Federal Savings Bank. In addition, the Corporation proposes
to reserve 1,000,000 shares of Common Stock under the 1998 Omnibus Stock Plan
which is being presented to the shareholders for approval as Proposal 3.
16
<PAGE>
The proposed increase in the Corporation's authorized Common Stock has been
recommended by the Board of Directors to assure that an adequate supply of
authorized unissued shares is available for future acquisitions and general
corporate needs, such as future stock dividends or stock splits or issuance
under stock based benefit plans. Other than the proposed acquisition of Guaranty
State Bancorp and United Federal Savings Bank, and the proposed 1998 Omnibus
Stock Plan, there are currently no plans or arrangement relating to the issuance
of any of the additional shares of the Corporation's Common Stock proposed to be
authorized. Such shares would be available for issuance without further action
by the shareholders, unless required by the Corporation's Amended and Restated
Articles of Incorporation or bylaws or by applicable law.
The issuance of additional shares of the Corporation's Common Stock may,
among other things, have a dilutive effect on earnings per share and on the
equity and voting power of existing holders of the Corporation's Common Stock.
The issuance of additional shares of the Corporation's Common Stock by the
Corporation also may potentially have anti-takeover effect by making it more
difficult to obtain shareholder approval of various actions, such as a merger or
removal of management. The text of Article II as proposed to be amended is as
follows:
"The aggregate number of shares which the Corporation is authorized to
issue is 30,000,000 shares. The shares shall be all of one class,
designated as common stock."
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
PROPOSAL 3. APPROVAL OF 1998 OMNIBUS STOCK PLAN
On January 27, 1998, the Board of Directors of the Corporation approved the
Triangle Bancorp, Inc. 1998 Omnibus Stock Plan (the "Omnibus Plan"), subject to
approval by the shareholders of the Corporation. The material features of the
Omnibus Plan are described briefly below. Also included below is a table showing
the number and dollar value of options granted under the Omnibus Plan to Named
Executive Officers, and certain groups identified in the table.
The Omnibus Plan is intended to encourage high levels of performance by the
Corporation's officers and other key employees and to enable the Corporation to
recruit, reward, retain and motivate directors, advisory directors, officers and
key employees of experience and ability on a basis competitive with industry
practices. The Omnibus Plan is administered by the Compensation Committee.
Eligibility for awards under the Omnibus Plan and the amount of those awards are
determined solely by the Compensation Committee. As of the end of 1997,
approximately 26 directors, 248 advisory directors, and 530 officers and
employees were eligible to receive awards under the Omnibus Plan. Awards under
the Omnibus Plan may include incentive stock options or non-qualified stock
options, stock appreciation rights ("SARs"), restricted stock, performance
awards or other stock-based awards. The Compensation Committee also retains sole
discretion to determine the terms and conditions of such awards, including the
vesting schedule. The option price for incentive stock options issued under the
Omnibus Plan may not be less than the fair market value of the Common Stock on
the date of grant; however, the Compensation Committee may exercise discretion
as to the exercise price per share of any non-qualified option awarded under the
Omnibus Plan.
The exercise price of options granted under the Omnibus Plan is payable in
cash or, at the discretion of the Compensation Committee, in shares of Common
Stock owned by the optionee having a fair market value equal to the exercise
price, or through a combination of cash and shares of Common Stock. Option
grants will require the withholding of any applicable taxes required to be
withheld upon the exercise of an option.
In the event of a Change of Control of the Corporation, in addition to any
action required or authorized by the terms of an award agreement, the interest
of a holder of an outstanding award will become fully vested and exercisable. In
addition, the Compensation Committee may, as its discretion, recommend that the
Board of Directors take either of the following actions as a result of, or in
anticipation of, any such event: (i) offer to
17
<PAGE>
purchase any outstanding award made pursuant to the Omnibus Plan from the holder
for its equivalent cash value, as determined by the Compensation Committee, as
of the date of the Change of Control; or (ii) make adjustments or modifications
to outstanding awards as the Compensation Committee deems appropriate.
Under the Omnibus Plan, a "Change of Control" is defined as the earliest
date on which either of the following events occur: (i) an individual, entity,
or group acquires beneficial ownership of 20% or more of the combined voting
power of all classes of the Corporation's outstanding capital stock or control
in any manner of the election of a majority of the directors, of the
Corporation, (ii) the Corporation consolidates or merges with or into another
corporation, association, or entity, or is otherwise reorganized, where the
Corporation is not the surviving corporation in such transaction and the holders
of the voting securities of the surviving entity immediately after the
transaction; (iii) the Corporation shall sell substantially all of its assets to
another entity which is not a wholly-owned subsidiary; or (iv) there is, during
any period of two (2) consecutive years, a change in the majority of the Board
of Directors unless the election of each new director was approved by at least
two-thirds of the directors then still in office who are directors at the
beginning of such two (2) year period.
In the event of a reorganization, recapitalization, stock split, stock
dividend, exchange of stock, combination of stock, merger, consolidation or any
other change in the corporate structure of the Corporation which results in a
change in the Common Stock, or in the event of a sale by the Corporation of all
or a significant portion of its assets or any distribution to its shareholders
other than a normal cash dividend, the Compensation Committee may make
appropriate adjustments in the shares covered by the Omnibus Plan and the then
outstanding awards.
The following table sets forth certain information regarding the options
granted under the Omnibus Plan through February 28, 1998:
<TABLE>
<CAPTION>
Number of Securities
Name Dollar Value (1) Underlying Options (#)
---- ---------------- ----------------------
<S> <C> <C>
Michael S. Patterson $29.125 36,425
H. Leigh Ballance, Jr. -0- -0-
Steven R. Ogburn 29.125 13,017
Debra L. Lee 29.125 13,017
Edward O. Wessell 29.125 8,836
All five executive officers 29.125 71,295
Non-executive director group 29.125 32,894
Non-executive officer employee group 29.125 49,952
</TABLE>
Federal Income Tax Consequences
The following is a summary only of the general tax principles applicable to
awards under the Omnibus Plan under federal law as in effect on the date of this
Proxy Statement.
