UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
__X__ ANNUAL REPORT UNDER Section 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997
_____ TRANSITION REPORT Pursuant to Section 13 or 15(d) of THE SECURITIES
EXCHANGE ACT of 1934
Commission File Number 0-21346
TRIANGLE BANCORP, INC.
(Exact Name of Registrant as specified in its Charter)
NORTH CAROLINA 56-1764546
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
4300 Glenwood Avenue
Raleigh, North Carolina 27612
(Address of principal executive offices) (Zip Code)
(919) 881-0455
(Registrant's Telephone Number Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - No Par Value
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES __X__ NO _____
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-K contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of February 28, 1998, based upon the closing sales price of
the Common Stock ($31.88) on March 11, 1998, was approximately $357,158,335.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of March 6, 1998, 13,080,761 shares of no par value common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement for the 1998 Annual Shareholders Meeting
(the "Proxy Statement") is incorporated by reference into Part III hereof.
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PART I
ITEM 1. Description of Business
General
Triangle Bancorp, Inc. (the "Corporation") was incorporated under the laws
of North Carolina on November 27, 1991 for the purpose of becoming a one-bank
holding company. The Corporation acquired Triangle Bank ("Triangle Bank") in
August 1992 as part of the reorganization of Triangle Bank into a one-bank
holding company structure. Pursuant to the reorganization, the former
shareholders of Triangle Bank became shareholders of the Corporation. On October
2, 1997, the Corporation acquired Bank of Mecklenburg, Charlotte, North Carolina
("Mecklenburg"), as a wholly-owned subsidiary, and became a multi-bank holding
company. Triangle Bank and Mecklenburg are referred to herein collectively as
the "Banks". On October 31, 1997, the Corporation acquired Coastal Leasing LLC,
Greenville, North Carolina ("Coastal Leasing"). To date, the Corporation has not
engaged in any material activities other than its ownership and management of
the Banks and Coastal Leasing and the issuance of trust preferred securities in
June 1997.
As a bank holding company, the Corporation's primary business is that of
owning the capital stock of the Banks and Coastal Leasing and promoting the
general development of its business. At December 31, 1997, the Corporation had
consolidated assets of approximately $1.6 billion and was the eighth largest
banking organization headquartered in North Carolina.
Recent and Pending Acquisitions
In June 1997, the Corporation sold two offices, both located in Sanford,
North Carolina, including $21 million in deposits and $11 million in loans and
fixed assets.
On August 15, 1997, Triangle Bank acquired two branch offices from Branch
Banking and Trust Company and eight branch offices from United Carolina Bank,
all of which were divested in connection with the merger of those two companies.
The ten branches are located in eastern and south-central North Carolina. In the
branch acquisition, Triangle Bank assumed approximately $195 million in deposits
and approximately $61 million in aggregate principal amount in loans associated
with the ten branches. The branch acquisition was accounted for as a purchase
and therefore the operations of these branches are reflected in the
Corporation's financial statements from the date of purchase.
On October 2, 1997, Triangle acquired Mecklenburg, with $270 million in
assets, as a wholly-owned subsidiary. Mecklenburg operates three branches in
Charlotte, North Carolina. The Mecklenburg acquisition was accounted for under
the pooling-of-interests method of accounting.
On October 31, 1997, Triangle acquired Coastal Leasing, with $13 million in
assets, as a wholly-owned subsidiary. Coastal Leasing is a business equipment
leasing company headquartered in Greenville, North Carolina. The Coastal Leasing
acquisition was accounted for under the pooling-of-interests method of
accounting.
As both the Mecklenburg and Coastal Leasing acquisitions were accounted for
using the pooling-of-interests method of accounting, all historical information
has been restated to reflect Mecklenburg; however, based on materiality, Coastal
has been pooled for 1997 only. As a result, the Corporation's total assets and
net
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income as of and for the year ended December 31, 1996, have been restated from
$971 million to $1.2 billion and from $11.3 million to $13.2 million,
respectively.
On October 16, 1997, the Corporation entered into an agreement to acquire
Guaranty State Bancorp ("Guaranty State") and its commercial bank subsidiary,
Guaranty State Bank, both located in Durham, North Carolina. As of December 31,
1997, Guaranty had approximately $107 million in total assets, $72 million in
loans, $92 million in deposits, and $11 million in shareholders' equity.
Guaranty State Bank has five branches in Durham, North Carolina, four of which
are expected to become branches of Triangle Bank. The transaction will be
accounted for under the pooling-of-interests method of accounting. All
regulatory approvals have been received, and the Guaranty State shareholders are
to meet on March 30, 1998 to vote on the proposed acquisition. The transaction
is expected to be consummated in April 1998.
On March 4, 1998, Triangle entered into an agreement to acquire United
Federal Savings Bank, Rocky Mount, North Carolina ("United Federal"), a
federally-chartered savings bank whose deposits are insured by the Savings
Association Insurance Fund of the FDIC. At December 31, 1997, United Federal had
total assets of $304 million, total deposits of $266 million, and shareholders'
equity of $22 million. United Federal operates 13 branches in the North Carolina
communities of Rocky Mount, Cary, Greenville, Morehead City, New Bern, Pinetops,
Raleigh, Spring Hope, Tarboro, Warrenton and Wilson and two mortgage origination
offices located in Charlotte and Wilmington. United Federal will be merged into
Triangle Bank. The United Federal acquisition will be accounted for under the
pooling-of-interests method of accounting, and is subject to the approval of
United Federal's shareholders and all applicable regulatory agencies. The United
Federal acquisition is expected to be consummated in the third quarter of 1998.
In addition, it is anticipated that the Corporation will continue to
investigate and hold discussions and negotiations in connection with possible
acquisitions of, or combinations with, other banks and financial service
entities. As of the date hereof, the Corporation has not entered into any
agreements or understandings with respect to any such transactions other than
the proposed acquisitions of Guaranty State and United Federal.
Trust Securities Issuance
In May 1997, the Corporation caused a Delaware statutory business trust
subsidiary to be created which issued trust preferred securities in the amount
of $19.33 million to eight qualified institutional buyers, and $619,000 in trust
common securities to the Corporation (collectively, the "Trust Securities"),
both sales occurring on June 3, 1997. The Trust Securities have a maturity of 30
years, pay dividends at the rate of 9.375% and may be treated as tier 1 capital
by the Corporation. To fund the trust, the Corporation sold to the trust $19.95
million of junior subordinated notes with a yield and maturity identical to the
Trust Securities. Holders of the Trust Securities are entitled to receive
preferential cumulative cash distributions accumulating from the date of
original issuance and payable semi-annually in arrears on the first day of June
and December of each year, commencing December 1, 1997, at an annual rate equal
to 9.375%. The distribution rate and distribution payment dates of the Trust
Securities correspond to the interest rate and interest payment dates of the
junior subordinated debentures, which are the sole assets of the trust. The
Corporation, through various agreements, has irrevocably and unconditionally
guaranteed all of the trust's obligations under the Trust Securities regarding
the payment of distributions and payment on liquidation or redemption of the
Trust Securities, but only to the extent of funds held by the trust. The Trust
Securities are subject to mandatory redemption in whole, but not in part, upon
repayment of the junior subordinated debentures at their stated maturity or upon
their early redemption. The junior subordinated debentures may be redeemed prior
to their stated maturity upon the occurrence of certain events or at the option
of the Corporation on or after June 1, 2007. The Corporation caused the Trust
Securities to be issued because they are a relatively inexpensive form of
regulatory capital for the Corporation. The sale of the Trust Securities was
effected in a transaction exempt from the registration
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requirements of the Securities Act of 1933. In November 1997, the trust
preferred securities sold to institutional buyers were registered under the
Securities Act of 1933 and an exchange offer conducted whereby all but $1.0
million of such trust preferred securities were exchanged for registered
securities.
Business of the Corporation
Banking. The Corporation's largest subsidiary is Triangle Bank. Triangle
Bank, headquartered in Raleigh, North Carolina, and Mecklenburg, headquartered
in Charlotte, North Carolina, are both chartered as state banks under the laws
of the State of North Carolina and are members of the Federal Reserve System
(the "Federal Reserve"). Deposit insurance is provided by the Bank Insurance
Fund ("BIF") of the FDIC. The sole business of the Banks is to provide banking
services to businesses and individuals in the communities they serve through 56
branches of Triangle Bank in eastern and south-central North Carolina and three
branches of Mecklenburg in Charlotte, North Carolina. The Banks primarily serve
small and medium-sized businesses as well as consumers within their markets.
Triangle Bank began business on January 4, 1988. On June 30, 1991,
Enterprise Bancorp, Inc., a North Carolina bank holding company, and its
wholly-owned subsidiary, Enterprise Bank, National Association, merged into
Triangle Bank, adding approximately $34 million in assets to Triangle Bank. On
December 28, 1993, New East Bancorp, a North Carolina holding company, and its
wholly-owned subsidiaries, New East Bank of the Albemarle, New East Bank of the
Cape Fear, New East Bank of Goldsboro, New East Bank of Greenville and New East
Bank of New Bern, merged into Triangle Bank, adding approximately $131 million
in assets to the Bank. Triangle Bank merged with Columbus National Bank,
Standard Bank and Trust, Unity Bank and Trust Co. and The Village Bank as well
as acquiring three branch offices from NationsBank during 1995, adding
approximately $409 million in assets. Triangle Bank's wholly owned subsidiary,
Unity Financial Services (acquired through Unity Bank and Trust Co. merger),
changed its name to Triangle Investment Services in October 1995. This
subsidiary provides brokerage services. Triangle Bank merged with Granville
United Bank in October 1996, acquired four branches from First Union in January
1996 and completed a branch swap transaction in May 1996. In 1997, Triangle Bank
sold two branches in Sanford, North Carolina and acquired 10 branches as a
result of the UCB/BB&T merger adding a net of $174 million in deposits and $50
million in loans.
Mecklenburg began business on July 12, 1989 with one office in Charlotte.
Mecklenburg opened a second office in Charlotte in 1991, and purchased a third
office, with $28 million in deposits, in March 1996 from Essex Savings Bank.
Banking Services. The Banks offer a wide range of banking services,
including acceptance of deposits, checking services, debit cards, 24-hour phone
access to account information, commercial and consumer loans, mortgages, real
estate development and construction loans, safe deposit boxes, and credit cards.
The Banks offer their customers fully-automated, 24-hour teller machines
("ATMs"). This service is provided by ATM machines at selected branch locations
and by giving the Banks' customers access to the ATM network of the Cirrus
system and the HONOR system, which operate ATMs in many states.
Deposits. The Banks offer a variety of deposit accounts, including savings,
checking and time deposits of various types ranging from daily "money market"
accounts to longer-term certificates of deposit. Retirement accounts, such as
Individual Retirement Accounts, are also offered. The Banks seek to maintain
stability in their deposits by establishing direct relationships with their
depositors. Therefore, the Banks do not accepted brokered deposits. At December
31, 1997, Triangle Bank and Mecklenburg had deposits of approximately $1 billion
and $195 million, respectively.
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Lending Activities. The Banks offer a wide range of consumer, commercial,
real estate development, construction, and mortgage loans to small to
medium-sized businesses and to individuals. Loans are generally secured by real
property, equipment, inventory, accounts receivable, or other assets. In
addition, the Banks often obtain personal guarantees from the owners of the
businesses to which loans are extended. The Banks' lending policies are
established and periodically reviewed by their Boards of Directors. Loan
policies are also subject to the regulations of federal and state bank
regulators.
Real estate loans constituted the largest portion of the Banks' loans. Real
estate loans include both loans to businesses to finance or refinance real
estate used for the business and loans to individuals for residential real
estate. Commercial loans include credit lines for working capital, short-term
seasonal, or inventory financing as well as longer term loans. The Banks also
offer residential real estate, construction, and land development loans to
developers and builders. Finally, the Banks offer consumer loans to individuals.
Consumer loans constitute the least significant portion of the Banks' loan
portfolios.
Real estate development and construction loans accounted for approximately
8% of the Banks' loans at December 31, 1997. In addition, when loans that are
substantially secured by real estate are taken into account, loans secured in
full or in part by real estate constituted approximately 68% of the outstanding
loans at December 31, 1997. The Banks closely monitor their loan portfolios and
believe their current loan loss reserves adequately reflect problem loans that
have been identified to date.
Leasing. The Corporation conducts leasing activities through its
wholly-owned subsidiary, Coastal Leasing. Coastal Leasing is headquartered in
Greenville, North Carolina and operates four offices in addition to its
Greenville office. At December 31, 1997, Coastal Leasing had approximately $14
million in total assets, $13 million in leases, and $3 million in shareholders'
equity. Coastal Leasing began business in 1971 in Greenville, North Carolina,
opening its other offices in eastern North Carolina and tidewater Virginia over
the years as its business grew. Coastal engages in business equipment leasing.
Coastal's leasing activities complement the financing activities of the Banks
and provide alternatives to small business customers of the Banks.
Investments. The Corporation and its subsidiaries seek to maintain
liquidity by maintaining investments in liquid securities. Currently,
investments include primarily collateralized mortgage obligations, United States
Treasury obligations and federal agency and municipal securities. At December
31, 1997, the average maturity of the Corporation's available for sale and held
to maturity investment portfolios were approximately 122 and 75 months,
respectively.
Competition. Commercial banking in North Carolina is extremely competitive,
due in large part to statewide branching. Currently, many of the Corporation's
banking competitors are significantly larger and have greater resources than the
Corporation. The Corporation continues to encounter significant competition from
a number of sources, including bank holding companies, commercial banks, thrift
and savings and loan institutions, credit unions, and other financial
institutions and financial intermediaries. Among commercial banks, Triangle Bank
and Mecklenburg compete in their market areas with some of the largest banking
organizations in the state, several of which have as many as 200 to 300 branches
in North Carolina and many billions in assets. The Banks also compete for
interest-bearing funds with a number of investment alternatives, including
brokerage firms, "money-market" mutual funds, insurance companies, government
and corporate bonds, and other securities. Competition with the Banks are not
limited to financial institutions based in North Carolina. The enactment of
federal legislation authorizing nationwide interstate banking has greatly
increased the size and financial resources of some of the Banks' competitors.
Consequently, many of the Banks' competitors have substantially higher lending
limits due to their greater total capitalization, and many perform functions for
their customers, such as trust services that the Banks do not offer. As a result
of the interstate
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banking legislation, the Banks' markets are open to future penetration by banks
located in other states thereby increasing competition.
The management of the Corporation believes banks compete in the following
areas: convenience of location, interest rates for deposits and loans, types of
accounts and services offered, and quality of the personnel providing services.
The Banks endeavor to provide quality service by operating centrally-located
branches, staffed with experienced bank personnel. The Banks offer a variety of
accounts and loans comparable to those offered by other banks. The Banks also
rely on the personal contacts of its officers and directors to attract
depositors and borrowers in its target market of small to medium-sized
businesses.
Employees. At December 31, 1997, the Corporation's subsidiaries employed
436 full-time employees and 162 part-time employees. None of its employees are
covered by a collective bargaining agreement. The Corporation believes its
subsidiaries' relationships with their employees to be good.
Triangle Bank and Mecklenburg each has a 401(k) plan for substantially all
of their respective employees. The Corporation has a qualified incentive stock
option plan for key officers and employees of the Corporation and its
subsidiaries, and a non-qualified stock option plan for directors and certain
officers of the Corporation and its subsidiaries. The Corporation also has an
employee stock purchase plan which allows employees to purchase the
Corporation's stock at a 15% discount from the stock's fair market value through
payroll deductions. The Corporation also has change of control agreements and
employment agreements that contain "change of control" provisions with certain
officers that would benefit such officers in the event of a change of control of
the Corporation and its subsidiaries.
Properties
The Corporation's executive offices are located at 4300 Glenwood Avenue,
Raleigh, North Carolina. The Corporation owns the four-story, 27,000 square foot
building which was purchased and renovated by the Corporation in 1996. The
executive office building also serves as the headquarters of Triangle Bank and
houses a branch of Triangle Bank. Triangle Bank operates 56 branch locations of
which 23 are either leased buildings or property on which Triangle Bank has
branch offices. Mecklenburg's headquarters office is located at 2000 Randolph
Road, Charlotte, North Carolina, which building is a two-story, 10,000 square
foot building owned by Mecklenburg. Mecklenburg operates two other branches in
Charlotte, both of which are owned by Mecklenburg. Coastal is headquartered at
2820 East Tenth Street, Greenville, North Carolina, in a one-story, 5,000 square
foot building. Coastal leases all of its offices. In addition, the Corporation
owns two buildings, with an aggregate of approximately 28,000 square feet, which
house its operations center in Selma, North Carolina. The Corporation believes
its facilities and those of its subsidiaries are adequate for their business
needs.
Governmental Regulation
General. Holding companies, banks and many of their nonbank affiliates are
extensively regulated under both federal and state law. The following is a brief
summary of certain statutes, rules and regulations affecting the Corporation and
the Banks. This summary is qualified in its entirety by reference to the
particular statutory and regulatory provisions referred to below and is not
intended to be an exhaustive description of the statutes or regulations
applicable to the Corporation's business. Supervision, regulation and
examination of the Corporation and the Banks by the bank regulatory agencies are
intended primarily for the protection of the Banks' depositors rather than
holders of the common stock of the Corporation.
In 1994, Congress adopted legislation which permits adequately capitalized
and managed bank holding companies to acquire control of a bank in any state
(the "Interstate Banking Law"). Existing state laws
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setting minimum age restrictions on target banks can be retained, so long as the
age requirement does not exceed five years. Acquisitions will be subject to
anti-trust provisions that cap at 10% the portion of the United States' bank
deposits a single bank holding company may control, and cap at 30% the portion
of a state's deposits a single bank holding company may control. States have the
authority to waive the 30% cap.
Under the Interstate Banking Law, beginning on June 1, 1997, banks have
been permitted to merge with one another across state lines, subject to
concentration, capital and Community Reinvestment Act requirements and
regulatory approval. Only Texas and Montanta have opted out of interstate
branching through legislation. A state can also choose to permit out-of-state
banks to open new branches within its borders. In addition, if a state chooses
to allow interstate acquisition of branches, then an out-of-state bank also may
acquire branches by merger.
Interstate branches that primarily siphon off deposits without servicing a
community's credit needs will be prohibited. If loans are less than 50% of the
average of all institutions in the state, the branch will be reviewed to see if
it is meeting community credit needs. If it is not, the branch may be closed and
the bank may be restricted from opening a new branch in the state.
Holding Company Regulation
General. The Corporation is a holding company registered with the Federal
Reserve under the Bank Holding Company Act (the "BHC Act"). As such, the
Corporation and its subsidiaries are subject to the supervision, examination and
reporting requirements contained in the BHC Act and the regulation of the
Federal Reserve. The BHC Act requires that a bank holding company obtain the
prior approval of the Federal Reserve before (i) acquiring direct or indirect
ownership or control of more than 5% of the voting shares of any bank, (ii)
taking any action that causes a bank to become a subsidiary of the bank holding
company, (iii) acquiring all or substantially all of the assets of any bank, or
(iv) merging or consolidating with any other bank holding company.
The BHC Act generally prohibits a bank holding company, with certain
exceptions, from engaging in activities other than banking, or managing or
controlling banks or other permissible subsidiaries, and from acquiring or
retaining direct or indirect control of any company engaged in any activities
other than those activities determined by the Federal Reserve to be closely
related to banking, or managing or controlling banks, as to be a proper incident
thereto. In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices. For
example, factoring accounts receivable, acquiring or servicing loans, leasing
personal property, conducting discount securities brokerage activities,
performing certain data processing services, acting as agent or broker in
selling credit life insurance and certain other types of insurance underwriting
activities have all been determined by regulations of the Federal Reserve to be
permissible activities of bank holding companies. Pursuant to delegated
authority, the Federal Reserve Bank of Richmond has authority to approve certain
activities of holding companies within its district, including the Corporation,
provided the nature of the activity has been approved by the Federal Reserve.
Despite prior approval, the Federal Reserve has the power to order a holding
company or its subsidiaries to terminate any activity or to terminate its
ownership or control of any subsidiary when it has reasonable cause to believe
that continuation of such activity or such ownership or control constitutes a
serious risk to the financial safety, soundness or stability of any bank
subsidiary of that bank holding company.
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Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve on any extensions of credit to the
bank holding company or any of its subsidiaries, investments in the stock or
securities thereof and the acceptance of such stock or securities as collateral
for loans to any borrower. A bank holding company and its subsidiaries are also
prevented from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.
The Federal Reserve may issue cease and desist orders against bank holding
companies and non-bank subsidiaries to stop actions believed to present a
serious threat to a subsidiary bank. The Federal Reserve also regulates certain
debt obligations, changes in control of bank holding companies and capital
requirements.
Under the provisions of the North Carolina law, the Holding Company is
registered with and subject to supervision by the North Carolina Commissioner of
Banks (the "Commissioner").
Capital Requirements. The Federal Reserve has established risk-based
capital guidelines for bank holding companies and state member banks based on
the capital framework for international banking organizations developed by the
Basle Committee on Banking Regulations and Supervisory Practices. The minimum
standard for the ratio of capital to risk-weighted assets (including certain off
balance sheet obligations, such as standby letters of credit) is 8%. At least
half of this capital must consist of common equity, retained earnings and a
limited amount of perpetual preferred stock, less certain goodwill items ("Tier
I capital"). The remainder ("Tier 2 capital") may consist of a limited amount of
other preferred stock, subordinated debt and a limited amount of loan loss
reserves.
The Federal Reserve also has adopted a minimum (leverage) ratio of Tier 1
capital to total assets of 4%. The 4% Tier 1 capital to total assets ratio
constitutes the leverage standard for bank holding companies and state member
banks, and will be used in conjunction with the risk-based ratio in determining
the overall capital adequacy of banking organizations. In proposing such
standards, the Federal Reserve emphasized that in all cases the suggested
standards are supervisory minimums and that an institution would be permitted to
maintain such minimum levels of capital only if it were a strong banking
organization, rated composite one under the CAMEL rating system for banks or the
BOPEC rating system for bank holding companies. The Federal Reserve noted that
most expansion-oriented banking organizations have maintained leverage capital
ratios of between 4% and 5% of total assets, and it is likely that these ratios
will be applied to the Corporation. At December 31, 1997, the Corporation had
not been advised by the Federal Reserve of a minimum leverage capital ratio
requirement specifically applicable to it.
As of December 31, 1997 the Corporation had Tier I risk-adjusted, total
regulatory capital and leverage capital of approximately 10.98%, 12.24% and
7.55%, respectively, all in excess of the minimum requirements.
Bank Regulation
The Banks are subject to numerous state and federal statutes and
regulations that affect their business, activities, and operations, and are
supervised and examined by the Commissioner and the Federal Reserve. The Federal
Reserve and the Commissioner regularly examine the operations of banks over
which they exercise jurisdiction. They have the authority to approve or
disapprove the establishment of branches, mergers, consolidations, and other
similar corporate actions, and to prevent the continuance or development of
unsafe or unsound banking practices and other violations of law. The Federal
Reserve and the Commissioner regulate and monitor all areas of the operations of
banks and their subsidiaries, including loans, mortgages, issuances of
securities, capital adequacy, loss reserves, and compliance with the CRA and
other laws and regulations.
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Interest and certain other charges collected and contracted for by the banks are
also subject to state usury laws and certain federal laws concerning interest
rates.
The vast majority of the deposit accounts of the Banks are insured by the
BIF of the FDIC up to a maximum of $100,000 per insured depositor. Currently,
approximately $32 million of Mecklenburg's deposits are insured by the Savings
Association Insurance Fund ("SAIF") of the FDIC as those deposits were acquired
by Mecklenburg from a SAIF-insured savings bank. The FDIC issues regulations and
conducts periodic examinations, requires the filing of reports, and generally
supervises the operations of its insured banks. This supervision and regulation
is intended primarily for the protection of depositors. Any insured bank that is
not operated in accordance with or does not conform to FDIC regulations,
policies, and directives may be sanctioned for noncompliance. Civil and criminal
proceedings may be instituted against any insured bank or any director, officer,
or employee of such bank for the violation of applicable laws and regulations,
breaches of fiduciary duties, or engaging in any unsafe or unsound practice. The
FDIC has the authority to terminate insurance of accounts pursuant to procedures
established for that purpose.
Although the Corporation is not subject to any direct legal or regulatory
restrictions on dividends (other than the requirements under the North Carolina
corporation laws that a distribution may not be made if after giving it effect
the corporation would not be able to pay its debts as they become due in the
usual course of business or the corporation's total assets would be less than
its liabilities), the Corporation's ability to pay cash dividends is dependent
upon the amount of dividends paid by its subsidiaries. The ability of the Banks
to pay dividends to the Corporation is subject to statutory and regulatory
restrictions on the payment of cash dividends, including the requirement under
the North Carolina banking laws that cash dividends be paid only out of
undivided profits and only if the bank has surplus of a specified level. Federal
bank regulatory agencies also have the general authority to limit the dividends
paid by insured banks and bank holding companies if such payment is deemed to
constitute an unsafe and unsound practice.