Options. There are no tax consequences to the optionee upon the grant of a
qualified option pursuant to the Omnibus Plan. There are no tax consequences to
the optionee upon exercise of a stock option, except that the amount by which
the fair market value of the shares at the time of exercise exceeds the option
exercise price is a tax preference item possibly giving rise to alternative
minimum tax. If the shares of Common Stock acquired are disposed of within two
years from the date the option was granted and within one year after the shares
are transferred to the optionee, a "disqualifying disposition" occurs and gain
in an amount equal to the lesser of (i) the fair market value of the shares on
the date of exercise minus the option exercise price or (ii) the amount realized
on disposition minus the option exercise price (except for certain "wash" sales,
gifts or sales to related persons), is taxed as ordinary income and the
Corporation will be entitled to a corresponding deduction in an amount equal to
the optionee's ordinary income at that time.
18
<PAGE>
Non-Qualified Stock Options. There are no tax consequences to the optionee
upon the grant of a non-qualified option pursuant to the Omnibus Plan. Upon the
exercise of a non-qualified stock option, taxable ordinary income will be
recognized by the holder in an amount equal to the excess of the fair market of
the shares purchased at the time of such exercise over the aggregate option
price. The Corporation will be entitled to a corresponding federal income tax
deduction. Upon any subsequent sale of the shares, the optionee will generally
recognize a taxable capital gain or loss based upon the difference between the
per share fair market value at the time of exercise and the per share selling
price at the time of the subsequent sale of the shares.
Stock Appreciation Rights. There are no tax consequences to the employee
upon the grant of an SAR pursuant to the Omnibus Plan. Upon the exercise of an
SAR, the holder will realize taxable ordinary income on the amount of cash
received and the Corporation will be entitled to a corresponding federal income
tax deduction.
Restricted Stock. Unless the grantee of restricted stock under the Omnibus
Plan makes the election described below, such grantee will not recognize income
and the Corporation will not be allowed a deduction at the time such shares of
restricted stock are granted. While the restrictions on the shares are in
effect, a grantee will recognize compensation income equal to the amount of
dividends received and the Corporation will be allowed a deduction in a like
amount. When the restrictions on the shares are removed or lapse, the excess
fair market value of the shares on the date the restrictions are removed or
lapse over the amount paid by the grantee for the shares will be ordinary income
to the grantee and will be allowed as a deduction for federal income tax
purposes to the Corporation. Upon disposition of the shares, the gain or loss
realized by the grantee will be taxable as capital gain or loss. However, by
filing a Section 83(b) election with the Internal Revenue Service within 30 days
after the date of grant, a grantee's ordinary income will be determined as of
the date of grant. In such case, the amount of ordinary income recognized by
such a grantee and deductible by the Corporation will be equal to the excess of
the fair market value of the shares as of the date of grant over the amount paid
by the grantee for the shares. If such election is made and a grantee thereafter
forfeits his or her stock, no deduction will be allowed for the amount
previously included in such grantee's income.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE "FOR" PROPOSAL 3.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P., Certified Public Accountants, has
been appointed by the Board of Directors to serve as the Corporation's
independent accountants for 1998, and a proposal to ratify that appointment will
be introduced at the Annual Meeting. If shareholders do not approve this
proposal, the Board of Directors will reconsider the appointment.
Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they desire
to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 4.
PROPOSALS OF SHAREHOLDERS
It currently is expected that the 1999 Annual Meeting will be held during
April 1999. Any proposal of a shareholder which is intended to be presented at
the 1999 Annual Meeting must be received by the Corporation at its principal
executive office in Raleigh, North Carolina, not later than November 30, 1998 in
order to be included in the Corporation's proxy statement and form of
appointment of proxy to be issued in connection with that meeting.
March 20, 1998
19
<PAGE>
Preliminary Copy
REVOCABLE APPOINTMENT OF PROXY
TRIANGLE BANCORP, INC.
Annual Meeting of Shareholders
April 28, 1998
Appointment of Proxy Solicited by Board of Directors
The undersigned hereby appoints Steven R. Ogburn, Debra L. Lee and William V.
Leaming, Jr., or either of them, with full powers of substitution, to act as
attorneys and proxies to vote all shares of common stock of Triangle Bancorp,
Inc. (the "Corporation") held of record by the undersigned on March 6, 1998 at
the Annual Meeting of Shareholders to be held at the Radisson Governors Inn,
I-40 at Davis Drive, Exit 280, Research Triangle Park, North Carolina, on
Tuesday, April 28, 1998, at 10:00 A.M., and at any adjournments thereof, as
follows:
1. Election of directors:
|_| |_|
FOR all nominees WITHHOLD authority to vote
listed below for all nominees
listed below
For Two-Year Term: Cy N. Bahakel, George W. Holt
For Three-Year Terms: Carole S. Anders, Charles H. Ashford, Jr., Edwin
B. Borden, Robert E. Bryan, Jr., N. Leo Daughtry, Michael A. Maxwell,
Patrick H. Pope, Edythe M. Poyner
Instruction: To withhold your vote for one or more nominees, write the
name(s) of such nominee(s) on the line below.
----------------------------------------------------------------------
2. Approval of amendment to the Corporation's Articles of Incorporation
to increase the authorized number of shares of Common Stock from
20,000,000 to 30,000,000.
|_| |_| |_|
FOR AGAINST ABSTAIN
3. Approval of Triangle Bancorp, Inc. 1998 Omnibus Stock Plan.
|_| |_| |_|
FOR AGAINST ABSTAIN
4. Ratification of appointment of Coopers & Lybrand L.L.P., as
independent public accountants for fiscal 1998:
<PAGE>
|_| |_| |_|
FOR AGAINST ABSTAIN
5. Transaction of any other business that may properly come before the
meeting.
The Board of Directors recommends a vote FOR each of the listed proposals.
THIS APPOINTMENT OF PROXY WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE
GIVEN, THIS APPOINTMENT OF PROXY WILL BE VOTED FOR PROPOSALS 2, 3 AND 4, AND, IN
THE ELECTION OF DIRECTORS, BY CASTING AN EQUAL NUMBER OF VOTES FOR EACH NOMINEE
LISTED UNDER PROPOSAL 1. IF, AT OR BEFORE THE TIME OF THE MEETING, ANY NOMINEE
LISTED UNDER PROPOSAL 1 HAS BECOME UNAVAILABLE FOR ANY REASON, THE PROXIES HAVE
THE DISCRETION TO VOTE FOR A SUBSTITUTE NOMINEE.
This appointment of proxy may be revoked at any time before it is exercised by
filing with the Secretary of the Corporation either an instrument revoking it or
a duly executed appointment of proxy bearing a subsequent date or by attending
the Annual Meeting and voting in person.
The undersigned acknowledges receipt from the Corporation, prior to the
execution of this appointment of proxy, of the Notice of Annual Meeting, a Proxy
Statement dated March 20, 1998, and the 1997 Annual Report to Shareholders.
Dated: _____________________________
_____________________________
Print Name of Shareholder
_____________________________
Signature of Shareholder
Please date and sign your name exactly as your name appears on this appointment
of proxy. If shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
If shareholder is a corporation, please sign in full corporate name by the
president or other authorized officer. If shareholder is a partnership, please
sign in partnership name by authorized person.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS APPOINTMENT OF PROXY
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE
- --------------------------------------------------------------------------------
2
<PAGE>
EXHIBIT INDEX
To Preliminary Proxy Materials
of Triangle Bancorp, Inc.
Exhibit Name
- ------------
Triangle Bancorp, Inc. 1998 Omnibus Stock Plan (filed pursuant to Instruction 3
of Item 10 to Schedule 14A)
TRIANGLE BANCORP, INC.
1998 OMNIBUS STOCK PLAN
<PAGE>
TRIANGLE BANCORP, INC.
1998 Omnibus Stock Plan
Table of Contents
Section Page
ARTICLE I - Name, Purpose and Definitions 1
1.1 Name 1
1.2 Purpose 1
1.3 Definitions 1
ARTICLE II - Eligibility 4
ARTICLE III - Awards 4
3.1 General 4
3.2 Stock Options 4
3.3 Stock Appreciation Rights 5
3.4 Restricted Stock 6
3.5 Performance Awards 6
3.6 Other Awards 7
ARTICLE IV - Award Documents 7
4.1 General 7
4.2 Required Terms 7
4.3 Optional Terms 7
ARTICLE V - Shares of Stock Subject to the Plan 9
5.1 General 9
5.2 Additional Shares 9
5.3 Computation Rules 9
5.4 Shares to be Used 9
ARTICLE VI - Administration 10
6.1 General 10
6.2 Duties 10
6.3 Powers 10
6.4 Intent to Avoid Insider Trading 10
ARTICLE VII - Adjustments Upon Changes in Capitalization 11
2
<PAGE>
ARTICLE VIII - Changes of Control 11
8.1 General 11
8.2 "Change of Control 11
8.3 Definition of "Person" Applicable to Change of Control 12
ARTICLE IX - Amendment and Termination 12
9.1 Amendment of Plan 12
9.2 Termination of Plan 12
9.3 Procedure for Amendment of Termination 13
ARTICLE X - Miscellaneous
10.1 Rights of Employees 13
10.2 Compliance with Law 13
10.3 Unfunded Status 13
10.4 Limits on Liability 13
10.5 Section References 14
ARTICLE XI - Effective Date of Plan 14
3
<PAGE>
Triangle Bancorp, Inc.
1998 Omnibus Stock Plan
ARTICLE I
NAME, PURPOSE, AND DEFINITIONS
Section 1.1. Name. The Plan shall be known as the "Triangle Bancorp, Inc.
1998 Omnibus Stock Plan" (the "Plan").
Section 1.2. Purpose. The purpose of the Plan is to benefit the Company,
Subsidiaries, and their shareholders by encouraging and enabling key Employees
and such other persons as are eligible to participate herein to acquire a
financial interest in the Company. The Plan is intended to aid the Company and
Subsidiaries in attracting and retaining directors, local directors, officers
and key employees and in attracting and retaining persons in key relationships
with the Company and Subsidiaries, to stimulate the efforts of those
individuals, and to strengthen their desire to remain in the office or in the
employ of, or in a beneficial relationship with, the Company and Subsidiaries.
Section 1.3. Definitions. Whenever used in the Plan, unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:
(a) "Award" or "Awards" means an award granted pursuant to Article III.
(b) "Award Document" means a document described in Article IV hereof
setting forth the terms, conditions, and limitations applicable to the
Award granted to the Participant.
(c) "Beneficiary," with respect to a Participant, means (i) one or more
persons as the Participant may designate as primary or contingent
beneficiary in a writing delivered to the Company or Committee or,
(ii) if there is no such valid designation in effect at the
Participant's death, either (A) the Participant's spouse or (B) if the
Participant is not married at the date of the Participant's death, the
Participant's estate. This definition shall not, however, supersede or
adversely affect any definition or designation of beneficiary which
may be included in any Award.