Like the Corporation, the Banks are required by federal regulations to
maintain certain minimum capital levels. The levels required of the Banks are
the same as required for the Corporation. At December 31, 1997, Triangle Bank
had Tier I risk-adjusted, total regulatory capital and leverage capital of
approximately 9.51%,10.76% and 6.70%, respectively, all in excess of the minimum
requirements. Similarly, Mecklenburg had Tier I risk-adjusted, total regulatory
capital and leverage capital of approximately 13.93%, 15.05% and 7.32%,
respectively, all in excess of the minimum requirements.
The Banks are subject to insurance assessments imposed by the FDIC.
Effective January 1, 1997, the FDIC adopted a risk-based assessment schedule
providing for annual assessment rates ranging from 0% to .27% of an
institution's average assessment base, applicable to institutions insured by
both the BIF and the SAIF. The actual assessment to be paid by each insured
institution is based on the institution's assessment risk classification, which
is based on whether the institution is considered "well capitalized",
"adequately capitalized" or "under capitalized", as such terms are defined in
the applicable federal regulations, and whether the institution is considered by
its supervisory agency to be financially sound or to have supervisory concerns.
The FDIC also is authorized to impose one or more special assessments in any
amount deemed necessary to enable repayment of amounts borrowed by the FDIC from
the United States Treasury Department and, beginning in 1997, all banks pay
additional annual assessments at the rate of .013% of their average assessment
base. Effective January 1, 1999, there is proposed to be a merger of the SAIF
and the BIF insurance funds of the FDIC. One of the principal issues is the
amount of additional funds needed to recapitalize the SAIF prior to the merger.
In September 1996, a one-time special assessment was levied on SAIF-insured
deposits (including such deposits held by commercial banks) at the rate of .657%
on all SAIF-insured deposits held as of March 31, 1995; however, Mecklenburg was
not assessed the special assessment on its SAIF-insured deposits due to a
regulatory exemption obtained by Essex Savings Bank, FSB from whom Mecklenburg
obtained the deposits.
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The deposits of United Federal, proposed to be acquired by Triangle Bank, also
are insured by the SAIF and, after the acquisition, Triangle Bank will have both
BIF and SAIF-insured deposits. It cannot be predicted as to whether any further
assessments will be made on BIF-insured banks. In November 1997, the FDIC's
Board of Directors voted to maintain premium rates at their current level
through the first half of 1998.
Banks are subject to the Community Reinvestment Act of 1977 ("CRA"). Under
the CRA, the appropriate federal bank regulatory agency is required, in
connection with its examination of a bank, to assess such bank's record in
meeting the credit needs of the community served by that bank, including low and
moderate-income neighborhoods. The regulatory agency's assessment of the bank's
record is made available to the public. Further, such assessment is required of
any bank which has applied to (i) charter a national bank, (ii) obtain deposit
insurance coverage for a newly chartered institution, (iii) establish a new
branch office that will accept deposits, (iv) relocate an office, or (v) merge
or consolidate with, or acquire the assets or assume the liabilities of, a
federally regulated financial institution. In the case of a bank holding company
applying for approval to acquire a bank or other bank holding company, the
Federal Reserve will assess the record of each subsidiary bank of the applicant
bank holding company, and such records may be the basis for denying the
application.
Monetary Policy and Economic Controls
The Corporation and the Banks are directly affected by government policy
and by regulatory measures affecting the banking industry in general. Of primary
importance is the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), whose actions directly affect the money supply and, in general,
affect banks' lending abilities by increasing or decreasing the cost and
availability of funds to banks. The Federal Reserve Board regulates the
availability of bank credit in order to combat recession and curb inflationary
pressures in the economy by open market operations in United States government
securities, changes in the discount rate on member bank borrowings, changes in
reserve requirements against bank deposits, and limitations on interest rates
that banks may pay on time and savings deposits.
Deregulation of interest rates paid by banks on deposits and the types of
deposits that may be offered by banks have eliminated minimum balance
requirements and rate ceilings on various types of time deposit accounts. The
effect of these specific actions and, in general, the deregulation of deposit
interest rates have generally increased banks' cost of funds and made them more
sensitive to fluctuations in money market rates. In view of the changing
conditions in the national economy and money markets, as well as the effect of
actions by monetary and fiscal authorities, no prediction can be made as to
possible future changes in interest rates, deposit levels, loan demand, or the
business and earnings of the Banks or the Corporation. As a result, banks,
including the Banks, are facing a significant challenge to maintain acceptable
net interest margins.
Guide 3 Disclosures
The following schedule is provided as an index to the disclosure
requirements under Guide 3 of the Guides for the Preparation and Filing of
Reports and Registration Statements under the Securities Exchange Act of 1934.
10
<PAGE>
<TABLE>
<CAPTION>
Index to Reference to
Guide 3 Form 10-K Page
Disclosures Table Number
<S> <C> <C>
I. Distribution of Assets, Liabilities and Shareholders' Equity interest rates
and interest differential
(A) Average Balance Sheets 1 12
(B) Net Income Analysis 1 12
(C) Net Interest Income and Volume/Rate Variance 2 13
II. Securities Portfolio
(A) Book Value of Securities 4 21
(B) Securities by Maturities 4 19
(C) This item is not applicable since no items exist that related to this
disclosure
III. Loan Portfolio
(A) Types of Loans 3 14
(B) Maturities and Sensitivity of Loans to Changes in Interest Rates 3 15
Risk Elements 3 17
(C) Management's policy is to discontinue the accrual of interest and reverse
unpaid interest when management deems that collection of additional
interest is doubtful.
(D) This item is not applicable since no items existed from inception through
December 31, 1997 that related to the disclosure of this item.
IV. Summary of Loan Loss Experience
(A) Analysis of Allowance for Loan Losses 3 16
(B) Allocation of the Allowance for Loan Losses 3 17
V. Deposits
(A) Average Deposits and Rates paid 1 12
(B) Items B, C and E are not applicable
(C) Outstanding balances and maturities of certificates of deposits in amounts of
$100,00 or more as of December 31, 1997 5 22
VI. Return on Equity and Assets 7 24
VII. Short-Term Borrowings 6 23
VIII. Interest Sensitivity Table 8 25
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP INC. Table 1
INTEREST INCOME AND AVERAGE BALANCES
(In thousands)
1997 1996
----------------------------------- -----------------------------------
Interest Interest
Average Income/ Average Average Income/ Average
Balance Expense Yield/Rate Balance Expense Yield/Rate
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Taxable investment securities and
interest bearing due from banks $ 216,599 $ 13,152 6.07% $ 237,381 $ 14,341 6.04%
Non-taxable investment securities
and interest bearing due from banks* 192,327 13,070 6.80% 134,766 9,038 6.71%
Federal funds sold and securities purchased
with agreements to resell 602 33 5.48% 2,494 127 5.09%
Gross Loans** 873,055 82,153 9.41% 718,206 67,633 9.42%
Allowance for loan losses (12,427) -- 0.00% (10,343) -- 0.00%
---------------------------------- ----------------------------------
Total Interest Earning Assets 1,270,156 108,408 8.54% 1,082,504 91,139 8.42%
---------------------------------- ----------------------------------
Noninterest Earning Assets
Cash and Due From Banks 38,666 37,020
Premises and Equipment, Net 28,221 24,041
Interest Receivable and Other 39,811 31,069
Unrealized gain (loss) on
securities available for sale 34 (364)
---------- ----------
Total Noninterest Earning Assets 106,732 91,766
---------- ----------
Total Average Assets $1,376,888 $1,174,270
========== ==========
Interest Bearing Liabilities:
Demand deposits $ 167,018 $ 3,836 2.30% $ 135,592 $ 3,209 2.37%
Money market and savings deposits 195,704 7,605 3.89% 168,376 5,770 3.43%
Time deposits 591,128 33,373 5.65% 524,220 30,003 5.72%
Borrowed Funds 138,273 8,148 5.89% 98,467 5,345 5.43%
---------------------------------- ----------------------------------
Total Interest Bearing Liabilities 1,092,123 52,962 4.85% 926,655 44,327 4.78%
---------------------------------- ----------------------------------
Noninterest Bearing Liabilities:
Demand deposits 153,169 134,571
Interest payable and other 17,287 12,616
---------- ----------
Total Noninterest Bearing Liabilities 170,456 147,187
---------- ----------
Total Liabilities 1,262,579 1,073,842
Shareholders' Equity 114,309 100,428
---------- ----------
Total Liabilities and
Shareholders' Equity $1,376,888 $1,174,270
========== ==========
Interest Rate Spread 3.69% 3.64%
==== ====
Taxable Equivalent Net Interest Income and
Net Yield on Interest Earning Assets $55,446 4.37% $ 46,812 4.32%
=================== ====================
<CAPTION>
1995
-----------------------------------
Interest
Average Income/ Average
Balance Expense Yield/Rate
-----------------------------------
<S> <C> <C> <C>
Interest Earning Assets:
Taxable investment securities and
interest bearing due from banks $ 247,679 $ 15,470 6.25%
Non-taxable investment securities
and interest bearing due from banks* 24,872 2,083 8.37%
Federal funds sold and securities purchased
with agreements to resell 9,165 525 5.73%
Gross Loans 588,645 56,497 9.60%
Allowance for loan losses (9,509) - 0.00%
-----------------------------------
Total Interest Earning Assets 860,852 74,575 8.66%
-----------------------------------
Noninterest Earning Assets
Cash and Due From Banks 34,314
Premises and Equipment, Net 17,995
Interest Receivable and Other 28,966
Unrealized gain (loss) on
securities available for sale (1,721)
---------
Total Noninterest Earning Assets 79,554
---------
Total Average Assets $ 940,406
=========
Interest Bearing Liabilities:
Demand deposits $ 117,732 $ 3,190 2.71%
Money market and savings deposits 135,055 4,556 3.37%
Time deposits 416,142 23,542 5.66%
Borrowed Funds 50,811 2,981 5.87%
----------------------------------
Total Interest Bearing Liabilities 719,740 34,269 4.76%
----------------------------------
Noninterest Bearing Liabilities:
Demand deposits 119,170
Interest payable and other 11,466
---------
Total Noninterest Bearing Liabilities 130,636
---------
Total Liabilities 850,376
Shareholders' Equity 90,030
---------
Total Liabilities and
Shareholders' Equity $ 940,406
=========
Interest Rate Spread 3.90%
====
Taxable Equivalent Net Interest Income and
Net Yield on Interest Earning Assets $ 40,306 4.68%
=====================
</TABLE>
* Tax equivalent adjustment of $1,860, $1,180, and $851 made in 1997, 1996
and 1995, respectively.
The effective tax rates used were 36% for federally tax exempt amounts and 7.75%
for state tax exempt amounts.
** Includes nonaccrual loans and loans held for sale.
- --------------------------------------------------------------------------------
12
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP INC. Table 2
RATE/VOLUME VARIANCE ANALYSIS
(In thousands)
1997 compared to 1996 1996 compared to 1995
Interest Interest
Income Income
Expense Volume Rate Expense Volume Rate
Variance Variance Variance Variance Variance Variance
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Taxable investment securities and
interest bearing due from banks $ (1,189) $ (1,104) $ (85) $ (1,129) $ (794) $ (335)
Non-taxable investment securities
and interest bearing due from banks* 4,032 3,910 122 6,955 7,449 (494)
Federal funds sold and securities purchased
with agreements to resell (94) (103) 9 (398) (345) (53)
Gross Loans 14,520 14,571 (51) 11,136 12,219 (1,083)
------------------------------------- -------------------------------------
$ 17,269 $ 17,274 $ (5) $ 16,564 $ 18,529 $ (1,965)
===================================== =====================================
Interest Bearing Liabilities:
Demand deposits $ 627 $ 724 $ (97) $ 19 $ 451 $ (432)
Money market and savings deposits 1,835 1,005 830 1,214 1,141 73
Time deposits 3,370 3,782 (412) 6,461 6,183 278
Borrowed Funds 2,803 2,313 490 2,364 2,602 (238)
------------------------------------- -------------------------------------
Total Interest Bearing Liabilities $ 8,635 $ 7,824 $ 811 $ 10,058 $ 10,377 $ (319)
===================================== =====================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 3
LOANS
(In thousands)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Analysis of Loans:
Commercial, Financial and Agricultural $ 206,146 $ 194,726 $ 181,024 $ 167,423 $ 152,709
Real estate, Construction and Land Development 79,676 56,077 81,892 84,391 59,442
Real estate, Mortgage 492,262 383,447 258,243 178,388 158,441
Real estate, Equity Lines of Credit 58,846 40,288 36,594 30,666 27,499
Consumer Loans and Leases 115,008 82,505 81,712 65,321 60,659
Other 4,457 6,246 9,750 10,046 2,688
----------------------------------------------------------------------
TOTAL $ 956,395 $ 763,289 $ 649,215 $ 536,235 $ 461,438
======================================================================
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 3
ANALYSIS OF CERTAIN LOAN MATURITIES AT DECEMBER 31, 1997
(In thousands)
Real Estate
Commercial Construction
Financial and Land
& Agricultural Development Total
Due within one year $ 81,492 $ 64,476 $145,968
Due after one year - five years
Fixed Rate 54,527 4,626 59,153
Variable Rate 45,611 7,751 53,362
--------- -------- --------
Total 100,138 12,377 112,515
--------- -------- --------
Due after five - ten years
Fixed Rate 7,705 2,174 9,879
Variable Rate 16,811 649 17,460
--------- -------- --------
Total 24,516 2,823 27,339
--------- -------- --------
Total $ 206,146 $ 79,676 $285,822
========= ======== ========
- --------------------------------------------------------------------------------
15
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 3
RESERVE FOR LOAN LOSSES AND NONPERFORMING ASSETS
(In Thousands)
For the year ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Beginning balance $ 10,890 $ 9,658 $ 10,161 $ 11,769 $ 5,472
Deduct charge offs:
Commercial, financial and agricultural 1,506 850 1,295 1,631 686
Real estate, construction and land development -- -- -- 1,151 77
Real estate, mortgage 19 249 358 156 150
Installment to individuals 715 676 407 506 245
Other 802 -- 2 7 --
-----------------------------------------------------------------
TOTAL 3,042 1,775 2,062 3,451 1,158
Add recoveries:
Commercial, financial and agricultural 994 592 763 197 184
Real estate, construction and land development -- -- 7 12 --
Real estate, mortgage 53 43 136 195 38
Installment to individuals 175 140 130 42 62
Other 67 -- -- -- --
-----------------------------------------------------------------
TOTAL 1,289 775 1,036 446 284
-----------------------------------------------------------------
Net charge offs 1,753 1,000 1,026 3,005 874
Additions charged to operations 3,458 2,330 523 1,299 2,272
Provision for acquired loans 1,205 (98) -- 98 110
Allowance acquired in mergers -- -- -- -- 4,789
-----------------------------------------------------------------
Ending balance $ 13,800 $ 10,890 $ 9,658 $ 10,161 $ 11,769
=================================================================
Ratio of net charge offs during the period
to average loans outstanding during the period
0.20% 0.14% 0.18% 0.60% 0.24%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Table 3
TRIANGLE BANCORP, INC.
ALLOCATION OF THE RESERVE FOR LOAN LOSSES
At December 31,
(Dollars in thousands)
--------------------------------------------------------------------------------
1997 1996 1995
--------------------------------------------------------------------------------
% of loans in % of loans in % of loans in
each category each category each category
Amount to Total Loans Amount to Total Loans Amount to Total Loans
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, Financial and
Agricultural $ 4,204 21.55% $ 4,115 27.88% $ 3,665 31.22%
Real Estate, Construction
and Land Development 416 9.75% 169 12.61% 272 15.74%
Real Estate, Mortgage 2,826 50.05% 1,995 39.78% 1,912 33.27%
Real Estate, Equity Lines
of Credit 650 6.15% 402 5.64% 340 5.72%
Consumer Loans 1,698 8.55% 1,289 12.59% 1,220 12.18%
Other 380 3.95% 57 1.50% 76 1.87%
Unallocated 3,626 0.00% 2,863 0.00% 2,173 0.00%
--------------------------------------------------------------------------------
TOTAL $13,800 100.00% $10,890 100.00% $ 9,658 100.00%
================================================================================
<CAPTION>
------------------------------------------------------
1994 1993
------------------------------------------------------
% of loans in % of loans in
each category each category
Amount to Total Loans Amount to Total Loans
------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, Financial and
Agricultural $ 3,632 25.51% $ 4,724 33.09%
Real Estate, Construction
and Land Development 708 14.09% 653 12.88%
Real Estate, Mortgage 2,812 43.49% 3,254 34.34%
Real Estate, Equity Lines
of Credit 274 5.28% 260 5.96%
Consumer Loans 1,006 10.81% 823 13.15%
Other 23 0.82% 19 0.58%
Unallocated 1,706 0.00% 2,036 0.00%
------------------------------------------------------
TOTAL $10,161 100.00% $11,769 100.00%
======================================================
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 3
ANALYSIS OF NONPERFORMING ASSETS
(In Thousands)
1997 1996 1995 1994 1993
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 2,141 $ 1,666 $ 1,532 $ 1,738 $ 3,849
Loans contractually past due 90 or 3,997 2,107 1,033 1,028 220
or more days as to principal or interest
Foreclosed assets 246 507 499 799 1,859
--------------------------------------------------------
Total $ 6,384 $ 4,280 $ 3,064 $ 3,565 $ 5,928
========================================================
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 4
SECURITIES
(In thousands)
December 31,
----------------------------------------------------------------------
1997 1996
Available for Sale Book Value Market Value Book Value Market Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury $ 98,269 $ 99,020 $ 117,732 $ 117,902
U.S. Agencies 10,233 10,246 12,179 12,157
State and Political Subdivisions 31,501 32,322 14,369 14,341
Mortgage Backed Securities 467 467 127,818 128,030
Collateralized Mortgaged Obligations 251,332 250,056 2,145 2,108
End-User Derivatives 4,293 3,850
FHLB Stock 17,535 17,535 5,534 5,534
Federal Reserve Stock 2,210 2,210 2,524 2,524
Other Investments 64 64 64 64
----------------------------------------------------------------------
Total $ 411,611 $ 411,920 $ 286,658 $ 286,510
======================================================================
Held to Maturity
U.S. Agencies $ 72,128 $ 72,881 $ 72,134 $ 72,583
State and Political Subdivisions 12,998 13,405 13,663 13,918
Mortgage Backed Securities 6,376 6,343 8,711 8,564
Collateralized Mortgaged Obligations 3,038 3,044 3,050 3,025
Other Investments 253 273 554 577
----------------------------------------------------------------------
Total $ 94,793 $ 95,946 $ 98,112 $ 98,667
======================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 4
SECURITIES
(In thousands)
WEIGHTED AVERAGE YIELDS AT DECEMBER 31, 1997
Due in One After
Available for Sale Year or less 1 - 5 years 5 - 10 years 10 years Total
<S> <C> <C> <C> <C> <C>
U.S. Treasury 6.43% 6.13% 6.16%
U.S. Agencies 5.91% 5.91%
State and Political Subdivisions 4.75% 5.11% 5.07%
Mortgage Backed Securities 6.87% 6.87%
Collateralized Mortgaged Obligations* 8.49% 7.58% 7.56%
Other Investments 7.32% 7.32%
-----------------------------------------------------------------------------
Total 6.43% 6.11% 6.91% 6.84% 6.58%
-----------------------------------------------------------------------------
Held to Maturity
U.S. Agencies 5.90% 6.41% 7.58% 6.28%
State and Political Subdivisions 4.57% 5.17% 5.33% 5.59% 5.32%
Mortgage Backed Securities 5.72% 6.10% 5.65% 6.82% 6.19%
Collateralized Mortgaged Obligations* 6.36% 6.03% 6.25%
Other Investments 9.00% 9.00%
-----------------------------------------------------------------------------
Total 5.87% 6.31% 6.23% 6.07% 6.15%
-----------------------------------------------------------------------------
* Analysis performed using contractual maturities of collateralized mortgage obligations.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 4
SECURITIES
(In thousands)
Book Value as of December 31, 1997
------------------------------------------------------------------
Average
Due in One After Market Maturity
Available for Sale Year or less 1 - 5 years 5 - 10 years 10 years Total Value in Years
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 11,487 $ 86,782 $ -- $ -- $ 98,269 $ 99,020 1.20
U.S. Agencies 10,233 10,233 10,246 2.02
State and Political Subdivisions 3,683 27,817 31,500 32,322 10.19
Mortgage Backed Securities 467 467 467 20.35
Collateralized Mortgaged Obligations* 5,053 246,280 251,333 250,056 17.29
FHLB Stock 17,535 17,535 17,535
Federal Reserve Stock 2,210 2,210 2,210
Other Investments 64 64 64
--------------------------------------------------------------------------------------------
Total $ 11,487 $ 97,015 $ 8,736 $ 294,373 $411,611 $ 411,920 10.21
============================================================================================
Held to Maturity
U.S. Agencies $ 28,849 $ 39,378 $ 3,902 $ -- $ 72,128 $ 72,881 2.62
State and Political Subdivisions 531 3,513 5,644 3,310 12,998 13,405 5.66
Mortgage Backed Securities 1,608 1,943 687 2,138 6,376 6,343 5.12
Collateralized Mortgaged Obligations* 2,028 1,009 3,038 3,044 14.67
Other Investments 253 253 273 3.25
--------------------------------------------------------------------------------------------
Total $ 30,988 $ 45,087 $ 12,261 $ 6,457 $ 94,793 $ 95,946 6.26
============================================================================================
* Analysis performed using contractual maturities of collateralized mortgage obligations.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 5
LARGE TIME DEPOSIT MATURITIES
(In thousands)
Analysis of Time Deposits of $100,000 or more at December 31, 1997:
Remaining maturity of three months or less $ 51,458
Remaining maturity of over three months through 12 months 48,864
Remaining maturity of over twelve months 10,971
---------
Total time deposits of $100,000 or more $ 111,293
=========
- --------------------------------------------------------------------------------
22
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 6
SHORT-TERM DEBT
(Dollars in thousands)
1997 1996
----------------------------------------------------- -------------------------------------------
Securities Securities
Federal Sold Under TT & L Federal Sold Under TT & L
Funds Agree to Master Note Funds Agree to Note
Purchased Repurchase Note Option Combined Purchased Repurchase Option Combined
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
End of year:
Amount outstanding $24,800 $20,601 $15,705 $ 400 $61,506 $ 3,900 $34,738 $ 342 $38,980
Weighted average interest rate 5.85% 4.56% 4.80% 5.27% 5.15% 7.00% 4.90% 5.15% 5.11%
Maximum amount outstanding $30,800 $25,360 $15,704 $ 400 $72,264 $35,745 $39,466 $ 400 $75,611
at any month end
Averages:
Average outstanding during year $ 3,503 $19,971 $ 6,884 $ 288 $30,646 $10,876 $31,502 $ 395 $42,773
Weighted average interest rate 5.76% 4.61% 4.70% 4.24% 4.76% 5.74% 5.17% 3.15% 5.30%
during the year
<CAPTION>
1995
-----------------------------------
Securities
Federal Sold Under
Funds Agree to
Purchased Repurchase Combined
<S> <C> <C> <C>
End of year:
Amount outstanding $16,155 $23,667 $39,822
Weighted average interest rate 5.98% 4.49% 5.09%
Maximum amount outstanding $21,125 $25,394 $46,519
at any month end
Averages:
Average outstanding during year $ 4,061 $60,073 $64,134
Weighted average interest rate 5.76% 5.43% 5.45%
during the year
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
TRIANGLE BANCORP, INC. Table 7
SELECTED KEY FINANCIAL RATIOS
For the year ended December 31,
1997 1996 1995
-------------------------------------
Return on Average Assets 1.20% 1.13% 0.97%
Return on Average Equity 14.51% 13.16% 10.12%
Dividends Paid ratio 31.39% 26.71% 22.11%
Average Equity to Average Assets 8.30% 8.55% 9.57%
- --------------------------------------------------------------------------------
24
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TRIANGLE BANCORP Table 8
INTEREST SENSITIVITY
DECEMBER 31, 1997
(Dollars in thousands)
0 - 3 4 to 12 1 to 5 Over 5
Balance Months Months Years Years
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federal funds sold $ 1,549 $ 1,549 $ -- $ -- $ --
Interest bearing deposits in banks 23,027 23,027 -- -- --
Securities 506,713 -- 42,512 142,829 321,372
Loans and leases, net 942,595 -- -- -- --
--------------------------------------------------------------------------------
Earning assets 1,473,884 24,576 42,512 142,829 321,372
--------------------------------------------------------------------------------
Total assets $ 1,605,012
===========
Interest bearing demand deposits $ 167,651 67,060 -- 67,060 33,530
Savings deposits 66,931 -- -- 53,545 13,386
Money market account deposits 175,196 -- 87,598 87,598 --
Time deposits 600,466 -- -- -- --
Short-term debt 61,506 61,506 -- -- --
FHLB advances 193,500 45,000 80,000 68,500 --
Corporation obligated
manditorily redeemable securities 19,951 19,951
--------------------------------------------------------------------------------
Costing liabilities $ 1,265,250 173,566 167,598 276,703 46,916
--------------------------------------------------------------------------------
GAP $ (148,990) $ (125,086) $ (133,874) $ 274,456
---------------------------------------------------------------
% of total assets -9.28% -7.79% -8.34% 17.10%
---------------------------------------------------------------
Cumulative GAP $ (148,990) $ (274,076) $ (407,951) $ (133,495)
---------------------------------------------------------------
% of total assets -9.28% -17.08% -25.42% -8.32%
---------------------------------------------------------------
Assumptions regarding non-maturing deposits follow the FDICIA section 305 maximums.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
MARKET RISK
As discussed in the Management Discussion and Analysis Asset and Liability
Management section, the Company's market risk relates to the interest rate risk
inherent in its lending and deposit taking activities. The Banks use a model to
simulate interest movements and the effect such movements would have on the
market value of portfolio equity. The market value of portfolio equity is the
present value of expected cash flows from assets, liabilities and off balance
sheet contracts using current market discount rates .
In executing the model, assumptions, which may or may not actually occur in
rapid interest rate changes, are used. The assumptions related to non-maturing
deposits are based on the FDICIA 305 maximum maturities. Assumptions regarding
expected cash flows are based on the individual maturities of the Companies
securities, loans, deposits and other borrowings.
The table below illustrates the effect of interest rate movements, both up and
down, of 100 and 200 basis points for each of the Banks.
- --------------------------------------------------------------------------------
December 31, 1997
Market Value
of Portfolio Estimated
Equity Change from
(In Thousands) Base
$ $ %
--------------------------------------------------
TRIANGLE BANK
Up 200 102,060 (4,039) -3.81%
Up 100 103,887 (2,212) -2.08%
Base 106,099 - 0.00%
Down 100 108,751 2,652 2.50%
Down 200 111,903 5,804 5.47%
BANK OF MECKLENBURG
Up 200 18,438 (937) -0.88%
Up 100 18,882 (493) -0.46%
Base 19,375 - 0.00%
Down 100 19,927 552 0.52%
Down 200 20,543 1,168 1.10%
- --------------------------------------------------------------------------------
26
<PAGE>
ITEM 2. Properties
See Item 1. Description of Business-Properties.
ITEM 3. Legal Proceedings
There are no material legal proceedings pending to which the Corporation or
its direct or indirect subsidiaries is a party or of which any of their
property is subject.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the Corporation's shareholders in the fourth
quarter of 1997
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters
The stock price and shareholder data appear on page FS-1 of this Annual
Report on Form 10-K. Restrictions on paying dividends are described in Item
1 on Form 10-K under the heading "Bank Regulation".
ITEM 6. Selected Financial Data
The selected consolidated financial data appears on page FS-2 of this
Annual Report on Form 10-K.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's discussion and analysis of financial condition and results of
operations for the years ended December 31, 1997 and December 31, 1996
appears on pages FS-3 through FS-9 of this Annual Report on Form 10-K. See
page 26 for a discussion of market risk.
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements, together with the report thereon of
Coopers & Lybrand L.L.P. dated January 19, 1998, appears on pages FS-10
through FS-38 of this Annual Report on Form 10-K.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
No changes in accountants or disagreements on accounting or financial
disclosure occurred in the period from January 1, 1996 through the date
hereof.
27
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information contained under the captions "Proposal 1. Election of
Directors", "Incumbent Directors, Director Relationships", and "Executive
Officers" in the Proxy Statement is incorporated herein by reference.
ITEM 11. Executive Compensation
The information contained under the captions "Director Compensation",
"Compensation Committee Report", "Compensation Committee Interlocks and
Insider Participation", "Executive Compensation" and "Performance Graph" in
the Proxy Statement is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information contained under the caption "Beneficial Ownership of Voting
Securities" in the Proxy Statement is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
The information contained under the captions "Indebtedness of Management"
and "Transactions with Management" in the Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
Financial Statements:
Report of Independent Accounts........................................FS-10
Consolidated Balance Sheets as of
December 31, 1997 and 1996............................................FS-11
Consolidated Statements of Income
for the years ended December 31, 1997, 1996 and 1995..................FS-12
Consolidated Statements of Changes in
Shareholders' Equity for the years ended
December 31, 1997, 1996 and 1995......................................FS-13
Consolidated Statements of Cash
Flows for the years ended December 31,
1997, 1996 and 1995..........................................FS-14 to FS-15
Notes to Consolidated Financial Statements...................FS-16 to FS-38
28
<PAGE>
The following exhibits listed in accordance with the number assigned to
each in the Exhibit Table of Item 601 of Regulation S-K under the Securities Act
of 1933, as amended, are included in this Form 10-K.
Exhibit
Number
2(a) Amended and Restated Agreement and Plan of Reorganization and Merger
By and Among Guaranty State Bancorp, Guaranty State Bank, Triangle
Bancorp, Inc. and Triangle Bank dated as of November 18, 1997
(incorporated by reference to Exhibit 2(a) to the Registrant's Form
S-4 (Registration No. 333-44027) as declared effective by the
Commission on February 6,1998)
2(b) Agreement and Plan of Reorganization and Merger By and Among United
Federal Savings Bank, Triangle Bancorp, Inc. and Triangle Bank dated
as of March 4, 1998 (incorporated by reference to Exhibit 10(a) to the
Registrant's Form 8-K filed with the Commission on March 25, 1998)
3(a) Articles of Incorporation of Triangle Bancorp, Inc. as amended at the
meeting of shareholders on May 23, 1995 (incorporated by reference to
Exhibit 3(a) to the Registrant's Form 10-K filed with the Commission
on March 25, 1997)
3(b) Bylaws of Triangle Bancorp, Inc. as amended at the special meeting of
shareholders on April 28, 1997 and by the Board of Directors on
January 27, 1998
4 Specimen of Common Stock Certificate of Triangle Bancorp, Inc.
10(a) Triangle Bancorp, Inc. 1988 Incentive Stock Option Plan, as amended on
August 19, 1997 and on November 18, 1997
10(b) Triangle Bancorp, Inc. 1988 Non-Qualified Stock Option Plan, as
amended on August 19, 1997 and on November 18, 1997
10(c) Triangle Bancorp, Inc. 1998 Omnibus Stock Plan
10(d) Triangle Bancorp, Inc. Deferred Compensation Plan for Outside
Directors (incorporated by reference to Exhibit 10(c) to the
Registrant's Form 10-K for the fiscal year ended December 31, 1993 as
filed with the Commission on March 31, 1994)
10(e) Triangle Bancorp, Inc. 1997 Deferred Compensation Plan for Outside
Directors
29
<PAGE>
10(f) Employment Agreement between Triangle Bancorp, Inc. and Michael S.
Patterson (incorporated by reference to Exhibit 10(a) to the
Registrant's Form 10-K for the fiscal year ended December 31, 1993 as
filed with the Commission on March 31, 1994)
10(g) Deferred Compensation Agreement between Triangle Bancorp, Inc. and
Michael S. Patterson (incorporated by reference to Exhibit 10(g) to
the Registrant's Form S-4 (Registration No.33-86226) as declared
effective by the Commission on January 20, 1995)
10(h) Deferred Compensation Agreement between Triangle Bancorp, Inc. and
Debra L. Lee (incorporated by reference to Exhibit 10(h) to the
Registrant's Form S-4 (Registration No. 33-86226) as declared
effective by the Commission on January 20, 1995)
10(i) Employment Agreement between Triangle Bancorp, Inc. and George W. Holt
(incorporated by reference to Exhibit 10(j) to the Registrant's Form
10-K filed on March 31, 1995)
10(j) Employment Agreement between Triangle Bancorp, Inc. and H. Leigh
Ballance, Jr. (incorporated by reference to Exhibit 10(k) to the
Registrant's Form 10-K filed on March 31, 1995)
10(k) Split Dollar Insurance Agreement and Deferred Compensation Agreement
between Triangle Bancorp, Inc. and Michael S. Patterson (incorporated
by reference to Exhibit 10(n) to the Registrant's Form 10-K filed on
March 31, 1996)
10(l) Change of Control Agreement among Triangle Bancorp, Inc., Triangle
Bank and Steven R. Ogburn
10(m) Change of Control Agreement among Triangle Bancorp, Inc., Triangle
Bank and Debra L. Lee
10(n) Employment Agreement between Triangle Bancorp, Inc. and Billy N.
Quick, Sr.
10(o) Change of Control Agreement among Triangle Bancorp, Inc., Triangle
Bank and Edward O. Wessell
10(p) Supplemental Employee Retirement Plan dated January 1, 1998 between
Triangle Bank and Michael S. Patterson.
10(q) Form of Supplemental Employee Retirement Plan dated January 1, 1998
between Triangle Bank and each of Debra L. Lee, Steven R. Ogburn and
Edward O. Wessell
30
<PAGE>
21 Subsidiaries of Registrant
23 Consent of Coopers & Lybrand L. L. P.
27 Financial Data Schedule for the year and quarter ended
December 31, 1997
27.1 Financial Data Schedule - Restated 1997 quarters
27.2 Financial Data Schedule - Restated 1996 quarters
27.3 Financial Data Schedule Restated December 31, 1995
(b) Reports on Form -8K
On October 17, 1997, a Form 8-K was filed to report the completion of the
acquisition of Mecklenburg.
On October 31, 1997, a Form 8-K was filed to restate historical financial
information due to the acquisition of Mecklenburg.
On December 19, 1997, a Form 8-K was filed reporting completion of one
month of combined operations of the Company and Mecklenburg. A consolidated
balance sheet and statement of income were included in the filing.
On December 22, 1997, a Form 8-K was filed which included the restated
historical financial information filed on October 31, 1997, without reference to
Mecklenburg's prior independent accountants in the audit opinion.
31
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TRIANGLE BANCORP, INC.
By /s/ Michael S. Patterson
-----------------------------
Michael S. Patterson
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Michael S. Patterson Chairman, President and Chief March 17, 1998
- --------------------------- Executive Officer
Michael S. Patterson
/s/ Debra L. Lee Chief Financial Officer March 17, 1998
- --------------------------- (Principal Financial and
Debra L. Lee Accounting Officer)
/s/ Lisa F. Campbell Controller (Principal
- --------------------------- Accounting Officer) March 17, 1998
Lisa F. Campbell
/s/ Carole S. Anders Director March 17, 1998
- ---------------------------
Carole S. Anders
/s/ Charles H. Ashford, Jr. Director March 17, 1998
- ---------------------------
Charles H. Ashford, Jr.
- --------------------------- Director March 17, 1998
Cy N. Bahakel
- --------------------------- Director March 17, 1998
E. B. Borden
32
<PAGE>
/s/ Robert E. Bryan, Jr. Director March 17, 1998
- ---------------------------
Robert E. Bryan, Jr.
/s/ David T. Clancy Director March 17, 1998
- ---------------------------
David T. Clancy
- --------------------------- Director March 17, 1998
N. Leo Daughtry
/s/ Syd W. Dunn Director March 17, 1998
- ---------------------------
Syd W. Dunn, Jr.
/s/ Willie S. Edwards Director March 17, 1998
- ---------------------------
Willie S. Edwards
/s/ James P. Godwin, Sr. Director March 17, 1998
- ---------------------------
James P. Godwin, Sr.
/s/ Robert L. Guthrie Director March 17, 1998
- ---------------------------
Robert L. Guthrie
/s/ John B. Harris, Jr. Director March 17, 1998
- ---------------------------
John B. Harris, Jr.
/s/ George W. Holt Director March 17, 1998
- ---------------------------
George W. Holt
/s/ Earl Johnson, Jr. Director March 17, 1998
- ---------------------------
Earl Johnson, Jr.
- --------------------------- Director March 17, 1998
J.L. Maxwell, Jr.
/s/ Michael A. Maxwell Director March 17, 1998
- ---------------------------
Michael A. Maxwell
33
<PAGE>
- --------------------------- Director March 17, 1998
Wendell H. Murphy
/s/ Patrick L. Pope Director March 17, 1998
- ---------------------------
Patrick L. Pope
/s/ William R. Pope Director March 17, 1998
- ---------------------------
William R. Pope
/s/ Edythe M. Poyner Director March 17, 1998
- ---------------------------
Edythe M. Poyner
/s/ Billy N. Quick, Sr. Director March 17, 1998
- ---------------------------
Billy N. Quick, Sr.
/s/ J. Dal Snipes Director March 17, 1998
- ---------------------------
J. Dal Snipes
/s/ N. Johnson Tilghman Director March 17, 1998
- ---------------------------
N. Johnson Tilghman
/s/ Sydnor M. White, Jr. Director March 17, 1998
- ---------------------------
Sydnor M. White, Jr.
/s/ J. Blount Williams Director March 17, 1998
- ---------------------------
J. Blount Williams
34
<PAGE>
================================================================================
Shareholder Information
- --------------------------------------------------------------------------------
Annual Meeting
The Annual Meeting of the shareholders of Triangle Bancorp, Inc. will be held on
Tuesday, April 28, 1998, at the Radisson Governors Inn, Research Triangle Park,
NC at 10:00 a.m.
Common Stock
At December 31, 1997, the Company had 12,980,925 shares of common stock
outstanding which was held by approximately 7,600 shareholders of record.
Beginning December 30, 1997, the Company's stock was listed on the New York
Stock Exchange ("NYSE") under the ticker symbol TGL. Prior to December 30, 1997,
the Company's stock was traded Over-the-Counter on the NASDAQ National Market
under the ticker symbol TRBC.
Stock Transfer Agent and Registrar
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016-3572
800-368-5948
Independent Accountants
Coopers & Lybrand L.L.P.
Certified Public Accountants
150 Fayetteville Street Mall
Suite 2300
Raleigh, North Carolina 27601
Quarterly Common Stock Prices and Dividends
The talbe below sets forth the range of high and low per share sales prices as
reported by the NYSE from December 30, 1997 forward and by NASDAQ for prior
periods. The table also sets forth per share dividend information for the period
indicated.
1997 1996
High Low Dividend High Low Dividend
- --------------------------------------------------------------------------------
Fourth Quarter 35.88 24.50 0.12 16.38 14.50 0.09
- --------------------------------------------------------------------------------
Third Quarter 30.00 21.75 0.10 15.25 13.50 0.07
- --------------------------------------------------------------------------------
Second Quarter 22.50 18.50 0.09 15.00 13.50 0.07
- --------------------------------------------------------------------------------
First Quarter 20.50 16.00 0.09 16.00 13.88 0.06
- --------------------------------------------------------------------------------
Dividend Reinvestment and Stock Purchase Plan
Triangle Bancorp, Inc. has a Dividend Reinvestment and Stock Purchase Plan which
allows shareholders to reinvest dividends and buy additional stock in any amount
up to $2,000 per quarter after they have made their initial purchase of stock.
For further information and an application, contact our Stock Transfer Agent.
About This Report
The 1997 Annual Report is presented using a summary format intended to provide
information regarding Triangle Bancorp, Inc.'s financial position and results of
operations in a concise manner that will be meaningful and useful to our
shareholders. The audited financial statements and detailed analytical schedules
are contained in the Triangle Bancorp, Inc. Annual Report on Form 10-K for the
year ended December 31, 1997.
Form 10-K
A copy of Triangle Bancorp, Inc.'s Form 10-K Annual Report to the Securities and
Exchange Commission for 1997 will be furnished, without charge, upon written
request to:
Investor Relations
Triangle Bancorp, Inc.
P.O. Box 31828
Raleigh, North Carolina 27622
Equal Opportunity Employer
As an equal opportunity employer, Triangle Bancorp, Inc. pledges to recruit,
hire, train and promote persons in all job classifications, without regard to
race, color, religion, sex, national origin, age, disability or veteran status.
Triangle Bancorp, Inc.
Corporate Headquarters
4300 Glenwood Avenue
Raleigh, NC 27612
(919) 881-0455
================================================================================
FS-1
<PAGE>
Selected Consolidated Financial Information
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
At Period End (in thousands)
Loans, net $ 942,595 $ 752,399 $ 639,557 $ 526,104 $ 449,738
Securities Available for Sale 411,920 286,510 216,523 156,745 --
Securities Held to Maturity 94,793 98,112 89,452 86,427 213,371
Total Assets 1,605,012 1,241,394 1,054,159 877,983 791,900
Total Deposits 1,191,926 1,025,752 844,878 737,388 674,302
Advances from the FHLB 193,500 58,000 59,500 20,500 5,500
Subordinated Debt 1,066 -- -- 2,000 6,700
Corporation-Obligated Mandatorily
Redeemable Capital Securities 19,951 -- -- -- --
Shareholders' Equity $ 119,093 $ 105,736 $ 96,870 $ 82,887 $ 80,360
Summary of Operation (in thousands)
Net Interest Income $ 53,586 $ 45,632 $ 39,455 $ 34,411 $ 24,407
Provision for Loan Losses 3,458 2,330 523 1,299 2,272
Noninterest Income 13,213 9,948 8,445 5,856 6,438
Noninterest Expense 37,577 32,761 33,601 31,123 22,753
Net Income $ 16,584 $ 13,220 $ 9,114 $ 5,184 $ 4,535
Per Share Data
Basic Earnings per Share $ 1.28 $ 1.05 $ 0.73 $ 0.43 $ 0.44
Diluted Earnings per Share $ 1.24 $ 1.02 $ 0.72 $ 0.42 $ 0.44
Book Value $ 9.17 $ 8.40 $ 7.73 $ 6.75 $ 6.74
Cash Dividends $ 0.40 $ 0.29 $ 0.16 $ 0.07 $ 0.02
Selected Ratios
Return on Average Assets 1.20% 1.13% 0.97% 0.63% 0.77%
Return on Average Equity 14.51% 13.16% 10.12% 6.31% 6.68%
Shareholders' Equity to Total Assets 7.42% 8.52% 9.19% 9.44% 10.15%
</TABLE>
Annual Stock Price
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
$7.50 $10.00 $14.25 $16.38 $35.38
Annual Compounded
Growth Rate
47%
Total Assets
(in millions)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
$792 $878 $1,054 $1,241 $1,605
Annual Compounded
Growth Rate
19%
Net Income
(in millions)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
$5 $5 $9 $13 $17
Annual Compounded
Growth Rate
38%
Diluted Earnings
Per Share
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
$0.44 $0.42 $0.72 $1.02 $1.24
Annual Compounded
Growth Rate
31%
FS-2
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
Return on Average
Equity (percent)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
6.68 6.31 10.12 13.16 14.51
OVERVIEW
The purpose of the following discussion is to provide the reader with a concise
understanding of the performance and financial condition of Triangle Bancorp,
Inc. (the "Company"). The Company is a multibank holding company incorporated
in November 1991 under the laws of the State of North Carolina, with four
wholly-owned subsidiaries: Triangle Bank ("Triangle"); Bank of Mecklenburg
("Mecklenburg"); collectively, (the "Banks"); Coastal Leasing LLC ("Coastal")
and Triangle Capital Trust.
HIGHLIGHTS
During 1997, the Company continued its strategy of growth both internally and
through acquisitions. In August, Triangle acquired eight branches of United
Carolina Bank and two branches of Branch Banking & Trust located in south
central and eastern North Carolina (the "Branch Acquisition") with $195 million
in deposits and $61 million in loans. The Branch Acquisition was accounted for
using purchase accounting and, therefore, is included from the date of
acquisition forward. In the Branch Acquisition, $15.8 million was recorded as
deposit premium and $920,000 was recorded as goodwill. The deposit premium is
being amortized over 10 years and the goodwill is being amortized over 3 years.
In October of 1997, the Company acquired, as wholly-owned subsidiaries,
Mecklenburg with assets of approximately $270 million and Coastal with $13
million in assets. Both of these acquisitions were accounted for using the
pooling-of-interests method of accounting. All prior periods have been restated
for Mecklenburg, however, based on materiality, Coastal has been pooled for 1997
only. As a result, the Company's total assets and net income for December 31,
1996 have been restated from $971 million to $1.2 billion, and from $11.3
million to $13.2 million, respectively.
In anticipation of the Branch Acquisition, which would increase the
Company's need for capital, in May 1997, the Company created a Delaware
statutory business trust subsidiary, Triangle Capital Trust, which issued
corporation-obligated mandatorily redeemable capital securities ("Trust
Securities") in the amount of $19.33 million and trust common securities in the
amount of $619,000 to the Company. The Trust Securities have a maturity of 30
years, pay dividends at the rate of 9.375% and may be treated as tier 1 capital
by the Company.
In the third quarter of 1997, Triangle formed a wholly-owned Delaware
investment subsidiary to house securities. In the fourth quarter of 1997,
Mecklenburg also formed a wholly-owned Delaware investment subsidiary.
During 1997, the Company's total assets grew to $1.6 billion from $1.2
billion at December 31, 1996. The growth in assets of 30% reflects internal
growth as well as the Branch Acquisition. In addition, a leveraged investment
program was employed by the Company to more effectively utilize capital. This
strategy is described further under the balace sheet analysis section below.
In early 1996, Triangle completed the purchase of four branch offices and
approximately $55 million in deposits from First Union of North Carolina and
Mecklenburg acquired one branch office and $26 million in deposits from Essex
Savings Bank ("1996 Branch Acquisition"). These transactions were accounted for
as purchases, therefore, the operations of these branches are reflected only
from the date of purchase. In the 1996 Branch Acquisition, $4.6 million was
recorded as deposit premium and it is being amortized over 10 years.
In addition, during 1996, the Company acquired Granville United Bank with
assets of approximately $60 million. This acquisition was accounted for using
the pooling-of-interests method of accounting, therefore, all historical
information was restated for 1996 reporting to reflect the operations of the
combined institutions.
During 1996, the Company's total assets grew to $1.2 billion from $1.1
billion at December 31, 1995. The growth in assets of 18% reflects internal
FS-3
<PAGE>
deposit growth as well as the 1996 Branch Acquisition. The funds acquired in the
1996 Branch Acquisition were principally invested in loans as demand was strong
for most of the year. The remaining funds were invested in securities as the
liquidity of the balance sheet increased through the year. In addition, a
leveraged investment portfolio strategy was employed by Mecklenburg to more
effectively utilize capital. (This strategy was implemented during late 1995 by
Mecklenburg, and discontinued in late 1997 after the acquisition of Mecklenburg
by the Company.)
Earnings increased to $16.6 million for the year ended December 31, 1997
compared to $13.2 million for the year ended December 31, 1996, a 26% increase.
The 1996 results reflected a $4.1 million increase, or 45%, in net income over
the $9.1 million earned for the year ended December 31, 1995. A summary of the
significant items impacting earnings are listed below.
1997 compared to 1996
o Net interest income increase $8 million for the year ended December 31,
1997 compared to 1996.
o The provision for loan losses increased $1 million in 1997 over the 1996
amount
o A gain of $2 million was recognized ($1.27 million after-tax) on the sale
of $25 million in deposits in 1997 versus a gain of $558,000 ($354,000
after-tax) in 1996 for a net after-tax increase of $916,000.
o Merger expenses of approximately $2.5 million ($1.6 million after-tax) were
incurred in 1997 versus approximately $494,000 ($313,000 after-tax) in 1996
for a net after-tax increase of $1.3 million.
1996 compared to 1995
o Net interest income increased $6 million for the year ended December 31,
1996 versus 1995.
o The provision for loan losses increased $1.8 million over the 1995 amount
due to loan growth in 1996.
o A gain of $558,000 ($354,000 after-tax) on the sale of deposits was
recognized in 1996 while a comparable gain of $529,000 ($349,000 after-tax)
was recognized in 1995 on the sale of the mortgage servicing portfolio.
o Merger expenses of approximately $494,000 ($313,000 after-tax) were
incurred in 1996 versus approximately $2.6 million ($1.7 million after-tax)
in 1995 for a net after-tax decrease of $1.4 million.
The return on average assets was 1.20% and 1.13% for the years ended
December 31, 1997 and 1996, respectively. The return on average equity was
14.51% and 13.16%, for the years ended December 31, 1997 and 1996, respectively,
an increase of 22%.
EARNINGS ANALYSIS
Net Interest Income
Net interest income, the principal source of the Company's earnings, is the
amount of income generated by earning assets (primarily loans and investment
securities) less the total interest cost of the funds obtained to carry them
(primarily deposits and other borrowings). The volume, rate and mix of both
earning assets and related funding sources determine net interest income.
Net interest income for 1997 increased to $53.6 million for $45.6 million
for 1996. This 18% increase primarily reflects as increase in the volume of
average earning assets of $190 million while average interest-bearing
liabilities increased $165 million. The taxable equivalent net interest margin
increased 5 basis points for the year ended December 31, 1997 over the same
period in 1996.