(d) "Board" means the Board of Directors of the Company as it may be
comprised from time to time.
(e) Code" means the Intemal Revenue Code of 1986, as amended from time to
time, or any successor statute, and applicable regulations.
(f) "Committee" means the committee appointed by the Board from among its
members and shall be comprised of not less than two (2) persons.
Unless and until otherwise
4
<PAGE>
appointed, the Committee shall be the Compensation Committee of the
Board or any successor committee with substantially the same
responsibilities if the members of that committee satisfy the
requirements of the following sentence. A member of the Committee must
not be an Employee and must otherwise satisfy Rule 16b-3 with respect
to grants to executive officers and directors. If at any time there
shall be no Compensation Committee of the Board or any successor
committee with substantially the same responsibilities whose members
satisfy the requirements of the foregoing sentence or if the Board
shall not have otherwise appointed a committee to administer the Plan,
the Board shall have the responsibilities assigned to the Committee
herein and references to the Committee herein shall refer to the
Board. In addition, the Board shall have the right to exercise, in
whole or in part, authority of the Committee hereunder with respect to
certain persons or classes of persons as Participants, in which case
as to those persons and as to such authority taken or retained by the
Board, references to the Committee herein shall refer to the Board.
(g) "Company" means Triangle Bancorp, Inc., a North Carolina corporation,
and any successor corporation.
(h) "Director" means any individual who is a member of the Board.
(i) "Disability" shall mean the inability, in the opinion of the Company's
group health insurance carrier (or claims processor, if applicable),
of a Participant, because of injury or sickness, to work at a
reasonable occupation which is available with the Participant's
employer (the Company or a Subsidiary) or at any gainful occupation
for which the Participant is or may become fitted.
(j) "Employee" means any individual who is an employee of the Company or
any Subsidiary, whether or not he or she is a Director.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute.
(l) "Fair Market Value" in reference to the Stock of the Company means as
of a given date either:
(i) The closing price of a share of Stock on the National Market
System or national securities exchange on which ' the Stock is
then trading as of the day immediately prior to such date, or if
Stock was not traded on that day, then on the next preceding
trading day during which a sale occurred; or
(ii) if the Stock is not traded on the National Market System or
listed on a national securities exchange, the mean between the
bid and asked prices per share last reported by the National
Association of Securities Dealers, Inc., for the over-the-counter
market on the day immediately prior to such date, or in the
absence of any bid and asked prices on that day, the mean of the
bid and asked prices per share of
5
<PAGE>
such Stock quoted on the next preceding day for which there were
such quotations; or
(iii) if the Stock is not traded on the National Market System or
listed on a national securities exchange, and quotations for the
Stock are not reported by the National Association of Securities
Dealers, Inc., the fair market value determined by the Committee
on the day immediately preceding such date on the basis of
available prices for the Stock or in such manner as the Committee
shall agree.
The Committee shall determine the Fair Market Value of any security that is
not publicly traded, using such criteria as it shall determine, in its sole
discretion, to be appropriate for such valuation.
(m) "Insider" means any person who is subject to Section 16.
(n) "Participant" means an Employee, Director, or other person designated
by the Committee to be eligible for an Award pursuant to this Plan.
(o) "Restricted Stock" means shares of Stock which have certain
restrictions attached to the ownership thereof, which may be issued
under Section 3.4.
(p) "Retirement" means termination of employment with the Company or a
Subsidiary for any reason other than death or Disability on or after
age 65.
(q) "Rule 16b-3" means Rule 16b-3 as promulgated by the Securities and
Exchange Commission on May 31, 1996, effective August 15, 1996, as
such regulation or successor regulation shall be hereafter amended.
(r) "Section 16" means Section 16 of the Exchange Act or any successor
regulation and the rules promulgated thereunder as they may be amended
from time to time.
(s) "Spouse" means the person of the opposite sex to whom the Participant
is married, as determined by the law of the Participant's legal
domicile, on the date of the Participant's death.
(t) "Stock" means shares of the no par value Common Stock of the Company.
(u) "Stock Appreciation Right" means a right,-the value of which is
determined relative to the appreciation in value of shares of Stock,
which may be issued under Section 3.3.
(v) "Stock Option" means a right to purchase shares of Stock granted
pursuant to Section 3.2 and includes Incentive Stock Options and
Non-Qualified Stock Options as defined in Section 3.2(a).
6
<PAGE>
(w) "Subsidiary" means any corporation (other than the Company), limited
liability company, or other business organization in an unbroken chain
of entities beginning with the Company in which each of such entities
other than the last one in the unbroken chain owns stock, units or
other interests possessing 50 percent or more of the total combined
voting power of all classes of stock, units or other interests in one
of the other entities in that chain.
(x) "Substantial Shareholder" means an Employee who is, at the time of the
grant to the Employee of an Award, an "owner" (as defined in Section
422(b)(6) of the Code, modified as provided in Section 424 of the
Code) of more than ten percent (I 0%) of the total combined voting
power of all classes of stock of the Company or any - Subsidiary.
ARTICILE II
ELIGIBILITY
Awards may be granted to any Employee who is or class of Employees who are
designated as Participants from time to time by the Committee and to such other
person, such as a non-Employee Director, local director, or consultant, whose
relationship with the Company or a Subsidiary is deemed by the Committee to be
sufficiently important to the Company or Subsidiary as to warrant receipt by
such person of an Award or such person that the Company or a Subsidiary or the
Committee wishes to secure as a key employee or director of the Company or a
Subsidiary for whom the grant of an Award will, in the Committee's judgment, act
as an inducement to such person to accept such position. The Committee shall
determine which Employees, Directors, or other eligible persons shall be
Participants, the types of Awards to be made to Participants, and the terms,
conditions, and limitations applicable to the Awards
ARTICLE III
AWARDS
Section 3.1. General. Awards may include, but are not limited to, those
described in this Article III, including its sections. The Committee may grant
Awards singly, in tandem, or in combination with other Awards, as the Committee
may in its sole discretion determine. Subject to the other provisions of this
Plan, Awards also may be granted in combination or in tandem with, in
replacement of, or as altematives to, grants or rights under this Plan and any
other employee plan of the Company.