For 1996, the Company's net interest income was $45.6 million, an increase
of 15% or $6.1 million over 1995. Net interest income was favorably impacted by
growth in the volume of average earning assets, which exceeded the volume growth
in average interest-bearing liabilities by $14 million. This volume growth was
offset by the fact that the taxable equivalent yield on interest-earning assets
declined by 24 basis points, and the cost of interest-bearing liabilities
increased by 2 basis points.
Provision for Loan Losses
The provision for loan losses for 1997 was $3.5 million versus $2.3 million in
1996. This increase reflects the growth in the loan portfolio during
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Return on Average
Assets (percent)
93 94 95 96 97
0.77 0.63 0.97 1.13 1.20
Triangle Bancorp, Inc. and Subsidiaries
FS-4
<PAGE>
Efficiency Ratio
(percent)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
73.8 77.3 70.2 58.9 56.3
1997. The Company continues to maintain adequate levels of coverage for
nonperforming assets as well as general reserves for the portfolio as described
further in the loans and leases section.
The 1996 provision for loan losses of $2.3 million was significantly higher
than the 1995 provision of $523,000 due to loan growth in 1996. The Company's
loan loss reserve calculation continued to show adequate reserve levels in 1996
as the loan portfolio demonstrated improving quality and realized reductions for
nonperforming assets.
Noninterest Income
Noninterest income for 1997 was $13.2 million versus $9.9 million for 1996, a
33% increase. This increase resulted primarily from a 1997 gain of $2 million on
the sale of approximately $25 million in deposits, which was higher than the
$558,000 gain recognized in 1996 on the sale of approximately $8 million in
deposits. Service charges on deposit accounts also increased significantly in
1997.
Net gains on sales of securities were lower in 1997 compared to 1996
primarily due to a decrease in Mecklenburg's net gains. In 1996, gains on sales
of investment securities were the result of gains on off-balance sheet
derivative products in connection with the leveraged investment portfolio
strategy implemented during late 1995. In 1997, as the acquisition approached,
this leverage strategy was unwound, thereby reducing the gains.
In January 1997, Mecklenburg segregated a group of assets into a trading
portfolio. During the year, $681,000 in net gains were recognized on the trading
account which was an increase over 1996 as the Company held no trading assets in
1996. By the time of the Company's acquisition of Mecklenburg, the trading
assets had been disposed and the Company held no trading assets as of December
31, 1997.
Other operating income increased in 1997 due to increased income from the
sale of loans, rental income from leased facilities, income from the investment
service subsidiaries and a smaller loss on the sale of certain fixed assets in
1997 compared to 1996.
Noninterest income increased to $9.9 million in 1996 form $8.4 million in
1995. This was due in large part to increased service charge income on deposit
accounts in 1996. Other service charges, primarily mortgage servicing income,
decreased from 1995 as the mortgage servicing portfolio was sold during late
1995. The gain on the sale of that portfolio of $529,000 in 1995 was marched by
a gain of $558,000 on the sale of deposits of approximately $8 million during
the second quarter of 1996. Also during 1996, noninterest income was impacted by
an increase in gains on sales of investment securities due primarily to gains on
off-balance sheet derivative products in connection with Mecklenburg's leveraged
investment portfolio strategy. These increases were mitigated by a reduction in
other operating income as a result of the loss on the sale of certain fixed
assets of acquired organizations.
Noninterest Expense
Noninterest expenses were $37.6 million for 1997, an increase of 15% from $32.8
for 1996, primarily due to increases in nonrecurring merger expenses of $2
million, amortization of intangibles of $650,000, legal and professional fees of
$666,000 and stationery, printing and office supplies of $331,000. Merger
expenses increased due to the Branch Acquisition and the acquisitions of
Mecklenburg and Coastal. The increase in amortization expense is due to the
deposit premium amortization associated with the Branch Acquisition. Legal and
professional fees are up due to general corporate litigation as well as an
increase in outside services such as consulting. Increases in other expenses are
due to the growth of the Company, including the Branch Acquisition in August, a
new branch location in January and three in-store facilities opened during the
year.
Noninterest expenses of $32.8 million for 1996 decreased form $33.6 million
for 1995. This decrease is due to the reduction of merger expenses and other
professional services. Absent the merger expenses, noninterest expenses
increased by 4%. This small increase is primarily a result of increased
intangible amortization expenses from the 1996 Branch Acquisition, increased
intangible amortization expenses from the 1996 Branch Acquisition, increased
facilities expenses as a new main office was purchased and upfitted and 4
additional branch office sites acquired or constructed during 1996. These
increases were offset by gaining the efficiencies of combining the operations of
merged companies.
FS-5
<PAGE>
Income Taxes
The Company's income tax expense for 1997 and 1996 was approximately 35.5% of
income. This level is less than the expected combined state and federal
statutory rates due to tax-exempt securities held, as well as the adjustment of
the deferred tax asset to reflect current tax rates.
During 1995, the Company's income tax expense approximated the federal
statutory rate. No state tax expense was recorded due to the use of net
operating loss carryforwards, which were fully utilized in 1995.
BALANCE SHEET ANALYSIS
The Company's total assets increased to $1.6 billion at December 31, 1997 from
$1.2 billion at December 31, 1996, a 30% increase. This growth, reflected
primarily in the investment and loan portfolios, was funded by additional
deposits purchased in the Branch Acquisition and borrowings from the Federal
Home Loan Bank ("FHLB"). In the fourth quarter of 1997, Triangle implemented a
$130 million leveraged investment program which employs a mix of fixed and
variable FHLB borrowings to purchase collateralized mortgage backed securities.
The yields on the investments exceed the cost of the borrowings resulting in
increased income for the Company. The Company continued to have a strong ratio
of average earning assets to total average assets of 92.25% for the year ended
December 31, 1997 compared to 91.99% for the year ended December 31, 1996.
Loans and Leases
The loan portfolio constitutes the Company's largest earning asset. During 1997,
average net loans and leases increased by $153 million to $861 million over the
1996 level of $708 million. This increase was due to strong loan demand
throughout the year in many of the Company's service areas, the acquisition of
Coastal with $13 million in leases, and the $61 million of loans acquired in the
Branch Acquisition.
The components of nonperforming assets are nonaccrual loans, loans 90 days
or more past due and other real estate owned ("OREO"). Nonperforming assets at
December 31, 1997 were $6.4 million, or .67% of gross loans and OREO, and
increase from .56% of gross loans and OREO at December 31, 1996. Net charge-offs
for 1997 were .20% of average loans versus .14% for 1996. While nonperforming
assets have increased slightly, these levels are considered to be relatively low
compared to industry averages.
The classification "nonaccrual" identifies those loans which management
recognized as collection problems, but which have not been identified as
losses. Loans are placed on nonaccrual status when payments of interest and/or
principal have remained delinquent for a period of 90 days or more or when
management's evaluation indicates probable default prior to the 90 day
delinquency period, unless the loan is both well secured and in the process of
collection. The Company's credit policy does not allow new funds to be committed
to borrowers who have credits in nonaccrual status.
A loan is considered impaired, based on current information and events, if
it is probable that the Company will be unable to collect the scheduled payments
of principal or interest when due according to the contractual terms of the loan
agreement. The measurement of impaired loans is generally based on the present
value of expected future cash flows discounted at the historical effective
interest rate, except that collateral-dependent loans are measured for
impairment based on the fair value of the collateral. During 1997 and 1996, the
Company did not have a significant investment in loans determined to be
impaired.
There are no loans, other than those included in nonperforming assets, that
(i) represent or result from trends or uncertainties which management reasonably
expects will materially impact future operating results, liquidity, or capital
resources, or (ii) represent material credits about which management is aware of
any information which causes management to have serious doubts as to the ability
of such borrowers to comply with the loan repayment terms.
The adequacy of the allowance for loan losses is monitored by management
through an internal loan review process. Among the factors determining the level
of the allowance are loan growth, projected net charge-offs, the amount of
nonperforming and past due loans, and current and anticipated economic
conditions.
The allowance for loan losses at December 31,
Net Charge-Offs as
% of Average Loans
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
0.24 0.60 0.18 0.14 0.20
Loans, net
(in millions)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
$450 $526 $640 $752 $943
Triangle Bancorp, Inc. and Subsidiaries
FS-6
<PAGE>
Deposits
(in millions)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
93 94 95 96 97
$647 $737 $845 $1.026 $1.192
1997 was 1.44% of gross loans (1.43% in 1996) and 216% of nonperforming assets
(254% in 1996). While nonperforming assets have increased slightly during 1997
and the coverage ratios noted above have decreased during 1997, based on
information currently available to management as described in the previous
paragraph, the allowance for loan losses is believed to be adequate. However,
future additions to the allowance may be necessary based on changes in economic
conditions or the circumstances of individual borrowers which may impact
borrowers' ability to repay their loans. The most recent regulatory agency
examinations have not noted any material problem loans that had not been
previously identified by management; however, examinations in the future may
result in regulatory agencies requiring additions to the provision for loan
losses based on information available at the time of the examination.
Securities, Federal Funds Sold and Interest-Bearing Deposits
Securities, federal funds sold and interest bearing deposits at the end of 1997
totaled $531 million, compared to $388 million at December 31, 1996. The
increase is due to the overall growth of the Company as well as the leveraged
investment program implemented by Triangle in the fourth quarter of 1997.
Interest-bearing deposits in banks increased $22 million due to Mecklenburg
having $22 million in an interest bearing account at the FHLB as collateral for
their FHLB advance. These funds became available when their trading assets were
sold, and the funds will be used in early 1998 to repay the advance.
Securities available for sale increased $125 million and securities held to
maturity decreased $3 million. Approximately 50% of the total securities
portfolio represents collateralized mortgage-backed securities, while US
Treasury and Agency obligations represent approximately 36% of the portfolio.
The remaining portfolio is in municipal obligations, FHLB and Federal Reserve
Bank ("FRB") stock.
Deposits
Deposits increased $166 million to $1.2 billion at December 31, 1997, compared
to $1.0 billion at December 31, 1996. This growth was found in all categories of
deposits. The $195 million in deposits purchased in the Branch Acquisition in
August was offset slightly by the divestiture of $25 million in deposits from
two branch offices in June 1997 and by limited growth through deliberate pricing
strategies.
Other Borrowings
During the year, the Company increased its use of other borrowings as it
determined these funds to be a cost effective alternative to deposits. This is
reflected in the December 31, 1997 balance sheet. Short-term debt increased to
$62 million at December 31, 1997 from $39 million on December 31, 1996. The
majority of the increase, $21 million, was in Federal Funds purchased as the
Company was in a net borrowing position at December 31, 1997.
FHLB advances increased significantly in 1997 to $194 million from $58
million. This relates to Triangle's leveraging employed in the fourth quarter of
1997. The maturity of these advances ranges from $80 million maturing in 1998,
$5 million in 1999 and the remainder in 2002.
As previously discussed, the Company, through Triangle Capital Trust,
issued $20 million in Trust Securities. The majority of these funds, $12
million, were used to provide capital to Triangle and the remainder used for
general corporate purposes.
Capital
The Company's primary source of new capital is retained earnings. Management
feels the Company has other funding sources if needed, including the ability to
issue additional common stock or debt. The $20 million in Trust Securities
issued in 1997 may be counted as Tier 1 capital by the Company. The Company
considers the Trust Securities, which bear interest at the rate of 9.375% per
annum and have a maturity of 30 years, to be a relatively inexpensive source of
capital. The adequacy of capital is reviewed regularly, in light of current
plans and economic conditions, to ensure that sufficient capital is available
for current and future needs, to minimize the Company's cost of capital and to
assure compliance with regulatory requirements.
FS-7
<PAGE>
Current federal regulations require that the Banks maintain a minimum ratio
of total captial to risk weighted assets of 8%, with at least 4% being in the
form of Tier 1 capital, as defined in the regulations. In addition, the Banks
must maintain a leverage ratio of 4%. As of December 31, 1997, the Bank's
capital exceeded the current capital reuirements. The Banks currently expects to
continue to exceed these minimums without altering current operations or
strategy.
The Company recognized the need to balance the retention of sifficient
capital to support future growth, meet regulatory requirements and provide
shareholders with a current cash return on their investment. As a result, for
the years ended December 31, 1997 and 1996, cash dividends paid were 31% and 27%
of earnings, respectively.
ASSET AND LIABILITY MANAGEMENT
The largest component of the Company's earnings is net interest income, which
can fluctuate widely when significant interest rate maovements occur. Management
is responsible for minimizing the Company's exposure to interest rate risk and
assuring an adequate level of liquidity.
To mitigate the impact of interest rate movements, the balance sheet must
be structured so that repricing opportunities exist for both assets and
liabilities, in generally equivalent amounts, at approximately the same time
intervals. Imbalances in these repricing opportunities at any point in time
constitute interest rate sensitivity. Interest rate sensitivity management
measures the potential exposure to fluctuating interest rates. The Company's
objective in managing interest rate sensitivity is to achieve reasonable
stability in the net interest margin throughout economic and interest rate
cycles by maintaining the proper balance of rate sensitive assets and
liabilities. The major factors used to manage interest rate risk include the mix
of fixed and floating interest rates, pricing, and maturity patterns of all
asset and liability accounts. Management regularly reviews the Company's
sensitivity position and evaluates alternative sources and uses of funds.
The Company's interest sensitivity is monitored using computer simulation
programs which analyze the effect of various rate environments on the Company's
net interest margin. In modeling the interest sensitivity of the Company's
balance sheet, assumptions must be made concerning the repricing of nonmaturing
liabilities such as deposit transaction accounts. Management has concluded that
the historical experience of the Company and the industry in general provide the
best basis for determining the repricing characterisics of these accounts.
Accordingly, management places a portion of transaction account balances as
repricing immediately and the remainder in the one to five year time period.
Using these assumptions, the Company's interest sensitivity within a one year
time frame reflects a positive impact on net interest income in a declining
interest rate environment. The Company has historically monitored its interest
sensitivity within an acceptable range in both rising and falling interest rate
environments and keeps its exposure to changing rates to a manageable level.
Prior to the Company's acquisition of Mecklenburg, Mecklendburg used
off-balance sheet derivative instruments to provide a cost-effective way to
manage interest rate sensitivity created primarily by the repricing mismatch of
the leveraged securities portfolio and its funding sources as well as overall
balance sheet interest rate risk. During 1997, the majority of these acitivities
were terminated, however two derivative products remain. At December 31, 1997,
Mecklenburg had a $15 million notional amount interest rate floor used to hedge
the balance sheet. It is marked to market each month, had a $17,000 value at
December 31, 1997 and expires in early 1998. Mecklenburg also had a $16 million
notional value off-balance sheet interest rate swap which is being used to hedge
deposits at December 31, 1997.
To ensure that sufficient funds are available for loan growth and deposit
withdrawals, as well as to provide for general needs, the Company must maintain
an adequate level of liquidity. Both assets and liabilities provide sources of
liquidity. Asset liquidity comes from the Company's ability to convert
short-term investments into cash and from the maturity and repayment of loans
and investment securities. Liability liquidity is provided by the Company's
ability to attract deposits and borrow against unencumbered assets. The primary
source of liability liquidity is the Compnay's customer base
Triangle Bancorp, Inc. and Subsidiaries
FS-8
<PAGE>
which provides core deposit growth. The overall liquidity position of the
Company is closely monitored and evaluated regularly by management. Management
believes the Company's liquidity sources at December 31, 1997 are adequate to
meet its operating needs.
EFFECT OF CHANGING PRICES
The results of operations and financial condition presented in this report are
based on historical cost information and are unadjusted for the effects of
inflation. Since the assets and liabilities of banks are primarily monetary in
nature (payable in fixed, determinable amounts) the performance of the Company
is affected more by changes in interest rates than by inflation. Interest rates
generally increase as the rate of inflation increases, but the magnitude of the
change in rates may be inconsistent. While the effect of inflation on banks is
normally not as significant as is its influence on those businesses which have
large investments in plant and inventories, it does have an effect during
periods of high inflation. There are normally corresponding increases in the
money supply, and banks will normally experience above average growth in assets,
loans, and deposits. Also, increases in the price of goods and services
generally will result in increased operating expenses. Inflation has not been a
significant factor in the Company's operations to date as the inflation rate has
been moderate since its inception.
IMPACT ON THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Company has made a
preliminary assessment of its software and does not believe it has any
significant systems that require modifications. An outside firm is undergoing an
extensive study of all of the Company's internal and external systems and this
is scheduled to be completed in 1998. The costs of this study are not considered
material and, based on information now available, the Company anticipates its
systems will properly process dates in the year 2000 and beyond.
FORWARD-LOOKING STATEMENTS
The foregoing discussion contains forward-looking statements about the Company's
financial condition and results of operations, which are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those reflected in the forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's judgment only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
and circumstances that arise after the date hereof.
Factors that may cause actual results to differ materially from these
forward-looking statements are the passage of unforeseen legislation or
regulation applicable to the Company's operations and the Company's ability to
accurately predict loan loss provision needs using its present loan review
process.
FS-9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Triangle Bancorp, Inc.
Raleigh, North Carolina
We have audited the consolidated balance sheets of Triangle Bancorp, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Triangle Bancorp,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Raleigh, North Carolina
January 19, 1998
FS-10
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
---------- ----------
(thousands,except share data)
<S> <C> <C>
Cash and due from banks $ 50,398 $ 40,178
Federal funds sold 1,549 2,558
Interest-bearing deposits in banks 23,027 879
Securities available for sale 411,920 286,510
Securities held to maturity, estimated
market value $95,946 in 1997 and $98,667 in 1996 94,793 98,112
Loans held for sale -- 2,413
Loans, net 942,595 752,399
Premises and equipment, net 32,503 26,426
Interest receivable 12,626 10,428
Deferred income taxes 6,567 6,816
Intangible assets, net 27,681 12,607
Other assets 1,353 2,068
---------- ----------
$1,605,012 $1,241,394
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 181,682 $ 154,015
Interest-bearing demand 167,651 135,841
Savings and money market accounts 242,127 187,619
Large denomination certificates of deposit 111,293 104,970
Other time 489,173 443,307
---------- ----------
Total deposits 1,191,926 1,025,752
Short-term debt 61,506 38,980
Federal Home Loan Bank of Atlanta advances 193,500 58,000
Corporation obligated manditorily
redeemable capital securities 19,951 --
Interest payable 8,546 8,584
Other liabilities 10,490 4,342
---------- ----------
Total liabilities 1,485,919 1,135,658
---------- ----------
Commitments and contingencies (Notes 14 and 16)
Shareholders' equity:
Common stock; no par value; 20,000,000 shares authorized;
12,980,925 shares and 12,586,481 shares issued and
outstanding in 1997 and 1996, respectively 75,562 76,670
Retained earnings 43,324 29,052
Net unrealized gains on securities available for sale 207 14
---------- ----------
Total shareholders' equity 119,093 105,736
---------- ----------
$1,605,012 $1,241,394
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
FS-11
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
(in thousands, except per share data)
-------- -------- --------
<S> <C> <C> <C>
Interest income:
Loans and fees on loans $ 82,153 $ 67,633 $ 56,497
Federal funds sold and securities purchased under
resale agreements 2,030 430 525
Securities 22,200 21,856 16,590
Deposits with other financial institutions 165 40 112
-------- -------- --------
Total interest income 106,548 89,959 73,724
======== ======== ========
Interest expense:
Large denomination certificates of deposit 6,391 5,914 4,854
Other deposits 38,423 33,068 26,434
Borrowed funds 8,148 5,345 2,981
-------- -------- --------
Total interest expense 52,962 44,327 34,269
======== ======== ========
Net interest income 53,586 45,632 39,455
Provision for loan losses 3,458 2,330 523
-------- -------- --------
Net interest income after provision for loan losses 50,128 43,302 38,932
-------- -------- --------
Noninterest income:
Service charges on deposit accounts 6,301 5,800 4,805
Other service charges, commissions and fees 1,894 1,894 2,111
Net gain on sales of securities 778 1,144 284
Net gain on trading account securities 681 -- --
Gain on sale of deposits 2,000 558 --
Other operating income 1,559 552 1,245
-------- -------- --------
Total noninterest income 13,213 9,948 8,445
-------- -------- --------
Noninterest expense:
Salaries and employee benefits 15,181 14,908 14,382
Occupancy expense 3,311 2,997 2,313
Equipment expense 2,803 2,667 2,628
Amortization of intangible assets 2,170 1,518 1,054
Merger expenses 2,542 494 2,582
Legal and professional fees 2,233 1,567 1,969
Stationery, printing and supplies 1,384 1,053 1,065
Other operating expense 7,953 7,557 7,608
-------- -------- --------
Total noninterest expense 37,577 32,761 33,601
-------- -------- --------
Income before income taxes 25,764 20,489 13,776
Income tax expense 9,180 7,269 4,662
-------- -------- --------
Net income $ 16,584 $ 13,220 $ 9,114
======== ======== ========
Basic earnings per share $ 1.28 $ 1.05 $ .73
======== ======== ========
Diluted earnings per share $ 1.24 $ 1.02 $ .72
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
FS-12
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements
of Changes in Shareholders' Equity
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Unrealized
Gain(Loss)
Common Stock on Securities Total
-------------------------- Undivided Available Shareholders'
Shares Amount Profits for Sale, Net Equity
----------- ----------- ----------- ------------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 12,309,937 $ 74,876 $ 12,264 $ (4,253) $ 82,887
Shares issued under stock plans 65,604 446 -- -- 446
Common shares issued to the public 175,000 1,300 -- -- 1,300
Repurchased shares (15,000) (188) -- -- (188)
Cash payments for fractional shares (1,018) (11) -- -- (11)
Cash dividends paid ($.16 per share) -- -- (2,015) -- (2,015)
Change in unrealized loss, net -- -- -- 5,337 5,337
Net income -- -- 9,114 -- 9,114
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 12,534,523 76,423 19,363 1,084 96,870
Shares issued under stock plans 71,069 527 -- -- 527
Repurchased shares (18,900) (277) -- -- (277)
Cash payments for fractional shares (211) (3) -- -- (3)
Cash dividends paid ($.29 per share) -- -- (3,531) -- (3,531)
Change in unrealized gain, net -- -- -- (1,070) (1,070)
Net income -- -- 13,220 -- 13,220
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 12,586,481 76,670 29,052 14 105,736
Pooling adjustment 325,000 40 2,894 -- 2,934
Shares issued under stock plans 189,844 1,584 -- -- 1,584
Repurchased shares (120,400) (2,732) -- -- (2,732)
Cash dividends paid ($.40 per share) -- -- (5,206) -- (5,206)
Change in unrealized gain, net -- -- -- 193 193
Net income -- -- 16,584 -- 16,584
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 12,980,925 $ 75,562 $ 43,324 $ 207 $ 119,093
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
FS-13
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 16,584 $ 13,220 $ 9,114
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 4,594 3,603 2,723
Writedown of fixed assets 5 -- 1,358
Accretion of discount on securities, net of
amortization of premiums 1,352 724 281
Provision for loan losses 3,458 2,330 523
Gain on sales of securities (1,459) (1,144) (284)
Gain on market valuation of loans held for sale -- (25) --
Loss (gain) on sale of premises and equipment (114) 239 (146)
Gain on sale of mortgage servicing portfolio -- -- (529)
Gain on sale of branches (2,000) (558) --
Net change in trading securities 42,548 -- --
Loans held for sale:
Originations (948) (21,798) (20,422)
Sales 3,361 25,934 17,876
Provision (benefit) for deferred taxes (36) (279) 672
Gain on sales of foreclosed assets (7) (14) (66)
Changes in assets and liabilities:
Interest receivable (1,630) (1,459) (1,739)
Other assets 1,128 233 461
Interest payable (400) 337 3,221
Other liabilities (735) (366) (855)
--------- --------- ---------
Net cash provided by operating activities 65,701 20,977 12,188
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity and principal paydowns of
securities available for sale 36,840 39,664 41,719
Proceeds from maturity and principal paydowns of
securities held to maturity 40,893 24,918 9,454
Proceeds from sales of securities available for sale 297,203 308,646 100,264
Proceeds from sales of securities held to maturity -- 14,645 --
Purchase of securities available for sale (501,763) (422,857) (172,566)
Purchase of securities held to maturity (37,509) (43,796) (34,428)
Net increase in loans (133,326) (118,196) (95,401)
Net capital expenditures, premises and equipment (5,463) (7,058) (5,265)
Proceeds from sales of foreclosed assets 323 307 382
Proceeds from sale of premises and equipment 261 475 218
Proceeds from sale of mortgage servicing portfolio -- -- 1,467
Net cash acquired in acquisitions and divestitures 102,613 74,281 32,164
--------- --------- ---------
Net cash used in investing activities
(199,928) (128,971) (121,992)
--------- --------- ---------
</TABLE>
(continued)
FS-14
<PAGE>
(Continued)
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposit accounts $ (5,410) $ 101,451 $ 52,867
Net increase (decrease) in short-term debt 22,526 (20,732) 34,561
Proceeds from common stock issuance -- -- 1,300
Proceeds from FHLB advances, net 135,500 18,000 17,500
Proceeds from issuance of corporation obligated
manditorily redeemable capital securities 19,951 -- --
Deferral of debt issuances costs (627) -- --
Repurchase of stock (2,732) (277) (188)
Cash payments for fractional shares -- (3) (11)
Shares issued under stock plans 1,584 527 446
Cash dividends paid (5,206) (3,531) (2,015)
--------- --------- ---------
Net cash provided by financing activities 165,586 95,435 104,460
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 31,359 (12,559) (5,344)
Cash and cash equivalents at beginning of year 43,615 56,174 61,518
--------- --------- ---------
Cash and cash equivalents at end of year $ 74,974 $ 43,615 $ 56,174
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 53,000 $ 43,657 $ 30,957
========= ========= =========
Income taxes $ 8,504 $ 7,432 $ 3,098
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
FS-15
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Triangle Bancorp, Inc. (the "Company") is a bank holding company
incorporated in November 1991 under the laws of the State of North
Carolina, with four wholly owned subsidiaries, Triangle Bank ("Triangle")
and Bank of Mecklenburg ("Mecklenburg"), (collectively, the "Banks"),
Coastal Leasing LLC ("Coastal"), and Triangle Capital Trust (the "Trust").