Section 3.2. Stock Options. A Stock Option is a right to-purchase a
specified number of shares of Stock at a specified price during such specified
time as the Committee shall determine, subject to the following:
(a) An option granted may be either of a type that complies with the
requirements of incentive stock options as defined in Section 422 of
the Code ("Incentive Stock
7
<PAGE>
Option") or of a type that does not comply with such requirements
("Non-Qualified Option").
(b) The exercise price per share of any Incentive Stock Option shall be no
less than the Fair Market Value per share of the Stock subject to the
option on the date such Stock Option is granted, except that, if an
Incentive Stock Option is granted to a Substantial Shareholder, the
exercise price per share shall be no less than one hundred ten percent
(110%) of the Fair Market Value per share of Stock subject to the
option on the date such Stock Option is granted.
(c) The exercise price per share of any Non-Qualified Option may be less
than the Fair Market Value per share of Stock subject to the option on
the date such Stock Option is granted.
(d) No Incentive Stock Option shall be exercisable after the expiration of
ten (I 0) years from the date on which the Incentive Stock Option is
granted, except that, if an Incentive Stock Option is granted to a
Substantial Shareholder, such Stock Option shall not be exercisable
after the expiration of five (5) years from the date on which the
Incentive Stock Option is granted.
(e) A Stock Option may be exercised, in whole or in part, by giving
written notice of exercise to the Company specifying the number of
shares of Stock to be purchased and complying with such other terms
and conditions as the Committee may specify.
(f) The exercise price of the Stock subject to the Stock Option may be
paid in cash or, at the discretion of the Committee, may also be paid
by the tender of shares of Stock already owned by the Participant, or
through a combination of cash and shares of Stock, or through such
other means that the Committee determines are consistent with the
Plan's purpose and applicable law. No fractional shares of Stock will
be issued or accepted.
(g) The exercise price of the Stock subject to the Stock Option may be
paid, at the discretion of the Committee, by delivery to the Company
or its designated agent of an irrevocable written notice of exercise
form together with irrevocable instructions to a broker-dealer to sell
or margin a sufficient portion of the shares as to which the Stock
Option is to be exercised and to deliver the sale or margin loan
proceeds directly to the Company to pay the exercise price.
Section 3.3. Stock Appreciation Rights. A Stock Appreciation Right is a
right to receive, upon surrender of the right, but without payment of an
exercise price, an amount payable in cash and/or shares of Stock under such
terms and conditions as the Committee shall determine, subject to the following:
(a) A Stock Appreciation Right may be granted in tandem with all or part
of a Stock Option, in addition to a Stock Option, or completely
independent of a Stock Option or
8
<PAGE>
any other Award under this Plan. A Stock Appreciation Right issued in
tandem with a Stock Option may be granted at the time of grant of the
related Stock Option or at any time thereafter during the term of the
Stock Option.
(b) The amount payable by the Company or Subsidiary in cash and/or shares
of Stock with respect to each right shall be equal in value to a
percent of the amount by which the Fair Market Value per share of
Stock on the exercise date exceeds the base value per share
established for the Stock Appreciation Right. The applicable percent
shall be established by the Committee. The amount payable in shares of
Stock, if any, is determined with reference to the Fair Market Value
on the date of exercise.
(c) Stock Appreciation Rights issued in tandem with Stock Options shall be
exercisable only to the extent that the Stock Options to which they
relate are exercisable. Upon the exercise of the Stock Appreciation
Right, the Participant shall surrender to the Company the underlying
Stock Option. Stock Appreciation Rights issued in tandem with Stock
Options shall automatically terminate upon the exercise of such Stock
Options.
(d) A Stock Appreciation Right may be a "limited" Stock Appreciation
Right, such as, for example, a Stock Appreciation Right exercisable
upon the occurrence of a certain event or certain events.
Section 3.4. Restricted Stock. Restricted Stock is shares of Stock that are
issued to a Participant or awarded to a Participant as "phantom stock" and are
subject to such terms, conditions, and restrictions as the Committee deems
appropriate, which may include, but are not limited to, restrictions upon the
sale, assignment, transfer, or other disposition of the Restricted Stock and the
requirement of forfeiture of the Restricted Stock upon termination of employment
or membership on the Board under certain specified conditions. The Committee may
provide for the lapse of any such term or condition based on such factors or
criteria as the Committee may determine. If the shares subject to a Restricted
Stock Award are issued to a Participant, the Participant shall have, with
respect to the Restricted Stock, all of the rights of a shareholder of the
Company, including, but not limited to, the right to vote the Restricted Stock
and the right to receive any cash or stock dividends on such Stock.
Section 3.5. Performance Awards. Performance Awards may be granted under
this Plan from time to time based on such terms and conditions as the Committee
deems appropriate provided that such Awards shall not be inconsistent with the
terms and purposes of this Plan. Performance Awards are Awards which are
contingent upon the performance of all or a portion of the Company and/or
subsidiaries or which are contingent upon the individual performance of the
Participant. Performance Awards may be in the form of performance units,
performance shares, and such other forms of performance Awards which the
Committee shall determine. The Committee shall determine the performance
measurements and criteria for such performance Awards.
9
<PAGE>
Section 3.6. Other Awards. The Committee may from time to time grant other
Stock and Stock-based Awards under the Plan, including, but not limited to,
those Awards pursuant to which shares of Stock are or may in the future be
acquired, Awards denominated in Stock units, securities convertible into shares
of Stock, and dividend equivalents. The Committee shall determine the terms and
conditions of such other Stock and Stock-based Awards provided that such Awards
shall not be inconsistent with the terms and purpose of this Plan.
ARTICLE IV
AWARD DOCUMENTS
Section 4.1. General. Each Award under this Plan shall be evidenced by an
Award Document issued by the Company or the Committee setting forth the number
of shares of Stock or other security, Stock Appreciation Rights, or units
subject to the Award and such other terms and conditions applicable to the Award
as are determined by the Committee. When deemed required or desirable by the
Committee, the Award Document shall be signed by the Participant.
Section 4.2. Required Terms. In any event, Award Documents shall include,
at a minimum, explicitly or by reference, the following terms:
(a) Assignability. Provisions defining the conditions under which and
transferees to whom an Award may be assigned, pledged, or otherwise
transferred. In the absence of any such provision, an Award may not be
assigned, pledged, or otherwise transferred except by will or by the
laws of descent and distribution and, during the lifetime of a
Participant, the Award may be exercised only by such Participant or by
the Participant's guardian or legal representative.
(b) Termination of Employment. A provision describing the treatment of an
Award in the event of the Retirement, Disability, death, or other
termination of an Employee Participant's employment with the Company,
including but not limited to terms relating to the vesting, time for
exercise, forfeiture, or cancellation of an Award in such
circumstances.
(c) Rights of Shareholder. A provision that a Participant shall have no
rights as a shareholder with respect to any securities covered by an
Award until the date the Participant becomes the holder of record.
Except as provided in Article VII hereof, no adjustment shall be made
for dividends or other rights, unless the Award Document specifically
requires such adjustment, in which case grants of dividend equivalents
or similar rights shall not be considered to be a grant of any other
shareholder right.
(d) Withholding. A provision requiring the withholding of applicable taxes
required by law from all amounts paid in satisfaction of an Award. In
the case of an Award paid in cash, the withholding obligation shall be
satisfied by withholding the applicable amount and paying the net
amount in cash to the Participant. In the case of Awards paid in
shares of Stock or other securities of the Company, a Participant may
satisfy the
10
<PAGE>
withholding obligation by paying the amount of any taxes in cash or,
with the approval of the Committee, shares of Stock or other
securities may be deducted from the payment to satisfy the obligation
in full or in part as long as such withholding of shares does not
violate any applicable laws, rules or regulations of federal, state,
or local authorities. The number of shares to be deducted shall be
determined by reference to the Fair Market Value of such shares of
Stock on the applicable date (the "given" date of Section 1.3(1)).
Section 4.3. Optional Terms. Award Documents may include the following
terms:
(a) Replacement. Substitution, and Reloading. Any provisions:
(i) permitting the surrender of outstanding Awards or securities held
by the Participant in order to exercise or realize rights under
other Awards, under similar or different terms (including the
grant of reload options); or
(ii) requiring holders of Awards to surrender outstanding Awards as a
condition precedent to the grant of new Awards under the Plan.
(b) Holding Period. In the case of an Award to an Insider:
(i) of an equity security, a provision stating (or the effect of
which is to require) that such security must be held for at least
six months (or such longer period as the Committee in its
discretion specifies) from the date of acquisition;
(ii) of a derivative security with a fixed exercise price within the
meaning of Section 16, a provision stating (or the effect of
which is to require) that at least six months (or such longer
period as the Committee in its discretion specifies) must elapse
from the date of acquisition of the derivative security to the
date of disposition of the derivative security (other than upon
exercise or conversion) or its underlying equity security; or
(iii) of a derivative security without a fixed exercise price within
the meaning of Section 16, a provision stating (or the effect of
which is to require) that at least six months (or such longer
period as the Committee in its discretion specifies) must elapse
from the date upon which such price is fixed to the date of
disposition of the derivative security (other than by exercise or
conversion) or its underlying equity security.
(c) Other Terms. Such other terms as are necessary and appropriate to
effect an Award to the Participant including, but not limited to, the
term of the Award, vesting provisions, deferrals, any requirements for
continued employment with the Company or a Subsidiary, any other
restrictions or
11
<PAGE>
conditions (including performance requirements) on the Award and the
method by which restrictions or conditions lapse, the effect on the
Award of a Change of Control as defined in Section 8.2, or the price,
amount, or value of Awards.
ARTICLE V
SHARES OF STOCK
SUBJECT TO THE PLAN
Section 5.1. General. Subject to the adjustment provisions of Article VII
hereof, the number of shares of Stock for which Awards may be granted under the
Plan shall not exceed One Million (1,000,000) shares.
Section 5.2. Additional Shares. Any unexercised or undistributed portion of
the terminated, expired, exchanged, or forfeited Award or Awards settled in cash
in lieu of shares of Stock shall be available for further Awards in addition to
those available under Section 5. 1.