The consolidated financial statements have been restated to include the
accounts and operations of companies acquired and accounted for as poolings
of interests as discussed in Note 2.
The accounting and reporting policies of the Company and its subsidiaries
follow generally accepted accounting principles and general practices
within the financial services industry. All amounts in tabular format are
in thousands of dollars unless otherwise noted. Following is a summary of
the more significant policies.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Securities
The Company classifies its securities into three types as follows:
(a) Securities Held to Maturity - Debt securities that the Company has the
positive intent and ability to hold to maturity which are reported at
amortized cost,
(b) Trading Securities - Debt and equity securities that are bought and
held principally for the purpose of selling in the near term which are
reported at fair value, with unrealized gains and losses included in
earnings, or
(c) Securities Available for Sale - Debt and equity securities not
classified as either Securities Held to Maturity or Trading Securities
which are reported at fair value, with unrealized gains and losses
reported as a separate component of shareholders' equity.
The classification of securities is generally determined at the date of
purchase. Gains and losses on sales of securities, computed based on
specific identification of adjusted cost of each security, are included in
other income at the time of the sales. Premiums and discounts on debt
securities are recognized in interest income on the interest method over
the period to maturity.
Loans and Allowance for Loan Losses
Loans are stated at the amount of unpaid principal, reduced by an allowance
for loan losses, unearned discounts and net deferred loan origination fees
and costs. Interest on loans is calculated by using the simple interest
method on daily balances of the principal amount outstanding. Deferred loan
fees and costs are amortized to interest income over the contractual life
of the loan using a method that approximates the level yield method.
FS-16
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loans and Allowance for Loan Losses (Continued)
A loan is considered impaired, based on current information and events, if
it is probable that the Company will be unable to collect the scheduled
payments of principal and interest when due according to the contractual
terms of the loan agreement. Uncollateralized loans are measured for
impairment based on the present value of expected future cash flows
discounted at the original contractual interest rate, while all
collateral-dependent loans are measured for impairment based on the fair
value of the collateral. During 1997 and 1996 there were no loans material
to the consolidated financial statements that were impaired as defined.
The Company uses several factors in determining if a loan is impaired. The
internal asset classification procedures include a thorough review of
significant loans and lending relationships and include the accumulation of
related data. This data includes loan payment status, borrowers' financial
data and borrowers' operating factors such as cash flows, operating income
or loss, etc.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and
prior loan loss experience. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions and trends that may affect the borrowers' ability to pay.
Income Recognition on Impaired and Nonaccrual Loans
Loans, including impaired loans, are generally classified as nonaccrual if
they are past due as to maturity or payment of principal or interest for a
period of more than 90 days, unless such loans are well-secured and in the
process of collection. Loans that are on a current payment status or past
due less than 90 days may also be classified as nonaccrual if repayment in
full of principal and/or interest is in doubt.
Loans may be returned to accrual status when all principal and interest
amounts contractually due (including arrearages) are reasonably assured of
repayment within an acceptable period of time, and there is a sustained
period of repayment performance (generally a minimum of six months) by the
borrower, in accordance with the contractual terms of interest and
principal.
FS-17
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Recognition on Impaired and Nonaccrual Loans (Continued)
While a loan is classified as nonaccrual and the future collectibility of
the recorded loan balance is doubtful, collections of interest and
principal are generally applied as a reduction to the principal
outstanding, except in the case of loans with scheduled amortizations where
the payment is generally applied to the oldest payment due. When the future
collectibility of the recorded loan balance is expected, interest income
may be recognized on a cash basis. In the case where a nonaccrual loan had
been partially charged-off, recognition of interest on a cash basis is
limited to that which would have been recognized on the recorded loan
balance at the contractual interest rate. Receipts in excess of that amount
are recorded as recoveries to the allowance for loan losses until prior
charge-offs have been fully recovered.
Foreclosed Assets
Assets acquired as a result of foreclosure are valued at the lower of the
recorded investment in the loan or fair value less estimated costs to sell.
The recorded investment is the sum of the outstanding principal loan
balance and foreclosure costs associated with the loan. Any excess of the
recorded investment over the fair value of the property received is charged
to the allowance for loan losses. Any subsequent write-downs are charged
against other expenses.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed by the
straight-line method based on estimated service lives of assets, or, for
leasehold improvements over the terms of the related leases, if shorter.
Intangible Assets
Intangible assets are composed primarily of core deposit premiums and
goodwill. Amortization of core deposit premiums and goodwill is computed
using the straight-line method based on the estimated useful lives of
assets. Useful lives range from 7 to 10 years for the core deposit premiums
and from 3 to 15 years for goodwill.
The Company evaluates intangible assets for potential impairment by
analyzing the operating results, trends and prospects of the Company. The
Company also takes into consideration recent acquisition patterns within
the banking industry and any other events or circumstances which might
indicate potential impairment.
FS-18
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Interest Rate Swaps, Floors and Caps
Prior to being acquired by the Company, Mecklenburg used interest rate
swaps, floors and caps for interest rate risk management. These instruments
were designated as hedges of specific assets and liabilities when
purchased. The net interest payable or receivable on swaps, caps, and
floors is accrued and recognized as an adjustment to interest income or
interest expense of the related asset or liability. Premiums paid for
purchased caps and floors were amortized over the term of the related asset
or liability. Upon the early termination of swaps, floors and caps, the net
proceeds received or paid, including premiums, were deferred and included
in other assets or liabilities and amortized over the shorter of the
remaining contract life or the maturity of the related asset or liability.
Upon disposition or settlement of the asset or liability being hedged,
deferral accounting was discontinued and any related premium or change in
fair value of the hedge instrument was recognized in earnings. If the hedge
instrument was retained subsequent to the disposition or settlement of the
underlying asset or liability, it would be reassigned to specific assets or
liabilities and any change in fair value of the instrument recognized in
earnings in connection with the previous disposition of the underlying
asset or liability would be recorded as a purchase premium and amortized
into interest income over the contract term as a yield adjustment of the
related asset or liability.
Income Taxes
The Company files a consolidated Federal income tax return. State income
tax returns are filed for each entity.
Deferred tax asset and liability balances are determined by application to
temporary differences of the tax rate expected to be in effect when taxes
will become payable or receivable. Temporary differences are differences
between the tax basis of assets and liabilities and their reported amounts
in the financial statements that will result in taxable or deductible
amounts in future years. The effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the enactment
date.
Cash Flow
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and Federal funds sold. Generally,
Federal funds are purchased and sold for one-day periods.
Reclassifications
Certain items included in the 1996 and 1995 financial statements have been
reclassified to conform to the 1997 presentation. These reclassifications
have no effect on the net income or shareholders' equity previously
reported.
FS-19
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
New Accounting Pronouncements
The Company will adopt Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income" on January 1, 1998. SFAS No. 130
establishes standards for reporting and displaying comprehensive income and
its components in a full set of general-purpose financial statements.
The Company will adopt SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information" on January 1, 1998. SFAS No. 131
specifies revised guidelines for determining an entity's operating segments
and the type and level of financial information to be disclosed. The impact
of adopting this statement is not expected to be material to the Company's
consolidated financial statements.
Use of Estimates in the Preparation of the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
The Company adopted SFAS No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities" on January 1, 1997.
The adoption of this pronouncement had no material effect on the Company's
financial statements.
2. MERGERS AND ACQUISITIONS
On October 2, 1997 the Company completed the acquisition of Mecklenburg
through the issuance of one share of the Company's common stock for each
share of the outstanding common stock of Mecklenburg, or 2,185,068 shares.
On October 31, 1997 the Company acquired Coastal through the issuance of
325,000 shares of the Company's stock. On October 24, 1996 the Company
completed the merger of Granville United Bank ("Granville") with and into
Triangle through the issuance of 1.75 shares of the Company's common stock
for each share of the outstanding common stock of Granville, or 752,289
shares. These mergers were accounted for as poolings of interests, however,
due to materiality, Coastal was pooled for 1997 only.
Separate results of the pooled entities for the year ended December 31,
1996 are as follows:
Company(1) Mecklenburg Combined
---------- ----------- --------
Total income $ 81,360 $ 18,547 $ 99,907
Net interest income 40,256 5,376 45,632
Net income 11,301 1,919 13,220
(1) Prior to Mecklenburg merger
FS-20
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. MERGERS AND ACQUISITIONS (Continued)
Mecklenburg and Coastal, prior to their merger with the Company, reported
total income of $15.9 million and $1.9 million, respectively, net interest
income of $4.3 million and $1.3 million, respectively, and net income of
$1.8 million and $166,000, respectively, for the nine months ended
September 30, 1997.
In August 1997, Triangle acquired ten branches with approximately $195
million in deposits and $61 million in loans and paid a premium of
approximately $15.8 million and recorded $920,000 in goodwill. The deposit
premium is being amortized over ten years and the goodwill is being
amortized over three years. This acquisition was accounted for as a
purchase and therefore, the results of operations have been included in the
consolidated financial statements from the date of the acquisition.
The Trust Securities described in Note 9 were issued in anticipation of the
1997 branch acquisition.
See Note 21 to these consolidated financial statements for a summary of
branch acquisitions in 1997 and 1996.
3. SECURITIES
The amortized cost and estimated market value of securities at December 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
1997:
Available for sale:
U.S. Treasury securities $ 98,269 $ 785 $ 34 $ 99,020
U.S. Agency obligations 10,233 18 5 10,246
Mortgage-backed securities 467 -- -- 467
Obligations of states and political subdivisions 31,501 825 3 32,323
Collateralized mortgage obligations 251,332 -- 1,277 250,055
Other investments 19,809 -- -- 19,809
-------- -------- -------- --------
$411,611 $ 1,628 $ 1,319 $411,920
======== ======== ======== ========
Held to maturity:
U.S. Agency obligations $ 72,128 $ 835 $ 82 $ 72,881
Mortgage-backed securities 6,376 8 41 6,343
Obligations of states and political subdivisions 12,998 409 2 13,405
Collateralized mortgage obligations 3,038 10 4 3,044
Other investments 253 20 -- 273
-------- -------- -------- --------
$ 94,793 $ 1,282 $ 129 $ 95,946
======== ======== ======== ========
</TABLE>
FS-21
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SECURITIES (Continued)
<TABLE>
<CAPTION>
Gross Gross Estimate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
1996:
Available for sale:
U.S. Treasury securities $117,732 $ 481 $ 311 $117,902
U.S. Agency obligations 12,179 47 69 12,157
Mortgage-backed securities 127,818 491 279 128,030
Obligations of states and political subdivisions 14,369 80 108 14,341
Collateralized mortgage obligations 2,145 -- 37 2,108
End-user derivatives 4,293 473 916 3,850
Other investments 8,122 -- -- 8,122
-------- -------- -------- --------
$286,658 $ 1,572 $ 1,720 $286,510
======== ======== ======== ========
Held to maturity:
U.S. Agency obligations $ 72,134 $ 680 $ 231 $ 72,583
Mortgage-backed securities 8,711 5 152 8,564
Obligations of states and political subdivisions 13,663 296 41 13,918
Collateralized mortgage obligations 3,050 -- 25 3,025
Other investments 554 23 -- 577
-------- -------- -------- --------
$ 98,112 $ 1,004 $ 449 $ 98,667
======== ======== ======== ========
</TABLE>
The amortized cost and estimated market value of securities at December 31,
1997 by contractual maturities are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
-------- --------
<S> <C> <C>
Available for sale:
Due in one year or less $ 11,487 $ 11,524
Due after one year through five years 97,015 97,742
Due after five years through ten years 8,736 8,826
Due after ten years 274,564 274,019
Other investments 19,809 19,809
-------- --------
$411,611 $411,920
======== ========
Held to maturity:
Due in one year or less $ 30,988 $ 30,966
Due after one year through five years 45,087 45,671
Due after five years through ten years 12,261 12,692
Due after ten years 6,457 6,617
-------- --------
$ 94,793 $ 95,946
======== ========
</TABLE>
FS-22
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SECURITIES (Continued)
Gross realized gains and losses on sales of securities for the years ended
December 31, 1997, 1996 and 1995 are summarized below: 1997 1996 1995
1997 1996 1995
------- ------- ------
Gross realized gains $ 1,964 $ 3,728 $ 848
======= ======= ======
Gross realized losses $ 1,186 $ 2,584 $ 564
======= ======= ======
Included in the 1996 gross realized gains and losses are gross gains of
$1,889,051 and gross losses of $682,049 on terminations or marks to market
of end-user derivatives.
During 1996, the Company, upon evaluation of the acquired Granville
investment portfolio, transferred securities with an amortized cost of
$4,557,000 and an estimated market value of $4,400,000 from the available
for sale category to the held to maturity category.
Mecklenburg liquidated its Held to Maturity portfolio during 1996. The
carrying value of the liquidated securities was approximately $14,715,000
and a loss of approximately $70,000 was recognized on the related sales.
Securities with an amortized cost of approximately $130 million and $154
million as of December 31, 1997 and 1996, respectively, were pledged to
secure public deposits, FHLB advances and for other banking purposes.
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
Major classifications of loans as of December 31, 1997 and 1996, are
summarized as follows:
1997 1996
--------- ---------
Commercial $ 189,482 $ 183,889
Real estate:
Construction and land development 79,676 56,077
Residential, 1-4 families 307,842 279,290
Residential, 5 or more families 5,005 3,554
Farmland 13,595 7,326
Nonfarm, nonresidential 224,666 133,546
Agricultural production 16,664 10,674
Consumer 101,675 82,580
Other 16,755 6,751
Net deferred loan costs (fees) 1,035 (398)
--------- ---------
956,395 763,289
Less allowance for loan losses 13,800 10,890
--------- ---------
$ 942,595 $ 752,399
========= =========
FS-23
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
A summary of the allowance for loan losses for the years ended December 31,
1997, 1996 and 1995, is as follows:
1997 1996 1995
-------- -------- --------
Balance, beginning of year $ 10,890 $ 9,658 $ 10,161
Provision charged against income 3,458 2,330 523
Loans charged off, net of recoveries (1,753) (1,000) (1,026)
Allowance on purchased (sold) loans 1,205 (98) --
-------- -------- --------
Balance, end of year $ 13,800 $ 10,890 $ 9,658
======== ======== ========
Nonperforming assets at December 31, 1997 and 1996, consist of the
following:
1997 1996
--------- ---------
Loans past due ninety days or more $ 3,997 $ 2,107
Nonaccrual loans 2,141 1,666
Foreclosed assets (included in other assets) 246 507
--------- ---------
$ 6,384 $ 4,280
========= =========
5. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1997 and 1996, are as follows:
1997 1996
--------- ---------
Premises $ 18,644 $ 16,895
Equipment and fixtures 15,725 12,787
Leasehold improvements 712 550
--------- ---------
35,081 30,232
Less accumulated depreciation and amortization 11,426 9,734
--------- ---------
23,655 20,498
Construction in process 2,038 684
Land 6,810 5,244
--------- ---------
$ 32,503 $ 26,426
========= =========
FS-24
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INTANGIBLE ASSETS
Intangible assets at December 31, 1997 and 1996 are as follows:
1997 1996
--------- ---------
Core deposit premiums $ 30,470 $ 14,646
Goodwill 2,083 1,174
Other intangibles 976 350
--------- ---------
33,529 16,170
Less accumulated amortization 5,848 3,563
--------- ---------
$ 27,681 $ 12,607
========= =========
Amortization expense, principally related to the core deposit premiums,
amounted to approximately $2,170,000, $1,518,000, and $1,054,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
7. SHORT-TERM DEBT
Short term debt consisted of the following as of December 31, 1997 and
1996:
1997 1996
--------- --------
Securities sold under repurchase agreements $ 20,601 $ 34,738
Federal funds purchased 24,800 3,900
Masternotes 15,705 --
Other 400 342
--------- --------
$ 61,506 $ 38,980
========= ========
The weighted average rate on short term debt was 5.15% and 5.11% at
December 31, 1997 and 1996, respectively.
The Company has pledged certain securities to collateralize the repurchase
agreements. These agreements generally mature and are renewed daily.
8. FEDERAL HOME LOAN BANK OF ATLANTA ADVANCES
FHLB Advances with interest rates and maturity dates and weighted average
rates (WAR) as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- ------------------
Amount WAR Amount WAR
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Due in one year $125,000 5.79% $ 8,000 6.95%
Due after one year within two years 5,000 6.14 50,000 5.56
Due after four years within five years 63,500 6.19 -- --
-------- ------- -------- -------
Balance, end of year $193,500 5.77% $ 58,000 5.75%
======== ======= ======== =======
</TABLE>
The advances are collateralized by qualifying mortgage loans and investment
securities.
FS-25
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. FEDERAL HOME LOAN BANK OF ATLANTA ADVANCES (Continued)
Each of the Banks is required to purchase and hold certain amounts of FHLB
stock in order to obtain FHLB advances. No ready market exists for the FHLB
stock and it has no quoted market value. This stock has a carrying value
based on cost and is redeemable at $100 per share subject to certain
limitations set by the FHLB.
9. CORPORATION OBLIGATED MANDITORILY REDEEMABLE CAPITAL SECURITIES
Corporation obligated manditorily redeemable capital securities ("Trust
Securities") aggregating $20,000,000 were issued in June 1997 through the
Trust, a statutory business trust registered in the State of Delaware.
These Trust Securities bear interest at the rate of 9.375% and have a
maturity of thirty years.
The proceeds from the Trust Securities were used by the Trust to purchase
junior subordinated debentures of the Company with a yield and maturity
identical to the Trust Securities. The distribution rate and payment dates
of the Trust Securities correspond to the distribution rate and interest
payment dates of the junior subordinated debentures, which are the sole
assets of the Trust. The Company has irrevocably and unconditionally
guaranteed all of the Trust's obligation under the Trust Securities, but
only to the extent of funds held by the Trust. The Trust Securities are
subject to mandatory redemption in whole, but not in part, upon repayment
of the junior subordinated debentures at their stated maturity or upon
their early redemption. The junior subordinated debentures may be redeemed
prior to their stated maturity upon the occurrence of certain events or at
the option of the Company on or after June 1, 2007.
10. INCOME TAXES
The components of income tax expense for the years ended December 31, 1997,
1996 and 1995 are as follows:
1997 1996 1995
------- ------- -------
Current expense $ 9,216 $ 7,548 $ 3,990
Deferred expense (benefit) (36) (279) 672
------- ------- -------
$ 9,180 $ 7,269 $ 4,662
======= ======= =======
The reconciliation of expected income tax at the statutory Federal rate
(35%) with income tax expense for the years ended December 31, 1997, 1996
and 1995, is as follows:
1997 1996 1995
------- ------- -------
Expected income tax expense at statutory rate $ 9,017 $ 7,171 $ 4,822
Increase (decrease) in income tax expense
resulting from:
State taxes, net of federal tax benefit 727 582 338
Benefit of net operating loss carryforward -- (229) (217)
Tax exempt interest (604) (389) (342)
Non-deductible interest 63 13 34
Other, net (23) 121 27
------- ------- -------
Income tax expense $ 9,180 $ 7,269 $ 4,662
======= ======= =======
FS-26
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES (Continued)
The components of net deferred tax assets at December 31, 1997 and 1996 are
as follows:
1997 1996
------- -------
Allowance for loan losses 3,445 $ 2,976
Accumulated depreciation 2,950 1,631
Deferred compensation 344 190
Net operating loss carryforwards 1,858 2,038
Depreciable basis of fixed assets (1,915) (368)
Other (4) 176
Unrealized securities (gains) losses (111) 173
------- -------
$ 6,567 $ 6,816
======= =======
The Company has federal net operating loss carryforwards of approximately
$6,000,000, which expire in years 2003 through 2008. Use of the net
operating loss carryforwards is limited to approximately $600,000 each
year.
11. EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) plan for its subsidiaries' employees 21
years of age or over with at least one year of service, which covers
substantially all employees. In 1997 neither Mecklenburg nor Coastal
employees were included in the Company's plan. Under the plan, employees
may contribute from 2% to 15% of compensation, subject to an annual maximum
as determined under the Internal Revenue Code. Employees may elect for up
to 25% of their contributions to be invested in the Company's common stock.
The Company matches, in contributions of the Company's common stock, 100%
of the employee's first 2% of contributions and 50% of the next 4% of
contributions. Mecklenburg also maintains a 401(k) Plan which covers
substantially all employees. Employees may contribute up to 6% of their
salary with the employer matching up to 6% of eligible contributions. The
Company contributed approximately $607,000, $505,000 and $412,000 to the
plans in 1997, 1996 and 1995, respectively.
The Company maintains an Employee Stock Purchase Plan (the "ESPP") that
allows employees to purchase stock of up to 10% of their compensation
through payroll deduction. In May 1997 this plan was amended to allow the
purchase of the stock at a 15% discount with the six month period beginning
July 1, 1997. The discount is taken on the lower of the market price on
July 1 or December 31 with shares being issued out of authorized but
unissued shares. A total of 250,000 shares have been authorized for the
plan with 7,568 issued on January 1, 1998.
12. EARNINGS PER SHARE
The Company adopted SFAS No. 128 "Earnings Per Share" on December 31, 1997.
As required, all prior period earnings per share have been restated to
conform with the provisions of the statement. Previously reported diluted
earnings per share for the years ended December 31, 1996 and 1995 were
$1.01 and $.71, respectively.
FS-27
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. EARNINGS PER SHARE (Continued)
The following table provides a reconciliation on income available to common
shareholders and the average number of shares outstanding for the years
ended December 31, 1997, 1996, and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net income $ 16,584 $ 13,220 $ 9,114
Average outstanding shares for basic EPS 12,932,379 12,558,378 12,493,246
Dilutive effect of stock options and warrants 484,584 400,332 221,348
----------- ----------- -----------
Total shares for diluted EPS 13,416,963 12,958,710 12,714,594
=========== =========== ===========
</TABLE>
13. COMMON STOCK
The Company has a Long-Term Incentive Plan which allows the Board of
Directors to award any combination of stock options, restricted stock and
cash.
The Company has a qualified incentive stock option plan for the benefit of
certain of the Company's key officers and employees and a non-qualified
stock option plan for directors and certain officers (the "Stock Option
Plans"). The Stock Option Plans expire on January 4, 1998, and as such, no
new awards will be made after that date. Options under these plans are
exercisable at no less than fair market value at the date of grant and are
subject to a prorated five-year, and in some instances three-year, vesting
requirement. The options are exercisable as they vest and expire no later
than ten years after that date.
On January 27, 1998, the Board of Directors of the Company approved the
Triangle Bancorp, Inc. 1998 Omnibus Stock Plan. This plan, which is subject
to approval by the shareholders of the Company, reserves 1,000,000 shares
for future grants in the form of stock options, restricted stock awards and
stock appreciation rights, the terms and conditions of which are to be
determined at the date of grant. Incentive options under this plan will be
granted at fair market value and will have ten year lives.
On January 1, 1996 the Company adopted SFAS No. 123, "Accounting for Stock
Based Compensation". As permitted by SFAS No. 123, the Company has chosen
to continue to apply APB Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related Interpretations. Accordingly, no
compensation cost has been recognized for options granted under the Stock
Option Plans or the ESPP.
The pro forma effect on net income and earnings per share of recording
compensation expense in accordance with SFAS No. 123 is presented in the
table below:
Year ended December 31,
------------------------------
1997 1996 1995
-------- -------- --------
Net income:
As reported $ 16,584 $ 13,220 $ 9,114
Pro Forma $ 16,153 $ 12,970 $ 9,081
Basic earnings per share
As reported $ 1.28 $ 1.05 $ .73
Pro Forma $ 1.25 $ 1.03 $ .73
Diluted earnings per share
As reported $ 1.24 $ 1.02 $ .72
Pro Forma $ 1.20 $ 1.00 $ .71
FS-28
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMON STOCK (Continued)
The fair value of options granted during 1997, 1996 and 1995 was estimated
using the Black-Scholes option pricing model with the following weighted
average assumptions.