Section 5.3. Computation Rules. For the purpose of computing the total
number of shares of Stock granted under the Plan, the following rules shall
apply to Awards payable in shares of Stock or other securities, where
appropriate:
(a) Except as provided in subsection (e) of this Section, each Stock
Option shall be deemed to be the equivalent of the maximum number
of shares that may be issued upon exercise of the particular
Stock Option;
(b) except as provided in subsection (e) of this Section, each other
Stockbased Award payable in some other security shall be deemed
to be equal to the number of shares to which it relates;
(c) except as provided in subsection (e) of this Section, where the
number of shares available under the Award is variable on the
date it is granted, the number of shares shall be deemed to be
the maximum number of shares that could be received under that
particular Award;
(d) where one or more types of Awards (both of which are payable in
shares of Stock or another security) are granted in tandem with
each other, such that the exercise of one type of Award with
respect to a number of shares cancels an equal number of shares
of the other, the number of shares under each type of Award shall
be deemed to be equivalent to the number of shares under the
other type of Award; and
(e) each share awarded or deemed to be awarded under the preceding
subsections shall be treated as share(s) of Stock, even if the
Award is for a security other than Stock.
12
<PAGE>
Additional rules for determining the number of shares of Stock granted under the
Plan may be made by the Committee, as it deems necessary or appropriate.
Section 5.4. Shares to be Used. The shares of Stock which may be issued
pursuant to an Award under the Plan may be authorized but unissued Stock or
Stock that is or has been acquired by the Company.
ARTICLE VI
ADMINISTRATION
Section 6.1. General. The Plan and all Awards pursuant thereto shall be
administered by the Committee so as to permit the Plan and any Award to comply
with Rule 16b-3. A majority of the members of the Committee shall constitute a
quorum. The vote of a majority of a quorum shall constitute action by the
Committee.
Section 6.2. Duties. The Committee shall have the duty to administer the
Plan, and to determine periodically the Participants in the Plan and the nature,
amount, pricing, timing, and other terms of Awards to be made to such
individuals.
Section 6.3. Powers. The Committee shall have all powers necessary to
enable, it to carry out its duties under the Plan properly, including, but not
limited to, the power to interpret and administer the Plan. All questions of
interpretation with respect to the Plan, the number of shares of Stock or other
security, Stock Appreciation Rights, or units granted, the terms of any Award
Documents, and other matters arising hereunder shall be determined by the
Committee, and its determination shall be final and conclusive upon all parties
in interest. In the event of any conflict between an Award Document and the
Plan, the terms of the Plan shall govern.. In addition, the Committee may
delegate to the officers or employees of the Company the authority to execute
and deliver such instruments and documents, to do all such acts and things, and
to take all such other steps deemed necessary, advisable or convenient for the
effective administration of the Plan in accordance with its terms and purpose,
except that the Committee may not delegate any discretionary authority with
respect to substantive decisions or functions regarding the Plan or Awards
thereunder as those relate to Insiders including, but not limited to, decisions
regarding the timing, eligibility, pricing, amount or other material ten-n of
such Awards. The Committee may, in its discretion and consistent with the terms
of the Plan, the requirements of Section 16 and Rule 16b-3 with respect to
Insiders, the requirements of other applicable law, and the terms of an Award
Document, amend, modify, or waive the provisions of an Award Document or grant a
new Award with respect to or in replacement of an existing Award; provided,
however, that no such amendment, modification, or waiver shall, without the
Participant's consent, alter or impair any rights or obligations under an Award
Document unless that is specifically permitted by the Award Document.
Section 6.4. Intent to Avoid Insider Trading. It is the intent of the
Company that the Plan and Awards hereunder satisfy and be interpreted in a
manner, that, in the case of Participants who are or may be Insiders, satisfies
the applicable requirements of Rule 16b-3, so that such
13
<PAGE>
persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 and will not be subjected to avoidable liability thereunder. If
any provision of the Plan or of any Award would otherwise frustrate or conflict
with the- intent expressed in this Section 6.4, that provision to the extent
possible shall be interpreted and deemed amended so as to avoid such conflict.
To the extent of any remaining irreconcilable conflict with such intent, the
provision shall be deemed void as applicable to Insiders.
ARTICLE VII
ADJUSTMENTS UPON CHANGES
IN CAPITALIZATION
In the event of a reorganization, recapitalization, Stock split, Stock
dividend, exchange of Stock, combination of Stock, merger, consolidation or any
other change in corporate structure of the Company affecting the Stock, or in
the event of a sale by the Company of all or a significant part of its assets,
or any distribution to its shareholders other than a normal cash dividend, the
Committee shall make appropriate adjustment in the number, kind, price and value
of shares of Stock authorized by this Plan and any adjustments to outstanding
Awards as it determines appropriate so as to prevent dilution or enlargement of
rights, unless the Award or Award Document provides otherwise.
ARTICLE VIII
CHANGES OF CONTROL
Section 8.1. General. In the event of a Change of Control of the Company,
in addition to any action or consequences required or authorized by the terms of
an Award Document, a Participant's interest in any outstanding Award shall
become fully vested and exercisable. In addition, the Committee may, in its
discretion, recommend that the Board of Directors take any of the following
actions, as a result of, or in anticipation of, any such event to assure fair
and equitable treatment of Plan Participants:
(a) offer to purchase any outstanding Award made pursuant to this
Plan from the holder for its equivalent cash value, as determined
by the Committee, as of the date of the Change of Control; or
(b) make adjustments or modifications to outstanding Awards as the
Committee deems appropriate to maintain and protect the rights
and interests of Plan Participants following such Change of
Control.
Any such action approved by the Board of Directors shall be conclusive and
binding on the Company, a Subsidiary, and all Participants.
Section 8.2. "Change of Control". For the purposes of this Section, a
"Change of Control" shall mean the earliest date on which one of the following
events shall occur:
14
<PAGE>
(a) Any Person (as defined hereafter) or Persons as a group
beneficially own more than 20% of the combined voting power of
all classes of the Company's outstanding capital stock or acquire
control in any manner of the election of a majority of the
directors of the Company;
(b) The Company consolidates or merges with or into another
corporation, association, or entity, or is otherwise reorganized,
where the Company is not the surviving corporation in such
transaction and the holders of the voting securities of the
Company immediately prior to such acquisition own less than a
majority of the voting securities of the surviving entity
immediately after the transaction;
(c) The Company shall sell substantially all of its assets to another
entity which is not a wholly-owned Subsidiary; or
(d) There is, during any period of two (2) consecutive years, a change
in the majority of the Board unless the election of each new
Director was approved by at least two-thirds of the directors then
still in office who are Directors at the beginning of such two (2)
year period.
Section 8.3. Definition of "Person" Applicable to Change of Control.
"Person" means any individual, inn, corporation, partnership, limited liability
company, trust, or other entity; provided, however, that "Person" does not
include:
(a) the Company or any Subsidiary; or
(b) any employee benefit plan of the Company or any Subsidiary or any
entity appointed or established by the Company or Subsidiary as a
fiduciary for or pursuant to the terms of any such employee
benefit plan.
ARTICLE IX
AMENDMENT AND TERMINATION
Section 9.1. Amendment of Plan. The Company expressly reserves the right,
at any time and from time to time, to amend in whole or in part any of the terms
and provisions of the Plan and any or all Award Documents under the Plan to the
extent permitted by law for whatever reason(s) the Company may deem appropriate;
provided, however, no amendment may be effective, without the approval of the
shareholders of the Company, if approval of such amendment is required in order
that transactions in Company securities under the Plan be exempt from the
operation of Section 16(b) of the Securities Exchange Act of 1934 or if such
amendment, with respect to the issuance of Incentive Stock Options, either:
(a) materially increases the number of shares of Stock which may be
issued under the Plan, except as provided for in Article VII; or
15
<PAGE>
(b) materially modifies the requirements as to eligibility for
participation in the Plan (unless designed to comport with the
Code, the Employee Retirement Security Act of 1974, or other
laws).
Section 9.2. Termination of Plan. Except as may otherwise be provided in
any Award Document, the Company expressly reserves the right, at any time, to
suspend or terminate the Plan and any or all Award Documents under the Plan to
the extent permitted by law for whatever reason(s) the Company may deem
appropriate, including, but not limited to, suspension or termination as to the
Company, any participating Subsidiary, any Participant, or any class of
Participants.
Section 9.3. Procedure for Amendment or Termination. Any amendment to the
Plan or termination of the Plan shall be made by the Company by resolution of
the Board and shall not require the approval or consent of any Subsidiary,
Participant, or Beneficiary in order to be effective, to the extent permitted by
law. Any amendment to the Plan or termination of the Plan may be retroactive to
the extent not prohibited by applicable law.
ARTICLE X
MISCELLANEOUS
Section 10.1. Rights of Employees. Status as an eligible Employee shall not
be construed as a commitment that any Award will be made under the Plan to such
eligible Employee or to eligible Employees generally. Nothing contained in the
Plan (or in any other documents related to this Plan or to any Award) shall
confer upon any Employee or Participant any right to continue in the employ or
other service of or relationship with the Company or constitute any contract or
limit in any way the right of the Company to change such person's compensation
or other benefits or to terminate the employment or relationship of such person
with or without cause.
Section 10.2. Compliance with Law. No certificate for Stock distributable
pursuant to this Plan shall be issued and delivered unless the issuance of such
certificate complies with all applicable legal requirements including, without
limitation, compliance with the provisions of applicable state securities laws,
the Securities Act of 1933, as amended from time to time or any successor
statute, the Exchange Act and the requirements of the market systems or
exchanges on which the Stock may, at the time, be traded or listed.
Section 10.3. Deferral Programs. The Board of Directors may, at its
discretion, adopt a program or programs of deferred receipt whereby a
Participant or Participants may defer receipt of Stock or cash otherwise
issuable or payable to the Participant pursuant to an Award, which program(s)
shall contain such rules concerning eligibility to participate, timing of
elections to defer, forms of distribution of the Stock or cash and the like as
the Board o. Directors shall determine.
16
<PAGE>
Section 10.4. Unfunded Status. The Plan shall be unfunded. Neither the
Company nor the Board of Directors shall be required to segregate any assets
that may at any time be represented by Awards made pursuant to the Plan. Neither
the Company, the Committee, nor the Board of Directors shall be deemed to be a
trustee of any amounts to be paid under the Plan.
Section 10.5. Limits on Liability. Any liability of the Company to any
Participant with respect to an Award shall be based solely upon contractual
obligations created by the Plan and the Award Document. Neither the Company nor
any member of the Board of Directors or the Committee, nor any other person
participating in any determination of any question under the Plan, or in the
interpretation, administration or application of the Plan, shall have any
liability to any party for any action taken or not taken, in good faith under
the Plan and that do not constitute willful misconduct. To the extent permitted
by applicable law, the Company shall indemnity and hold harmless each member of
the Board of Directors and the Committee from and against any and all liability,
claims, demands, costs, and expenses (including, but not limited to, the costs
and expenses of attomeys incurred in connection with the investigation or
defense of claims) in any manner connected with or arising out of any actions or
inactions in connection with the administration of the Plan except for such
actions or inactions which are not in good faith or which constitute willful
misconduct.
Section 10.6. Section References. All references in this Plan to sections
or articles shall refer to sections and articles of this Plan unless
specifically noted otherwise.
ARTICLE XI
EFFECTIVE DATE OF PLAN
This Plan shall become effective on the date of its adoption by the Board;
provided, however, the effectiveness of this Plan is subject to its approval and
ratification by the shareholders of the Company within one year from the date of
adoption hereof by the Board. The Committee shall have authority to grant Awards
hereunder until one day before the ten year anniversary of the date of adoption
of the Plan by the Board, subject to the ability of the Company to terminate the
Plan as provided in Article IX.
17