Year ended December 31,
1997 1996 1995
-------- -------- --------
1997 Employee Stock Purchase Plan:
Weighted average grant date fair value $ 5.30 -- --
Dividend yield 2.10% -- --
Risk free interest rates 6.00% -- --
Expected lives (years) 0.50 -- --
Volatility 32.00% -- --
Stock Option Plans:
Weighted average grant date fair value $ 6.42 $ 3.48 $ 2.68
Dividend yield 3.30% 3.90% 3.70%
Risk free interest rates 6.00% 6.00% 6.30%
Expected lives (years) 6.96 7.00 7.00
Volatility 32.00% 21.00% 25.00%
A summary of the status of the Stock Option Plans as of December 31, 1997,
1996 and 1995, and changes during the years ending on those dates,
including weighted average exercise price (Price), is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------------ ------------------------
Shares Price Shares Price Shares Price
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
year 1,056,641 $ 9.21 869,250 $ 7.97 808,444 $ 7.53
Granted 111,295 20.50 286,480 12.69 124,387 9.73
Exercised (169,512) 7.84 (55,144) 6.18 (33,604) 4.77
Forfeited (46,083) 11.58 (43,945) 11.05 (29,977) 7.08
---------- ---------- ---------- ---------- ---------- ----------
Outstanding at end of year 952,341 $ 10.63 1,056,641 $ 9.21 869,250 $ 7.97
========== ========== ========== ========== ========== ==========
</TABLE>
The following table summarizes information about the Stock Option Plans at
December 31, 1997 including weighted average remaining contractual term in
years (Term) and weighted average exercise price (Price).
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------- ---------------------
Range of Exercise Prices Number Term Price Number Price
------------------------ ------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 4.00 - $6.00 124,304 3.64 $ 5.94 83,009 $ 5.90
6.25 - 6.80 139,954 2.20 6.56 139,954 6.56
6.86 - 8.00 136,851 4.83 7.29 115,571 7.26
8.04 - 10.00 156,207 6.10 9.21 83,298 9.00
10.75 - 11.50 164,720 8.40 11.46 163,500 11.49
12.38 - 15.00 88,010 8.27 14.70 16,103 14.86
16.19 - 18.38 108,560 7.17 18.28 30,870 18.15
18.88 - 23.50 12,500 9.52 22.58 0 0
26.75 - 35.00 21,235 9.83 27.27 0 0
------- ------ ------- --------- --------
952,341 5.89 $ 10.63 632,305 $ 8.98
======= ====== ======= ========= ========
</TABLE>
During 1997, 7,800 of the Company's warrants were exercised leaving 4,200
remaining. All the warrants have an exercise price of $9.17 and expire on
December 31, 2000.
FS-29
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. REGULATORY RESTRICTIONS
The Banks, as North Carolina banking corporations, may pay dividends only
out of undivided profits as determined pursuant to North Carolina General
Statutes Section 53-87. However, regulatory authorities may limit payment
of dividends by any bank when it is determined that such a limitation is in
the public interest and is necessary to ensure the financial soundness of
the bank.
Under regulations of the Federal Reserve, banking affiliates are required
to maintain certain minimum average reserve balances which include both
cash on hand and deposits with the Federal Reserve. These deposits are
included in cash and cash equivalents in the accompanying balance sheets.
At December 31, 1997 and 1996, the Banks were required to maintain such
balances aggregating approximately $10,315,000 and $8,432,000,
respectively.
The Company and the Banks are subject to various regulatory capital
requirements administered by the federal and state banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the
consolidated financial statements. Management believes, as of December 31,
1997, that the Company and the Banks meet all capital adequacy requirements
to which they are subject.
As of December 31, 1997 and 1996, the most recent notification from the
FDIC categorized the Company and the Banks as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well capitalized the Banks must maintain minimum amounts and ratios, as set
forth in the table below. There are no conditions or events since that
notification that management believes have changed the Company's or the
Banks' category.
A summary of the Company's required and actual capital components follows:
<TABLE>
<CAPTION>
To Be Well Capitalized
Under Prompt Corrective
For Capital Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ----------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
---------------------------------------
Total Capital (to Risk Weighted Assets) $ 123,817 12.2% $ 80,959 8.0% $ 101,199 10.0%
Tier I Capital (to Risk Weighted Assets) 111,156 11.0 40,477 4.0 60,719 6.0%
Tier I Capital (to Average Assets) 111,156 7.6 58,855 4.0 73,569 5.0%
As of December 31, 1996:
---------------------------------------
Total Capital (to Risk Weighted Assets) $ 102,851 12.6% $ 65,196 8.0% $ 81,495 10.0%
Tier I Capital (to Risk Weighted Assets) 93,241 11.4 32,598 4.0 48,897 6.0
Tier I Capital (to Average Assets) 93,241 7.9 47,098 4.0 58,873 5.0
</TABLE>
FS-30
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. REGULATORY RESTRICTIONS (Continued)
A summary of Triangle's required and actual capital components follows:
<TABLE>
<CAPTION>
To Be Well Capitalized
Under Prompt Corrective
For Capital Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ----------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
----------------------------------------
Total Capital (to Risk Weighted Assets) $ 92,343 10.8% $ 68,630 8.0% $ 85,788 10.0%
Tier I Capital (to Risk Weighted Assets) 81,605 9.5 34,315 4.0 51,473 6.0
Tier I Capital (to Average Assets) 81,605 6.7 48,747 4.0 60,933 5.0
As of December 31, 1996:
----------------------------------------
Total Capital (to Risk Weighted Assets) $ 82,743 12.3% $ 53,855 8.0% $ 67,319 10.0%
Tier I Capital (to Risk Weighted Assets) 74,312 11.0 26,928 4.0 40,392 6.0
Tier I Capital (to Average Assets) 74,312 7.7 38,638 4.0 48,297 5.0
</TABLE>
A summary of Mecklenburg's required and actual capital components follows:
To Be Well Capitalized
<TABLE>
<CAPTION>
To Be Well Capitalized
Under Prompt Corrective
For Capital Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ----------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
----------------------------------------
Total Capital (to Risk Weighted Assets) $ 21,359 15.1% $ 11,352 8.0% $ 14,190 10.0%
Tier I Capital (to Risk Weighted Assets) 19,772 13.9 5,676 4.0 8,514 6.0
Tier I Capital (to Average Assets) 19,772 7.3 10,805 4.0 13,507 5.0
As of December 31, 1996:
----------------------------------------
Total Capital (to Risk Weighted Assets) $ 19,155 14.9% $ 10,286 8.0% $ 12,858 10.0%
Tier I Capital (to Risk Weighted Assets) 17,980 14.0 5,143 4.0 7,715 6.0
Tier I Capital (to Average Assets) 17,980 6.8 10,551 4.0 13,189 5.0
</TABLE>
15. LEASE OBLIGATIONS
The Company leases a portion of its facilities under various operating
leases. Rental expense related to such leases amounted to approximately
$1,160,000, $1,100,000 and $825,000 in 1997, 1996 and 1995, respectively.
Noncancelable, long-term lease commitments at December 31, 1997 range from
$1,000,000 in 1998 to $700,000 in 2002.
FS-31
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. COMMITMENTS AND CONTINGENCIES
The Company is party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit, lines of credit and standby letters of credit. These instruments
involve elements of credit risk in excess of amounts recognized in the
accompanying financial statements.
The Company's risk of loss in the event of nonperformance by the other
party to the commitment to extend credit, line of credit and standby letter
of credit is represented by the contractual amount of these instruments.
The Company uses the same credit policies in making commitments under such
instruments as it does for on-balance sheet instruments. The amount of
collateral obtained, if any, is based on management's credit evaluation of
the counterparty. Collateral held varies, but may include accounts
receivable, inventory, real estate and time deposits with financial
institutions. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements.
As of December 31, 1997 and 1996, outstanding financial instruments whose
contract amounts represent credit risk were as follows:
1997 1996
---- ----
Unfunded loans and lines of credit $ 201,744 $ 149,789
========= =========
Standby letters of credit $ 3,265 $ 4,435
========= =========
The Company's lending is concentrated primarily in North Carolina. Credit
has been extended to certain of the Company's customers through multiple
lending transactions.
Mecklenburg used off-balance sheet financial contracts to assist in
managing interest rate risk. Instruments used for this purpose include
interest rate swaps, interest rate caps and interest rate floors.
Mecklenburg managed the counterparty credit risk associated with these
instruments through credit approvals, limits and monitoring procedures.
For interest rate swaps, interest rate caps and interest rate floors,
notional principal amounts often are used to express the volume of
transactions however, the amount potentially subject to credit risk is much
smaller. As of December 31, 1997, the aggregate notional principal amount
of all outstanding financial instrument contracts used for interest rate
management totaled approximately $31 million. At December 31, 1997, the
carrying amount of financial instruments used for interest rate risk
management was approximately $17,000 and the estimated market value was
$33,000.
FS-32
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. COMMITMENTS AND CONTINGENCIES (Continued)
All these instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amounts recognized in the consolidated
financial statements. At December 31, 1997, off-balance sheet financial
instruments and their related fair value methods and assumptions, and fair
values are as follows:
<TABLE>
<CAPTION>
Estimated Contract or
Carrying Fair Notional
Amount Value Amount
------- ------- ----------
<S> <C> <C> <C>
Financial instruments used for interest rate
risk management, the designated asset or
liability and terms:
Interest rate swap agreements:
Certificates of deposit:
Receive fixed 5.97% pay 3 month
LIBOR February 1997 - March 1998
Receive 3 month fixed 6.00%, pay 3 $ -- $ 8 $ 8,000
month LIBOR March 1997 - March 1998) -- 8 8,000
------- ------- --------
$ -- $ 16 $ 16,000
======= ======= ========
Purchased interest rate floors:
Unassigned (Strike price 5%, 3
month LIBOR index, March 1996 -
January 1997) $ 17 $ 17 $ 15,000
======= ======= ========
</TABLE>
Various legal proceedings against the Company and its subsidiaries have
arisen from time to time in the normal course of business. Management
believes liabilities arising from these proceedings, if any, will have no
material adverse effect on the financial positions or results of operations
of the Company or its subsidiaries.
17. RELATED PARTY TRANSACTIONS
In the normal course of business certain directors and executive officers
of the Company, including their immediate families and companies in which
they have an interest, were loan customers. Activity in these loans is
summarized as follows :
1997 1996
------- -------
Balance, beginning of year $ 4,008 $ 4,827
Loans made 1,038 2,705
Payment received (1,420) (3,100)
Changes in composition 1,450 (424)
------- -------
Balance, end of year $ 5,076 $ 4,008
======= =======
FS-33
<PAGE>
18. PARENT COMPANY FINANCIAL DATA
The Company's principal asset is its investment in its subsidiaries.
Condensed financial statements for the parent company as of December 31,
1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995 are
as follows:
1997 1996
-------- --------
Condensed Balance Sheets
Cash $ 16,161 $ 368
Investments in wholly-owned subsidiaries 131,865 105,136
Loan to subsidiary 6,200 --
Other assets 1,373 365
-------- --------
Total assets $155,599 $105,869
======== ========
Short-term debt $ 15,705 $ --
Other liabilities 233 133
Junior subordinated deferred interest debentures
20,568 --
-------- --------
Total liabilities 36,506 133
Shareholders' equity 119,093 105,736
-------- --------
Total liabilities and shareholders' equity $155,599 $105,869
======== ========
Condensed Statements of Income 1997 1996 1995
------- ------- -------
Dividends from wholly-owned subsidiaries $ 6,204 $ 3,447 $ 588
Interest income 773 8 --
------- ------- -------
Total income 6,977 3,455 588
Interest expense 1,441 -- --
Other expenses 179 117 236
------- ------- -------
Total expenses 1,620 117 236
------- ------- -------
Income before equity in earnings
of wholly-owned subsidiaries 5,357 3,338 352
Equity in undistributed earnings
of wholly-owned subsidiaries 11,227 9,882 8,762
------- ------- -------
Net income $16,584 $13,220 $ 9,114
======= ======= =======
Condensed Statements of Cash Flows 1997 1996 1995
-------- ------- -------
Cash flows from operating activities:
Net income $ 16,584 $13,220 $ 9,114
Equity in undistributed earnings of
wholly-owned subsidiaries (11,227) (9,882) (8,762)
Amortization of debt issuance cost 10 -- --
Decrease (increase) in other assets 226 (309) 378
Increase (decrease) in other liabilities 100 38 (44)
-------- ------- -------
Net cash provided by operating activities 5,693 3,067 686
-------- ------- -------
Cash flows from investing activities:
Investment in subsidiary (12,375) 254 (1,070)
Net increase in loans to subsidiary (6,200) -- --
Purchases of common securities (617) -- --
-------- ------- -------
Net cash provided by (used in)
investing activities (19,192) 254 (1,070)
-------- ------- -------
(Continued)
FS-34
<PAGE>
18. PARENT COMPANY FINANCIAL DATA (Continued)
<TABLE>
<CAPTION>
Cash flows from financing activities: 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net increase in masternotes $ 15,705 $ -- $ --
Proceeds from junior subordinated debentures 20,568 -- --
Common shares issued to the public -- -- 1,300
Shares issued under stock plans 1,584 527 446
Dividends (5,206) (3,531) (2,015)
Cash issued for fractional shares -- (3) (11)
Debt issuance cost (627) -- --
Repurchased shares (2,732) (277) (188)
-------- -------- --------
Net cash provided by (used in) financing activities 29,292 (3,284) (468)
-------- -------- --------
Net increase (decrease) in cash 15,793 37 (852)
Cash at beginning of year 368 331 1,183
-------- -------- --------
Cash at end of year $ 16,161 $ 368 $ 331
======== ======== ========
</TABLE>
19. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires the disclosure of estimated fair values for financial instruments.
Quoted market prices, if available, are utilized as an estimate of the fair
value of financial instruments. Because no quoted market prices exist for a
significant part of the Company's financial instruments, the fair value of
such instruments has been derived based on management's assumptions with
respect to future economic conditions, the amount and timing of future cash
flows and estimated discount rates. Different assumptions could
significantly affect these estimates. Accordingly, the net realizable value
could be materially different from the estimates presented below. In
addition, these estimates are only indicative of individual financial
instruments' values and should not be considered an indication of the fair
value of the Company taken as a whole.
The carrying values of cash and due from banks, Federal funds sold and
interest-bearing deposits in banks are equal to the fair value due to the
nature of the financial instruments. The fair value of securities is
estimated based upon bid quotations received from various securities
dealers. Loans held for sale are considered short term assets that are
carried at market value at December 31, 1996. The fair value of the
Company's loans is determined by discounting the scheduled cash flows
through the loan's estimated maturity using estimated market discount rates
that most reflect the credit and interest rate risk inherent in the loan.
The estimate of maturity is based upon the stated average maturity of
management's estimates of prepayments considering current economic
conditions and prevailing interest rates.
The fair value of deposits with no stated maturities, such as
noninterest-bearing deposits, interest checking, money market and savings
accounts, are equal to the amount payable as required by SFAS No. 107. The
fair value of time deposits, such as certificates of deposit and Individual
Retirement Accounts, are based on the discounted contractual cash flows.
The discount rate is estimated using rates currently offered for deposits
of similar maturities.
Short-term debt includes repurchase agreements and Federal funds purchased,
which reprice daily or monthly to allow for their market value to equal
their carrying value. The fair value of FHLB advances and the corporation
obligated manditorily redeemable capital securities were determined by
discounting contractual cash flows using current rates for similar
borrowings.
FS-35
<PAGE>
19. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The fair value of off-balance sheet financial instruments has not been
considered in determining on balance sheet fair value. The fair value of
unfunded loans and lines of credit and standby letters of credit
approximates the stated value since they are either short term in nature or
subject to immediate repricing. The following table presents information
for financial assets and liabilities as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 50,398 $ 50,398 $ 40,178 $ 40,178
Federal funds sold 1,549 1,549 2,558 2,558
Interest-bearing deposits in banks 23,027 23,027 879 879
Securities 506,713 507,866 384,622 385,177
Loans held for sale -- -- 2,413 2,413
Loans, less allowance for loan losses 942,595 952,575 752,399 754,160
Interest receivable 12,626 12,626 10,428 10,428
---------- ---------- ---------- ----------
Total financial assets $1,536,908 $1,548,041 $1,193,477 $1,195,793
========== ========== ========== ==========
Financial liabilities:
Deposits $1,191,926 $1,199,616 $1,025,752 $1,026,872
Short-term debt 61,506 61,502 38,980 38,980
Federal Home Loan Bank of Atlanta advances 193,500 194,745 58,000 58,000
Corporation obligated manditorily redeemable capital
securities 19,951 18,093 -- --
Interest payable 8,546 8,546 8,584 8,584
---------- ---------- ---------- ----------
Total financial liabilities $1,475,429 $1,482,502 $1,131,316 $1,132,436
========== ========== ========== ==========
</TABLE>
The Company's remaining assets and liabilities are not considered financial
instruments.
20. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized unaudited quarterly financial data for the years ended December
31, 1997 and 1996 is as follows:
1997: Fourth Third Second First
------- ------- ------- -------
Interest income $29,041 $27,720 $25,633 $24,154
Interest expense 14,411 14,228 12,605 11,718
Provision for loan losses 874 1,105 935 544
Noninterest income 2,883 2,972 4,867 2,491
Noninterest expense 11,612 9,043 8,433 8,489
Income tax expense 1,622 2,179 3,160 2,219
------- ------- ------- -------
Net income $ 3,405 $ 4,137 $ 5,367 $ 3,675
======= ======= ======= =======
Basic earnings per share $ .26 $ .32 $ .42 $ .28
======= ======= ======= =======
Diluted earnings per share $ .25 $ .31 $ .40 $ .28
======= ======= ======= =======
FS-36
<PAGE>
20. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)
1996: Fourth Third Second First
------- ------- ------- -------
Interest income $23,561 $23,481 $22,265 $20,652
Interest expense 11,558 11,764 11,045 9,960
Provision for loan losses 828 348 747 407
Noninterest income 2,059 2,305 3,124 2,460
Noninterest expense 8,168 8,507 8,071 8,015
Income tax expense 1,724 1,924 1,905 1,716
------- ------- ------- -------
Net income $ 3,342 $ 3,243 $ 3,621 $ 3,014
======= ======= ======= =======
Basic earnings per share $ .27 $ .26 $ .28 $ .24
======= ======= ======= =======
Diluted earnings per share $ .26 $ .25 $ .28 $ .23
======= ======= ======= =======
21. OTHER INVESTING AND FINANCING ACTIVITIES
Excluded from the consolidated statements of cash flows was the effect of
transfers to trading securities of $41,867,000 during 1997; transfers to
securities held to maturity of $4,557,000 and $22,149,000 in 1996 and 1995,
respectively and transfers to securities available for sale of $44,332,000
in 1995.
The Company acquired ten branches and divested of two branches in 1997 and
acquired five branches and divested of one branch in 1996. In conjunction
with these transactions, assets acquired and liabilities assumed were as
follows:
1997 1996
--------- ---------
Deposits $ 173,584 $ 80,195
Loans (51,931) 117
Premium paid on deposits (15,824) (5,026)
Premises and equipment (3,028) (1,015)
Other assets (593) (132)
Other liabilities 405 142
--------- ---------
Net cash acquired $ 102,613 $ 74,281
========= =========
22. YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. The Company
has made a preliminary assessment of its software and does not believe it
has any significant systems that require modifications. An outside firm is
undergoing an extensive study of all of the Company's internal and external
systems and this is expected to be completed in 1998. As such, the costs of
becoming year 2000 compliant cannot be estimated at this time.
Additionally, there can be no guarantee that the systems of other companies
on which the Company's systems rely will be timely converted, or that an
inadequate conversion of a significant loan customer would not have a
material adverse effect on the Company.
FS-37
<PAGE>
23. PENDING ACQUISITIONS
On October 16, 1997, the Company entered into an agreement to acquire
Guaranty State Bancorp ("Guaranty") and its commercial bank subsidiary,
Guaranty State Bank, both located in Durham, North Carolina. As of December
31, 1997, Guaranty had approximately $107 million in assets. The
transaction will be accounted for using the pooling of interests method of
accounting. All regulatory approvals have been obtained and Guaranty
shareholders are to meet on March 30, 1998 to vote on the proposed
acquisition. The transaction is expected to be consummated in April 1998.
On March 4, 1998, Triangle entered in an agreement to acquire United
Federal Savings Bank, Rocky Mount, North Carolina ("United Federal").
United Federal is a federally-chartered savings bank whose deposits are
insured by the Savings Association Insurance Fund of the FDIC. At December
31, 1997, United Federal had total assets of approximately $304 million.
The United Federal acquisition will be accounted for using the pooling of
interests method of accounting and is subject to the approval of United
Federal's shareholders and all applicable regulatory agencies. The
transaction is expected to be consummated in the third quarter of 1998.
FS-38
AMENDED AND RESTATED
BYLAWS
OF
TRIANGLE BANCORP, INC.
As amended January 27, 1998 (Board of Directors) Article III, Section 2(a)
As amended September 17, 1997 (Shareholders) Article III, Section 2 (a)
As amended April 28, 1997 (Shareholders) Article III, Section 2(a)
As amended February 23, 1995 (Shareholders) Article III, Section 2(a)
As amended May 17, 1994 (Shareholders)
As amended May 11, 1993 (Shareholders)
As amended August 18, 1992 (Board of Directors)
<PAGE>
TABLE OF CONTENTS
ARTICLE I
OFFICES
1. Principal Office. . . . . . . . . . . . . . . . . . . 1
2. Registered Office . . . . . . . . . . . . . . . . . . 1
3. Other Offices . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF SHAREHOLDERS
1. Place of Meetings . . . . . . . . . . . . . . . . . . 1
2. Annual Meeting. . . . . . . . . . . . . . . . . . . . 2
3. Substitute Annual Meeting . . . . . . . . . . . . . . 2
4. Special Meetings. . . . . . . . . . . . . . . . . . . 2
5. Notice of Meetings. . . . . . . . . . . . . . . . . . 3
6. Shareholders List . . . . . . . . . . . . . . . . . . 5
7. Quorum. . . . . . . . . . . . . . . . . . . . . . . . 5
8. Voting of Shares and Voting Groups. . . . . . . . . . 6
9. Proxies . . . . . . . . . . . . . . . . . . . . . . . 7
10. Inspectors of Election. . . . . . . . . . . . . . . . 8
11. Shareholder Proposals . . . . . . . . . . . . . . . . 9
ARTICLE III
DIRECTORS
1. General Powers. . . . . . . . . . . . . . . . . . . . 10
2. Number, Term, and Qualification . . . . . . . . . . . 10
3. Election of Directors . . . . . . . . . . . . . . . . 11
4. Removal . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
5. Vacancies . . . . . . . . . . . . . . . . . . . . . . 13
6. Chairman. . . . . . . . . . . . . . . . . . . . . . . 13
7. Compensation. . . . . . . . . . . . . . . . . . . . . 14
8. Executive and Other Committees. . . . . . . . . . . . 14
9. Directors Emeritus. . . . . . . . . . . . . . . . . . 16
ARTICLE IV
MEETINGS OF DIRECTORS
1. Regular Meetings. . . . . . . . . . . . . . . . . . . 17
2. Special Meetings. . . . . . . . . . . . . . . . . . . 17
3. Notice of Meetings. . . . . . . . . . . . . . . . . . 17
4. Quorum. . . . . . . . . . . . . . . . . . . . . . . . 18
5. Manner of Acting. . . . . . . . . . . . . . . . . . . 18
6. Informal Action by Directors. . . . . . . . . . . . . 19
7. Attendance by Telephone . . . . . . . . . . . . . . . 20
ARTICLE V
OFFICERS
1. Number. . . . . . . . . . . . . . . . . . . . . . . . 20
2. Appointment and Term. . . . . . . . . . . . . . . . . 20
3. Removal . . . . . . . . . . . . . . . . . . . . . . . 21
4. Compensation. . . . . . . . . . . . . . . . . . . . . 21
5. President . . . . . . . . . . . . . . . . . . . . . . 21
6. Executive Vice Presidents, Senior Vice Presidents,
and Vice-Presidents . . . . . . . . . . . . . . . . 22
7. Secretary . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
8. Vice President, Finance . . . . . . . . . . . . . . . 24
9. Assistant Secretaries and Treasurers. . . . . . . . . 24
10. Controller and Assistant Controllers. . . . . . . . . 25
11. Executive Officers. . . . . . . . . . . . . . . . . . 25
12. Bonds . . . . . . . . . . . . . . . . . . . . . . . . 25
13. Voting Upon Stocks. . . . . . . . . . . . . . . . . . 26
ARTICLE VI
CERTIFICATES FOR AND TRANSFER OF SHARES
1. Certificates for Shares . . . . . . . . . . . . . . . 26
2. Transfer of Shares. . . . . . . . . . . . . . . . . . 27
3. Transfer Agent and Registrar. . . . . . . . . . . . . 27
4. Record Date . . . . . . . . . . . . . . . . . . . . . 28
5. Lost Certificates . . . . . . . . . . . . . . . . . . 29
6. Holder of Record. . . . . . . . . . . . . . . . . . . 29
7. Shares held by Nominees . . . . . . . . . . . . . . . 29
8. Acquisition by Corporation of its Own Shares. . . . . 31
9. Shareholder Protection Act. . . . . . . . . . . . . . 31
10. Control Share Acquisition Act . . . . . . . . . . . . 31
ARTICLE VII
INDEMNIFICATION AND REIMBURSEMENT
OF DIRECTORS AND OFFICERS
1. Indemnification for Expenses and Liabilities. . . . . 32
2. Advance Payment of Expenses . . . . . . . . . . . . . 33
<PAGE>
3. Insurance . . . . . . . . . . . . . . . . . . . . . . 34
4. Definitions . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII
GENERAL PROVISIONS
1. Distributions . . . . . . . . . . . . . . . . . . . . 35
2. Seal. . . . . . . . . . . . . . . . . . . . . . . . . 35
3. Fiscal Year . . . . . . . . . . . . . . . . . . . . . 36
4. Effective Date of Notice. . . . . . . . . . . . . . . 36
5. Corporate Records . . . . . . . . . . . . . . . . . . 36
6. Bylaw Amendments. . . . . . . . . . . . . . . . . . . 37
7. Amendments to Articles of Incorporation . . . . . . . 38
<PAGE>
BYLAWS
OF
TRIANGLE BANCORP, INC.
ARTICLE I
OFFICES
1. Principal Office. The principal office of the Corporation shall be
located in Wake County, North Carolina or such other place as is designated by
the Board of Directors.
2. Registered Office. The registered office of the Corporation required by
law to be maintained in the State of North Carolina may be, but need not be,
identical with the principal office.
3. Other Offices. The Corporation may have offices at such other places,
either within or without the State of North Carolina, as the Board of Directors
may from time to time determine or as the affairs of the Corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
1. Place of Meetings. All meetings of shareholders shall be held at the
principal office of the Corporation or at such other
<PAGE>
place, either within or without the State of North Carolina, as shall be
designated in the notice of the meeting or agreed upon by the Board of
Directors.
2. Annual Meeting. The annual meeting of the shareholders shall be held at
the principal office of the Corporation or at such other place, either within or
without the State of North Carolina, on such day and at such time during the
second quarter of the Corporation's fiscal year as the Board of Directors shall
from time to time determine, for the purpose of electing Directors of the
Corporation and for the transaction of such other business as may be properly
brought before the meeting.
3. Substitute Annual Meeting. If the annual meeting shall not be held
within the time period designated by these Bylaws, a substitute annual meeting
may be called in accordance with the provisions of Paragraph 4 of this Article
II. A meeting so called shall be designated and treated for all purposes as the
annual meeting.
4. Special Meetings. Special meetings of the shareholders may be called at
any time by the Chairman of the Board of Directors, the President, the
Secretary, or the Board of Directors of the Corporation.
<PAGE>
5. Notice of Meetings.
(a) Written or printed notice stating the time and place of the meeting
shall be delivered not less than ten nor more than sixty days before the date
thereof, either personally or by telegraph, teletype or other form of wire or
wireless communication, or by facsimile transmission, mail, or by private
carrier, or by any other means permitted by law, by or at the direction of the
Board of Directors, Chairman of the Board, President, Secretary, or other person
calling the meeting, to each shareholder of record entitled to vote at such
meeting, provided that such notice must be given to all shareholders, including
nonvoting shareholders, with respect to any meeting at which a merger, share
exchange, sale of assets other than in the regular course of business, or
voluntary dissolution is to be considered and in such other instances as
required by law. If a new record date for the adjourned meeting is fixed
pursuant to Paragraph 4 of Article VI, notice of the adjourned meeting shall be
given to persons who are shareholders as of the new record date. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the record of
shareholders of the Corporation, with postage thereon prepaid.
(b) In the case of an annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
it is a matter, other than
<PAGE>
election of Directors, on which the vote of the shareholders is expressly
required by the provisions of the North Carolina Business Corporation Act or
notice of such purpose is otherwise required by law to be provided. In the case
of a special meeting, the notice of meeting shall specifically state the purpose
or purposes for which the meeting is called.
(c) When a meeting is adjourned for more than one hundred twenty days or a
new record date is or must be fixed as required by law, notice of the adjourned
meeting shall be given as in the case of an original meeting. When a meeting is
adjourned for one hundred twenty days or less in any one adjournment, it shall
not be necessary to give any notice of the new date, time and place of the
adjourned meeting or of the business to be transacted thereat other than by
announcement at the meeting at which the adjournment is taken.
(d) A shareholder in a signed writing may waive notice of any meeting
before or after the date and time stated in the notice by delivering such waiver
to the Corporation for inclusion in the minutes. Attendance by a shareholder at
a meeting constitutes a waiver of notice of such meeting, unless at the
beginning of the meeting the shareholder objects to holding the meeting or
transacting business at the meeting, or objects to considering a matter not
within the purpose or purposes described in the meeting notice before it is
voted on.
<PAGE>
6. Shareholders List. After fixing the record date for a meeting, the
Secretary of the Corporation shall prepare an alphabetical list of the
shareholders entitled to notice of such meeting or any adjournment thereof,
arranged by voting group, class and series, with the address of and number of
shares held by each. Such list shall be kept on file at the principal office of
the Corporation, or at a place identified in the meeting notice in the city
where the meeting will be held, beginning two business days after notice of such
meeting is given and continuing through the meeting, and on written demand shall
be subject to inspection or copying by any shareholder, his agent or attorney at
any time during regular business hours. This list shall also be produced and
kept open at the time and place of the meeting and shall be subject to
inspection by any shareholder, his agent or attorney during the entire time of
the meeting or any adjournment.
7. Quorum.
(a) Unless otherwise provided by law, a majority of the votes entitled to
be cast on a matter by a separate voting group shall constitute a quorum of such
voting group on that matter at a meeting of shareholders. A separate voting
group may only take action on a matter at a meeting if a quorum of those shares
are present with respect to that matter. In the absence of a quorum at the
opening of any meeting of shareholders, such meeting may be adjourned from time
to time by the vote of a majority of the shares voting on the motion to adjourn,
but no other business may be transacted until and unless a quorum is present.
When a quorum is
<PAGE>
present at any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting. If a quorum is present at the
original meeting, a quorum need not be present at an adjourned meeting to
transact business.
(b) At a meeting at which a quorum is present, a separate voting group may
continue to do business until adjournment, notwithstanding the withdrawal of
sufficient shareholders to leave less than a quorum of the separate voting
group.
8. Voting of Shares and Voting Groups.
(a) Except as otherwise provided by the Articles of Incorporation or by
law, each outstanding share having voting rights shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders. All shares
entitled to vote and be counted together collectively on a matter as provided by
the Articles of Incorporation or by the North Carolina Business Corporation Act
shall constitute a single voting group. Additional required voting groups shall
be determined in accordance with the Articles of Incorporation, the Bylaws, and
the North Carolina Business Corporation Act.
(b) Except in the election of Directors, at a shareholder meeting duly held
and at which a quorum is present, action on a matter by a voting group shall be
approved if the votes cast within the voting group favoring the action exceed
the votes cast
<PAGE>
opposing the action, unless the vote by a greater number is required by law or
by the Articles of Incorporation or Bylaws of the Corporation. For such actions,
abstentions shall not be treated as negative votes. Corporate action on such
matters shall be taken only when approved by each and every voting group
entitled to vote as a separate voting group on such matter as provided by the
Articles of Incorporation or Bylaws or by the North Carolina Business
Corporation Act.
(c) Voting on all matters except the election of Directors shall be by
voice vote or by a show of hands unless the chairman of the meeting directs that
voting on such matter shall be by ballot.
(d) Absent special circumstances, shares of the Corporation shall not be
entitled to vote if they are owned, directly or indirectly, by another
corporation in which the Corporation owns, directly or indirectly, a majority of
the shares entitled to vote for directors of the second corporation; provided
that this provision does not limit the power of the Corporation to vote its own
shares held by it in a fiduciary capacity.
9. Proxies. Shares may be voted either in person or by one or more agents
authorized by a written proxy executed by the shareholder or by his duly
authorized attorney-in-fact. A proxy shall not be valid after the expiration of
eleven months from the date of its execution, unless the person executing it
specifies
<PAGE>
therein the length of time for which it is to continue in force, or limits its
use to a particular meeting. Any proxy shall be revocable by the shareholder
unless the written appointment expressly and conspicuously provides that it is
irrevocable and the appointment is coupled with an interest as required by law.
The shareholder may revoke the proxy by filing with the Secretary of the
Corporation either a written instrument of revocation or a duly executed proxy
bearing a later date or by attending the meeting and voting his shares in
person.
10. Inspectors of Election.
(a) Appointment of Inspectors of Election. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons, other than
nominees for office, as inspectors of election to act at such meeting or any
adjournment thereof. If inspectors of election are not so appointed, the
chairman of any such meeting may appoint inspectors of election at the meeting.
The number of inspectors shall be either one or three. In case any person
appointed as inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment by the Board of Directors in advance of the meeting
or at the meeting by the person acting as chairman.
(b) Duties of Inspectors. The inspectors of election shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies,
<PAGE>
receive votes, ballots or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine the result and do such acts as may be
proper to conduct the election or vote with fairness to all shareholders. The
inspectors of election shall perform their duties impartially, in good faith, to
the best of their ability and as expeditiously as is practical.
(c) Vote of Inspectors. If there are three inspectors of election, the
decision, act, or certificate of a majority shall be effective in all respects
as the decision, act, or certificate of all.
(d) Report of Inspectors. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge or question or matter
determined by them and shall execute a certificate of any fact found by them.
Any report or certificate made by them shall be prima facie evidence of the
facts stated therein.
11. Shareholder Proposals. Any shareholder wishing to nominate one or more
Directors or bring any other business before a meeting of shareholders must
provide notice to the Corporation at least 50 days before the meeting in writing
by registered mail, return receipt requested, of the business or nomination to
be presented by him or her at the shareholders' meeting. In the absence of such
notice to the Corporation, a shareholder shall not
<PAGE>
be entitled to present any business or nominate at any meeting of shareholders.
ARTICLE III
DIRECTORS
1. General Powers. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
by, the Board of Directors or by such committees as the Board of Directors may
establish pursuant to these Bylaws.
2. Number, Term, and Qualification.
(a) The number of Directors of the Corporation shall be not less than ten
nor more than twenty-eight as from time to time may be fixed or changed within
said minimum or maximum by the affirmative vote of a majority of Directors
present at any regular or special meeting of the Board of Directors at which a
quorum is present. Such minimum and maximum may not be changed by the Board of
Directors, but only by the affirmative vote of 75% of all eligible votes
present, in person or by proxy, at a meeting of shareholders at which a quorum
is present. Such meeting of shareholders unless the notice of a meeting states
that the purpose, or one of the purposes, of the meeting is to change the number
of Directors of the Corporation.
Note: The provisions of this Article III, Section 2.(a) have been adopted by the
shareholders of the Corporation and may not be amended except by the
shareholders in accordance with the provisions of Article VIII, Section 6.(a)
hereof.
<PAGE>
(b) At the first annual meeting of shareholders, the Directors shall be
divided into three classes, as nearly equal in number as possible, with the term
of office of the first class to expire at the first annual meeting of
shareholders after their election, the term of office of the second class to
expire at the second annual meeting of shareholders after their election, and
the term of office of the third class to expire at the third annual meeting of
shareholders after their election. At each annual meeting of shareholders
following such initial classification and election, Directors elected to succeed
those Directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of shareholders after their
election. A Director shall hold office until the annual meeting for the year in
which his term expires and until his successor is elected and qualified, or
until his earlier death, resignation, retirement, removal, or disqualification.
In the event of any increase or decrease in the number of Directors, the
additional or eliminated directorships shall be so classified or chosen so that
all classes of Directors shall remain and become equal in number as nearly as
possible. Directors need not be residents of the State of North Carolina or
shareholders of the Corporation.
(c) Any director who reaches the age of 70 years may serve only until the
next annual meeting of shareholders, except that directors who are 68 years of
age or older on January 27, 1998 may serve until either the next annual meeting
of sharehlders after reaching age 72 or the annual meeting of shareholders held
in the year 2000, whichever occurs first."
<PAGE>
3. Election of Directors. Except as provided in Paragraph 5 of this Article
III, Directors shall be elected at the annual meeting of shareholders; and those
persons who receive the highest number of votes at a meeting at which a quorum
is present shall be deemed to have been elected. If any shareholder so demands,
election of Directors shall be by ballot.
4. Removal.
(a) A Director may be removed from office with cause by the affirmative
vote of 75 percent of all eligible votes present at a meeting of shareholders at
which a quorum is present. A Director may be removed from office without cause
by the affirmative vote of 75 percent of all eligible votes present at a meeting
of shareholders at which a quorum is present, provided that removal without
cause is recommended to the shareholders by the Board of Directors pursuant to a
vote of not less than 75 percent of the Directors then in office. If a Director
is elected by a separate voting group, only the members of that voting group may
participate in the vote to remove him. For purposes of this Section, "cause" is
defined as personal dishonesty, incompetence, mental or physical incapacity,
breach of fiduciary duty involving personal profit, a failure to perform stated
duties, or a violation of any law, rule or regulation (other than a traffic
violation or similar routine offense) (based on a conviction for such offense or
an opinion of counsel to the Corporation to such effect). The entire Board of
Directors may not be removed except pursuant to the removal of individual
Directors in accordance with the foregoing provisions.
<PAGE>
(b) No Director may be removed at a meeting of shareholders unless the
notice of the meeting states that the purpose, or one of the purposes, of the
meeting is to remove that Director.
Note: The provisions of Section 4.(a) are contained in the Articles of
Incorporation of the Corporation and are included in the Bylaws only for ease of
reference. These Bylaw provisions have not been adopted by the shareholders.
5. Vacancies. A vacancy occurring in the Board of Directors, including,
without limitation, a vacancy created by an increase in the authorized number of
Directors or resulting from the shareholders' failure to elect the full
authorized number of Directors, may only be filled by the Directors remaining in
office, or if the Directors remaining in office constitute less than a quorum of
the Directors, by the affirmative vote of a majority of all remaining Directors
or by the sole remaining Director; provided that if any Director was elected by
a voting group, a vacancy in that position may be filled only by any remaining
Director or Directors elected by that voting group, if any, and if there are
none, by members of the related voting group. A Director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
6. Chairman. There may be a Chairman of the Board of
<PAGE>
Directors elected by the Directors from their number at any meeting of the
Board. The Chairman of the Board shall preside at all meetings of the Board of
Directors and perform such other duties as may be directed by the Board. In the
absence of the Chairman, the President shall preside at meetings of the Board.
The Chairman will not be considered an officer of the Corporation. The Chairman
will not participate in the operating management of the Corporation other than
in the capacity of a director. Further, the Chairman will have no authority to
sign and execute any documents or instruments on behalf of the Corporation.
7. Compensation. The Board of Directors may provide for the compensation of
Directors for their services as such and may provide for the payment of any and
all expenses incurred by the Directors in connection with such services.
8. Executive and Other Committees.
(a) The Board of Directors, by resolution adopted by 80 percent of the
Directors then in office, may designate from among its members an Executive
Committee and one or more other committees.
(b) Each committee shall consist of two or more Directors, and each, to the
extent authorized by law or provided in the resolution, shall have and may
exercise all of the authority of the Board of Directors, except no such
committee may: (1) authorize distributions; (2) approve or propose to
shareholders
<PAGE>
action that is required to be approved by shareholders under the North Carolina
Business Corporation Act or any successor to such statutes; (3) fill vacancies
on the Board of Directors or on any of its committees; (4) amend the Articles of
Incorporation; (5) adopt, amend, or repeal these Bylaws; (6) approve a plan of
merger not requiring shareholder approval; (7) authorize or approve
reacquisition of shares, except according to a formula or method prescribed by
the Board of Directors; or (8) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee (or a senior executive officer of
the Corporation) to do so within limits specifically prescribed by the Board of
Directors.
(c) Any resolutions adopted or other action taken by any such committee
within the scope of the authority delegated to it by the Board of Directors
shall be deemed for all purposes to be adopted or taken by the Board of
Directors. The designation of any committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility or liability imposed upon it or him by law.
(d) Regular meetings of any such committee may be held without notice at
such time and place as such committee may fix from time to time by resolution.
Special meetings of any such committee may be called by any member thereof upon
not less than one day's notice stating the place, date and hour of such meeting,
<PAGE>
which notice may be written or oral and if mailed, shall be deemed to be
delivered when deposited in the United States mail addressed to any member of
the committee at his business address. Any member of any committee may in a
signed writing waive notice of any meeting, and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
any committee need not state the business proposed to be transacted at the
meeting.
(e) A majority of the members of any such committee shall constitute a
quorum for the transaction of business at any meeting thereof, and actions of
such committee must be authorized by the affirmative vote of a majority of the
members of such committee.
(f) Any member of any such committee may be removed at any time with or
without cause by resolution adopted by the affirmative vote of at least 80
percent of the Directors then in office, and vacancies in the membership of a
committee resulting from death, resignation, disqualification, or removal shall
be filled by the Board of Directors pursuant to the affirmative vote of 80
percent of the Directors then in office.
(g) Any such committee shall elect a presiding officer from among its
members and may fix its own rules of procedure which shall not be inconsistent
with these Bylaws. It shall keep regular minutes of its proceedings and report
the same to the Board of Directors for its information at the meeting thereof
held next
<PAGE>
after the proceedings shall have been taken.
9. Directors Emeritus. The Board of Directors may, by resolution duly
adopted, appoint Directors Emeritus of the Corporation for outstanding
contributions to the Corporation. Such Directors Emeritus shall have no right to
vote on matters before the Board of Directors or to attend meetings of the Board
of Directors.
ARTICLE IV
MEETINGS OF DIRECTORS
1. Regular Meetings. A regular meeting of the Board of Directors shall be
held immediately after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
2. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board (if one has been duly
elected), the President or any two Directors. Such meetings may be held either
within or without the State of North Carolina.
3. Notice of Meetings.
(a) Regular meetings of the Board of Directors may be held without notice.
<PAGE>
(b) The person or persons calling a special meeting of the Board of
Directors shall, at least two days before the meeting, give notice thereof
either personally or by telephone, telegraph, teletype or other form of wire or
wireless communication or by facsimile transmission, mail or private carrier or
by any other means permitted by law. Such notice need not specify the business
to be transacted at, or the purpose of, the meeting that is called. Notice of an
adjourned meeting need not be given if the time and place are fixed at the
meeting adjourning and if the period of adjournment does not exceed ten days in
any one adjournment.
(c) A Director, in a signed writing, may waive notice of any meeting before
or after the date and time stated in the notice. Attendance by a Director at a
meeting shall constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened and does not vote for or assent to action taken at the meeting.
4. Quorum. A majority of the Directors in office immediately before the
meeting shall constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
5. Manner of Acting.
(a) Except as otherwise provided in this paragraph, the act of a majority
of the Directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors,
<PAGE>
unless a greater number is required by law, the Articles of Incorporation, or a
Bylaw adopted by the shareholders.
(b) A Director who is present at a meeting of the Board of Directors at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless his contrary vote is recorded or his dissent is
otherwise entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right of dissent shall not apply to a Director
who voted in favor of such action.
(c) The vote of a majority of the number of Directors then in office shall
be required to adopt a resolution constituting an Executive Committee or other
committee of the Board of Directors. The vote of a majority of the Directors
then holding office shall be required to adopt a resolution dissolving the
Corporation without action by the shareholders in circumstances authorized by
law. Vacancies in the Board of Directors may be filled as provided in Paragraph
5 of Article III of these Bylaws.
6. Informal Action by Directors. Action taken by the Directors or members
of a committee of the Board of Directors without a meeting is nevertheless Board
or committee action if written consent to the action in question is signed by
all of the
<PAGE>
Directors or members of the committee, as the case may be, and filed with the
minutes of the proceedings of the Board of Directors or committee, whether done
before or after the action so taken. Such action will become effective when the
last Director or committee member signs the consent, unless the consent
specifies a different date. Such consent will have the same force and effect as
a unanimous vote of the Board of Directors or the committee, as the case may be.
7. Attendance by Telephone. Any one or more Directors or members of a
committee may participate in a meeting of the Board of Directors or committee by
means of a conference telephone or similar communications device which allows
all persons participating in the meeting to hear each other simultaneously, and
such participation in the meeting shall be deemed presence in person at such
meeting.
ARTICLE V
OFFICERS
1. Number. The officers of the Corporation shall consist of a President, a
Secretary, a Vice President of Finance, and such Executive Vice Presidents,
Senior Vice Presidents, other Vice Presidents, Assistant Secretaries, and other
officers as the Board of Directors may from time to time appoint. Any two or
more offices, other than that of President and Secretary, may be held by the
same
<PAGE>
person. In no event, however, may an officer act in more than one capacity where
action of two or more officers is required.
2. Appointment and Term. The officers of the Corporation shall be appointed
by the Board of Directors pursuant to the affirmative vote of at least 80
percent of the Directors then in office. Such appointment may be made at any
regular or special meeting of the Board of Directors. Each officer shall hold
office until his death, resignation, retirement, removal, disqualification, or
his successor is appointed and qualifies.
3. Removal. Any officer or agent appointed by the Board of Directors may be
removed by the Board with or without cause pursuant to the affirmative vote of
at least 80 percent of the Directors then in office; but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
4. Compensation. The compensation of all officers of the Corporation shall
be fixed by the Board of Directors.
5. President. The President shall be the chief executive officer of the
Corporation and, subject to the control of the Board of Directors, shall
supervise and control the management of the Corporation in accordance with these
Bylaws. He shall preside at all meetings of shareholders and, in the absence of
the Chairman of the Board of Directors, at all meetings of the Board of
Directors. He shall sign, with any other proper officer, certificates for
<PAGE>
shares of the Corporation and any deeds, mortgages, bonds, contracts, or other
instruments which may be lawfully executed on behalf of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be delegated by the Board
of Directors to some other officer or agent; and, in general, he shall perform
all duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
6. Executive Vice Presidents, Senior Vice Presidents, and Vice-Presidents.
The Executive Vice Presidents and Senior Vice Presidents shall be superior in
authority to all other Vice Presidents. The Executive Vice Presidents and Senior
Vice Presidents, in order of their appointment, unless otherwise determined by
the Board of Directors, shall, in the absence or disability of the President,
perform the duties and exercise the powers of that office and shall have
authority to sign, with any other proper officer, certificates for shares of the
Corporation and any deeds, mortgages, bonds, contracts, or other instruments
which may be lawfully executed on behalf of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors to some other officer or agent. In addition, they shall perform such
other duties and have such other powers as the President or the Board of
Directors shall prescribe. Vice Presidents shall perform only such duties and
have
<PAGE>
only such powers as the Board of Directors shall specifically prescribe. In the
absence or disability of the President and all Executive Vice Presidents and
Senior Vice Presidents, Vice Presidents, in the order of their appointment,
unless otherwise determined by the Board of Directors, shall perform the duties
and exercise the powers of that office. In addition, they shall perform such
other duties and have such other powers as the President or the Board of
Directors shall prescribe. The Board of Directors shall designate one or more
Vice Presidents to be responsible for Finance and may designate one or more Vice
Presidents to be responsible for certain other functions, including, without
limitation, Operations and Personnel.
7. Secretary. The Secretary shall keep accurate records of the acts and
proceedings of all meetings of shareholders, Directors and committees. He shall
give all notices required by law and by these Bylaws. He shall have general
charge of the corporate books and records and of the corporate seal, and he
shall affix the corporate seal to any lawfully executed instrument requiring it.
He shall have general charge of the stock transfer books of the Corporation and
shall keep, at the registered or principal office of the Corporation, a record
of shareholders showing the name and address of each shareholder and the number
and class of the shares held by each. He shall deliver to the Secretary of State
of North Carolina for filing annual reports as required under the provisions
contained in Section 55-16-22 of the North Carolina Business Corporation Act or
any successor to such statute. He shall sign
<PAGE>
such instruments as may require his signature, and, in general, attest the
signature or certify the incumbency or signature of any other officer of the
Corporation and shall perform all duties incident to the office of Secretary and
such other duties as may be assigned him from time to time by the President or
by the Board of Directors.
8. Vice President, Finance. The Vice President, Finance shall have custody
of all funds and securities belonging to the Corporation and shall receive,
deposit or disburse the same under the direction of the Board of Directors. He
shall supervise the accounting affairs of the Corporation and keep full and
accurate accounts of the finances of the Corporation in books especially
provided for that purpose, which may be consolidated or combined statements of
the Corporation and one or more of its subsidiaries as appropriate, that include
a balance sheet as of the end of the fiscal year, an income statement for that
year, and a statement of cash flows for the year unless that information appears
elsewhere in the financial statements. If financial statements are prepared for
the Corporation on the basis of generally accepted accounting principles, the
annual financial statements must also be prepared on that basis. The Corporation
shall mail the annual financial statements, or a written notice of their
availability, to each shareholder within one hundred twenty days of the close of
each fiscal year. The Vice President, Finance shall, in general, perform all
duties incident to his office and such other duties as may be assigned to him
from time to time by the President or by the
<PAGE>
Board of Directors.
9. Assistant Secretaries and Treasurers. The Assistant Secretaries and
Assistant Treasurers shall, in the absence or disability of the Secretary or the
Treasurer, perform the respective duties and exercise the respective powers of
those offices, and they shall, in general, perform such other duties as shall be
assigned to them by the Secretary or the Treasurer, respectively, or by the
President or by the Board of Directors.
10. Controller and Assistant Controllers. The Controller shall, under the
supervision of the Vice President, Finance, have charge of the accounting
affairs of the Corporation and shall have such other powers and perform such
other duties as the Board of Directors shall designate. Each Assistant
Controller shall have such powers and perform such duties as may be assigned by
the Board of Directors, and the Assistant Controllers shall exercise the powers
of the Controller during that officer's absence or inability to act.
11. Executive Officers. Except as otherwise designated by the Board of
Directors, the Corporation's executive officers shall consist of the President,
the Senior and Executive Vice Presidents, and such of the other Vice Presidents
as the Board of Directors may from time to time specifically designate as
executive officers, being those persons in policy-making functions of the
Corporation.
<PAGE>
12. Bonds. The Board of Directors, by resolution, may require any or all
officers, agents and employees of the Corporation to give bond to the
Corporation, with sufficient sureties, conditioned on the faithful performance
of the duties of their respective offices or positions, and to comply with such
other conditions as may from time to time be required by the Board of Directors.
13. Voting Upon Stocks. Unless otherwise ordered by the Board of Directors,
the Chairman of the Board or the President shall have full power and authority
on behalf of the Corporation to attend, act, and vote at meetings on the
shareholders of any corporation in which this Corporation may hold stock, and at
such meetings shall possess and may exercise any and all rights and powers
incident to the ownership of such stock and which, as the owner, the Corporation
might have possessed and exercised if present. The Board of Directors may by
resolution from time to time confer such power and authority upon any other
person or persons.
ARTICLE VI
CERTIFICATES FOR AND TRANSFER OF SHARES
1. Certificates for Shares. Shares of the capital stock of the Corporation
shall be represented by certificates. Such
<PAGE>
certificates shall be in such form as required by law and as determined by the
Board of Directors, and such certificates shall be issued to every shareholder
for the fully paid shares owned by him. Each certificate shall be signed by the
Chairman of the Board, the President or any Vice President or a person who has
been designated as the chief executive officer of the Corporation and by the
Secretary, Assistant Secretary, Treasurer, or Assistant Treasurer and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of any such officers upon a certificate may be facsimiles or may be engraved or
printed. In case any officer who has signed or whose facsimile or other
signature has been placed upon such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of its issue. The
certificates shall be consecutively numbered or otherwise identified; and the
name and address of the persons to whom they are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation.
2. Transfer of Shares. Transfer of shares shall be made on the stock
transfer books of the Corporation only upon surrender of the certificates for
the shares sought to be transferred by the record holder thereof or by his duly
authorized agent, transferee, or legal representative. All certificates
surrendered for transfer shall be canceled before new certificates for the
transferred shares shall be issued.
<PAGE>
3. Transfer Agent and Registrar. The Board of Directors may appoint one or
more transfer agents and one or more registrars of transfer and may require all
stock certificates to be signed or countersigned by the transfer agent and
registered by the registrar of transfers.
4. Record Date.
(a) For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof or entitled to
receive payment of any dividend or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case not to be more than seventy days before the meeting or
action requiring a determination of shareholders.
(b) If no record date is fixed by the Board of Directors for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders or of shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
<PAGE>
(c) When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this paragraph, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes a new
record date, which it shall do if the meeting is adjourned to a date more than
one hundred twenty days after the date fixed for the original meeting.
5. Lost Certificates. The Board of Directors may authorize the issuance of
a new share certificate in place of a certificate claimed to have been lost or
destroyed, upon receipt of an affidavit of such fact from the person claiming
the loss or destruction. When authorizing such issuance of a new certificate,
the Board of Directors may require the claimant to give the Corporation a bond
in such sum as it may direct to indemnify the Corporation against loss from any
claim with respect to the certificate claimed to have been lost or destroyed; or
the Board of Directors may, by resolution reciting that the circumstances
justify such action, authorize the issuance of the new certificate without
requiring such a bond.
6. Holder of Record. Except as otherwise required by law, the Corporation
may treat the person in whose name the shares stand of record on its books as
the absolute owner of the shares and the person exclusively entitled to receive
notification and distributions, to vote, and otherwise to exercise the rights,
<PAGE>
powers, and privileges of ownership of such shares.
7. Shares held by Nominees.
(a) The Corporation shall recognize the beneficial owner of shares
registered in the name of a nominee as the owner and shareholder of such shares
for certain purposes if the nominee in whose name such shares are registered
files with the Secretary of the Corporation a written certificate in a form
prescribed by the Corporation, signed by the nominee and indicating the
following: (1) the name, address, and taxpayer identification number of the
nominee; (2) the name, address, and taxpayer identification number of the
beneficial owner; (3) the number and class or series of shares registered in the
name of the nominee as to which the beneficial owner shall be recognized as the
shareholder; and (4) the purposes for which the beneficial owner shall be
recognized as the shareholder.
(b) The purposes for which the Corporation shall recognize a beneficial
owner as the shareholder may include the following: (1) receiving notice of,
voting at and otherwise participating in shareholders' meetings; (2) executing
consents with respect to the shares; (3) exercising dissenters' rights under
Article 13 of the North Carolina Business Corporation Act; (4) receiving
distributions and share dividends with respect to the shares; (5) exercising
inspection rights; (6) receiving reports, financial statements, proxy
statements, and other communications from the Corporation; (7) making any demand
upon the Corporation required or permitted by law; and (8) exercising any other
rights or receiving any other benefits of a shareholder with respect to
<PAGE>
the shares.
(c) The certificate shall be effective ten business days after its receipt
by the Corporation and until it is changed by the nominee, unless the
certificate specifies a later effective time or an earlier termination date.
(d) If the certificate affects less than all of the shares registered in
the name of the nominee, the Corporation may require the shares affected by the
certificate to be registered separately on the books of the Corporation and be
represented by a share certificate that bears a conspicuous legend stating that
there is a nominee certificate in effect with respect to the shares represented
by that share certificate.
8. Acquisition by Corporation of its Own Shares. The Corporation may
acquire its own shares and shares so acquired shall constitute authorized but
unissued shares. Unless otherwise prohibited by the Articles of Incorporation,
the Corporation may reissue such shares. If reissue is prohibited, the Articles
of Incorporation shall be amended to reduce the number of authorized shares by
the number of shares so acquired. Such required amendment may be adopted by the
Board of Directors without shareholder action.
9. Shareholder Protection Act. The provisions of Article 9 of Chapter 55 of
the General Statutes of North Carolina, as such Article may be amended from time
to time, shall not apply to the
<PAGE>
Corporation.
10. Control Share Acquisition Act. The provisions of Article 9A of Chapter
55 of the General Statutes of North Carolina, as such Article may be amended
from time to time, shall not apply to the Corporation.
ARTICLE VII
INDEMNIFICATION AND REIMBURSEMENT
OF DIRECTORS AND OFFICERS
1. Indemnification for Expenses and Liabilities.
(a) Any person who at any time serves or has served: (1) as a director,
officer, employee or agent of the Corporation, (2) at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust, or
other enterprise, or (3) at the request of the Corporation as a trustee or
administrator under an employee benefit plan, shall have a right to be
indemnified by the Corporation to the fullest extent from time to time permitted
by law against Liability and Expenses in any Proceeding (including without
limitation a Proceeding brought by or on behalf of the Corporation itself)
arising out of his status as such or activities in any of the foregoing
capacities or results from him being called as a witness at a time when he was
not a named defendant or respondent to any Proceeding.
<PAGE>
(b) The Board of Directors of the Corporation shall take all such action as
may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this provision, including, without limitation, to
the extent needed, making a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of indemnity due him.
(c) Any person who at any time serves or has served in any of the aforesaid
capacities for or on behalf of the Corporation shall be deemed to be doing or to
have done so in reliance upon, and as consideration for, the rights provided for
herein. Any repeal or modification of these indemnification provisions shall not
affect any rights or obligations existing at the time of such repeal or
modification. The rights provided for herein shall inure to the benefit of the
legal representatives of any such person and shall not be exclusive of any other
rights to which such person may be entitled apart from this provision.
(d) The rights granted herein shall not be limited by the provisions
contained in Sections 55-8-51 through 55-8-56 of the North Carolina Business
Corporation Act or any successor to such statutes.
<PAGE>
2. Advance Payment of Expenses. The Corporation shall (upon receipt of an
undertaking by or on behalf of the Director, officer, employee or agent involved
to repay the Expenses described herein unless it shall ultimately be determined
that he is entitled to be indemnified by the Corporation against such Expenses)
pay Expenses incurred by such Director, officer, employee or agent in defending
a Proceeding or appearing as a witness at a time when he has not been named as a
defendant or a respondent with respect thereto in advance of the final
disposition of such Proceeding.
3. Insurance. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, or agent of another domestic
or foreign corporation, partnership, joint venture, trust, or other enterprise
or as a trustee or administrator under an employee benefit plan against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability.
4. Definitions. The following terms as used in this Article shall have the
following meanings. "Proceeding" means any threatened, pending or completed
action, suit, or proceeding and any appeal therein (and any inquiry or
investigation that could
<PAGE>
lead to such action, suit, or proceeding), whether civil, criminal,
administrative, investigative or arbitrative and whether formal or informal.
"Expenses" means expenses of every kind, including counsel fees. "Liability"
means the obligation to pay a judgment, settlement, penalty, fine (including an
excise tax assessed with respect to an employee benefit plan), reasonable
expenses incurred with respect to a Proceeding and all reasonable expenses
incurred in enforcing the indemnification rights provided herein. "Director,"
"officer," "employee," and "agent" include the estate or personal representative
of a Director, officer, employee, or agent. "Corporation" shall include any
domestic or foreign predecessor of this Corporation in a merger or other
transaction in which the predecessor's existence ceased upon consummation of the
transaction.
ARTICLE VIII
GENERAL PROVISIONS
1. Distributions. The Board of Directors may from time to time declare, and
the Corporation may pay, distributions and share dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and by
its Articles of Incorporation.
2. Seal. The corporate seal shall have the name of the Corporation
inscribed thereon and shall be in such form as may be
<PAGE>
approved from time to time by the Board of Directors. Such seal may be an
impression or stamp and may be used by the officers of the Corporation by
causing it, or a facsimile thereof, to be impressed or affixed or in any other
manner reproduced. In addition to any form of seal adopted by the Board of
Directors, the officers of the Corporation may use as the corporate seal a seal
in the form of a circle containing the name of the Corporation and the state of
its incorporation (or an abbreviation thereof) on the circumference and the word
"Seal" in the center.
3. Fiscal Year. The fiscal year of the Corporation shall be determined by
the Board of Directors.
4. Effective Date of Notice. Except as provided in Paragraph 5.(a) of
Article II, written notice shall be effective at the earliest of the following:
(1) when received; (2) five days after its deposit in the United States mail, as
evidenced by the postmark, if mailed with postage thereon prepaid and correctly
addressed; (3) upon confirmation of receipt by answerback code, if sent by
facsimile transmission; (4) upon transmission, if sent by telegraph or teletype;
or (5) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested and the receipt is signed by or on
behalf of the addressee.
5. Corporate Records. Any records maintained by the Corporation in the
regular course of its business, including its
<PAGE>
stock ledger, books of account and minute books, may be kept on or be in the
form of punch cards, magnetic tape, photographs, microphotographs or any other
information storage device; provided that the records so kept can be converted
into clearly legible form within a reasonable time. The Corporation shall so
convert any records so kept upon the request of any person entitled to inspect
the same. The Corporation shall maintain at its principal office the following
records: (1) Articles of Incorporation or Restated Articles of Incorporation and
all amendments thereto; (2) Bylaws or Restated Bylaws and all amendments
thereto; (3) resolutions by the Board of Directors creating classes or series of
shares and affixing rights, preferences or limitations to shares; (4) minutes of
all shareholder meetings or action taken without a meeting for the past three
years; (5) all written communications to shareholders for the past three years,
including financial statements; and (6) the Corporation's most recent annual
report filed with the North Carolina Secretary of State.
6. Bylaw Amendments.
(a) Except as otherwise provided herein, these Bylaws may be amended or
repealed and new Bylaws may be adopted by the affirmative vote of a majority of
the Directors present at any regular or special meeting of the Board of
Directors at which a quorum is present or by the shareholders at any regular or
special meeting of shareholders at which a quorum is present if the votes cast
favoring such action exceed the votes cast opposing such action.
<PAGE>
(b) The Board of Directors shall have no power to adopt a Bylaw: (1)
changing the statutory requirement for a quorum of Directors or action by
Directors or changing the statutory requirement for a quorum of shareholders or
action by shareholders; (2) providing for the management of the Corporation
otherwise than by the Board of Directors or the committees thereof; (3)
increasing or decreasing the fixed number for the size of the Board of Directors
or range of Directors, or changing from a fixed number to a range, or vice
versa; or (4) classifying and staggering the election of Directors.
(c) No Bylaw adopted, amended or repealed by the shareholders may be
readopted, amended or repealed by the Board of Directors, except to the extent
that the Articles of Incorporation or a Bylaw adopted by the shareholders
authorizes the Board of Directors to adopt, amend or repeal that particular
Bylaw or the Bylaws generally.
7. Amendments to Articles of Incorporation. To the extent permitted by law,
the Board of Directors may amend the Articles of Incorporation without
shareholder approval to (1) delete the initial directors' names and addresses;
(2) change the initial registered agent or office in any state in which it is
qualified to do business, provided such change is on file with the respective
Secretary of State; (3) change each issued and unissued share of an outstanding
class into a greater number of whole shares, provided
<PAGE>
that class is the Corporation's only outstanding share class; (4) change the
corporate name by substituting "corporation," "incorporated," "company,"
"limited," or the abbreviations therefor for a similar word or abbreviation or
by adding, deleting or changing a geographic designation in the name; (5) make
any other change expressly permitted by the North Carolina Business Corporation
Act to be made without shareholder action. All other amendments to the Articles
of Incorporation must be approved by the affirmative vote of 75 percent of the
votes present at a meeting of shareholders at which a quorum is present, in
accordance with Article X of the Corporation's Articles of Incorporation. The
notice of any such meeting must state that the purpose, or one of the purposes,
of the meeting is to consider the proposed amendment, and the notice must be
accompanied by a copy or summary of the amendment or amendments. The Board of
Directors must recommend any amendment to the Articles to be considered by
shareholders as set forth in, and subject to the terms of, North Carolina
General Statutes ss.55-10-03(a).
Note: This Bylaw provision has not been adopted by the share- holders of the
Corporation, but reflects the provisions of the Articles of Incorporation for
ease of reference.
No Par Value Common Stock
[LOGO]
THIS CERTIFICATE IS
TRANSFERABLE IN
CRANFORD, NJ OR CUSIP 895835 10 6
NEW YORK, NY SEE REVERSE FOR CERTAIN DEFINITIONS
TRIANGLE BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
- --------------------------------------------------------------------------------
This Certifies that
is the owner of
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
TRIANGLE BANCORP, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED: COUNTERSIGNED AND REGISTERED:
Registrar and Transfer Company
TRANSFER AGENT
AND REGISTRAR
BY:
/s/Susan C. Gilbert /s/Michael S. Patterson
Secretary President
AUTHORIZED SIGNATURE
<PAGE>
Triangle Bancorp, Inc.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws and regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------ -------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act
survivorship and not as tenants -------------------------
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value received ___________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFIYING NUMBER OF ASSIGNEE
- --------------------------------------
- -------------------------------------- ----------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
represented by the within Certificate and do hereby irrevocably constitute and
appoint
Attorney
- ------------------------------------------------------------------------
to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated X
------------------------------- -------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PRATICULAR WITHOUT ALTERNATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER
Signature(s) Guaranteed:
--------------------------------------------
--------------------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution" as such
term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934.
--------------------------------------------
TRIANGLE BANCORP, INC.
1988 INCENTIVE STOCK OPTION PLAN
Triangle Bancorp, Inc., a bank holding company organized and existing under the
laws of the State of North Carolina (herein referred to as the "Company"),
hereby adopts the following Stock Option Plan (the "Plan") for certain
individuals performing services for the Company or any of its subsidiaries.
1. Purpose. This Plan is intended to advance the interests of the Company
by allowing officers and other key employees of the Company or any of its
subsidiaries who have substantial responsibility for the direction and
management of the Company or any of its subsidiaries to acquire a proprietary
interest in the Company as an additional incentive to promote the Company's
success, and by encouraging such individuals to continue to provide their
services to the Company or any of its subsidiaries. These aims will be
effectuated by the granting of certain stock options issued under the Plan and
designated by the Committee (defined hereinafter) pursuant to Section 3(b)
hereof will qualify as Incentive Stock Options (hereinafter called "ISO's").
Under Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), and the terms of the Plan shall be interpreted in accordance with this
intention. Options granted under this Plan are referred to hereinafter as
"Options".
2. Plan. The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors ("the Board") of the Company, which shall
consist of not less than three members. Subject to the provisions of the Plan,
the Committee shall have full authority, in its description, to (a) determine
the employees (from the class of employees eligible under Section 3 hereof to
receive Options under the Plan) to whom Options shall be granted; (b) determine
the time or times at which Options shall be granted; (c) determine the option
price of the shares subject to each Option, which price shall be not less than
the minimum specified in accordance with Section 5 hereof; (d) determine
(subject to Sections 7 and 9 hereof) the time or times when each Option shall
become exercisable and the duration of the exercise; and (e) interpret the Plan
and prescribe, amend, and rescind rules and regulations relating to it. The
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive. The Committee may consult with counsel and other
professional advisors, who may be counsel or advisors to the Company, and shall
not incur any liability for any action taken in good faith in reliance upon the
advice of such counsel or advisors.
3. Eligibility. (a) Options may be granted by the Committee only to persons
who are officers or other key employees of the Company or a subsidiary of the
Company who perform services of major importance in the management, operation,
and development of the business of the Company or of any subsidiary of the
Company, and the Committee
<PAGE>
shall determine the number of shares to be allocated to each Option. In
determining the eligibility of an employee to receive an Option as well as in
determining the number of shares to be optioned to any individual, the Committee
shall consider the position and responsibilities of the individual being
considered, the nature and value to the Company of such individual's services
and accomplishments, the person's present and potential contributions to the
success of the Company, and such other factors as the Committee may deem
relevant. A person receiving an Option pursuant to this Plan shall sometimes be
referred to hereinafter as an "Optionee".
(b) At the time each Option is granted to an employee under this Plan, the
Committee shall determine whether such Option is to be designated as an ISO. No
Option granted to any employee who at the time of such grant owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its subsidiaries may be designated as an ISO,
unless at the time of such grant the option price is fixed at not less than 110%
of the fair market value of the Shares (defined hereinafter) subject to the
Option, and exercise of such Option is prohibited by its terms after the
expiration of five years from the date such Option is to the Plan. There will be
reserved for use upon the exercise of Options to be granted from time to time
under the Plan (subject granted.
(c) No individual shall be given the opportunity under this Plan to
exercise Options for Shares valued (at the time of the granting of the Option)
in excess of $100,000 in any calendar year, unless and except to the extent that
said Options shall have first become exercisable in a preceding year. No Option
shall be granted hereunder for the purchase of Shares in such a manner as would
cause the foregoing restriction to be violated.
4. Shares of Stock Subject to the provisions of Section 6 hereof) an
aggregate of 860,244 Shares of the no par value common stock (the "Shares") of
the Company, which, as the Committee shall from time to time determine, may be
in whole or in part either authorized but unissued Shares, or issued Shares
which shall have been reacquired by the Company. Any Shares subject to an Option
under the Plan, which Option for any reason expires or is terminated unexercised
as to such Shares, may again be subjected to an Option under the Plan.
5. Option Price. The purchase Price under each Option issued shall be
determined by the Committee at the time the Option is granted, but in no event
shall such purchase price be less than 100% (110%, in the case of an ISO granted
to an employee described in Section 3(b) hereof) of the fair market value of the
Company's Shares on the date of the grant. If the shares are traded in the
over-the-counter market, such fair market value shall be deemed to be the mean
between the asked and the bid prices on such day as reported by NASDAQ. If the
stock is traded on an exchange, such fair market value shall be deemed to be the
mean of the high and low prices at which it is quoted or traded on such day on
the exchange on which it generally has the greatest trading volume. In all
cases, any determination hereunder by the Committee as to the fair market value
of the
2
<PAGE>
Shares for which Options are granted shall be made in good faith and shall be
determinative for all purposes of this Plan.
6. Adjustment for Dilution, Etc. In the event that there is (a) a
subdivision or consolidation of the Company's common stock or any other capital
adjustment of the Company's common stock, (b) the payment by the Company, of a
stock dividend, or (c) any other increase or decrease in the outstanding common
stock of the Company effected without receipt of consideration by the Company,
then the number of Shares then covered by each outstanding Option granted
hereunder shall be adjusted proportionately with no adjustment in the total
purchase price of the Shares then so covered by such Option, and the number of
Shares reserved for the purpose of the Plan shall be adjusted by the same
proportion. All such adjustments shall be made by the Committee, whose
determination upon the same shall be final and binding upon the Optionees. No
fractional Shares shall be issued and any fractional Shares resulting from the
computations pursuant to this Section 6 shall be eliminated from the respective
Option. No adjustment shall be made for cash dividends or the issuance to
stockholders of rights to subscribe for additional Shares or other securities.
7. Duration and Exercise of Options. (a) All Options issued under the Plan
shall be for such period as the Committee shall determine, but for not more than
ten years (five years, in the case of any employee described in Section 3(b)
hereof) from the date of the grant thereof. The period of the Option, once it is
granted, may be reduced only as outlined in Section 9 hereof; provided, however,
that the Committee may, where the Company is involved in a merger,
consolidation, dissolution, or liquidation, accelerate the expiration date and
the dates on which any part of the Option may be exercisable for all the Shares
covered thereby, but the effectiveness of such acceleration, and the exercise of
the Option pursuant thereto in excess of the number of Shares for which it would
have been exercisable in the absence of such acceleration, shall be conditioned
upon the consummation of the merger, consolidation, dissolution, or liquidation.
Except as provided in Section 9 or subsection (b) below, no Option may be
exercised after termination of the Optionee's employment with the Company, and
in no event may an Option be exercised after the expiration of its term.
(b) Except as otherwise modified by the Committee, or as otherwise
expressly provided for herein, Options granted under this Plan shall become
exercisable as they vest in accordance with this Section 7. An employee may,
within three months after termination of his employment, exercise his option
with respect to the vested portion of the Shares subject to the Option,
determined in accordance with and based on the whole number of years of the
Optionee's continued employment with the Company or any subsidiary of the
Company from the date the Option is granted through the date of Optionee's
termination of employment, determined in accordance with the following schedule:
3
<PAGE>
Years of Percentage of
Continued Employment Shares Vested
------------------------------------------------
1 33.33%
2 33.33%
3 33.33%
In the event an Optionee terminates employment within the three-year period
described above, all Shares not vested in accordance with the Schedule described
above shall be forfeited, and the Optionee shall have no right to exercise his
Option with respect to any such forfeited Shares. In each case, such limitations
shall be calculated, in the case of any resulting fraction, to the nearest low
whole number of Shares. Notwithstanding the foregoing, the Committee may, in its
sole discretion, (i) prescribe longer time periods and additional requirements
with respect to the exercise of an Option, (ii) different vesting schedules with
respect to any Option, and (iii) terminate in whole or in part such portion of
any Option as has not yet become exercisable at the time of termination of it
determines that the Optionee is not performing satisfactorily the duties to
which he was assigned on the date the Option was granted or duties of at least
equal responsibility. Except as provided herein or in Section 9 hereof, no
Option may be exercised unless the Optionee is at the time of such exercise in
the employ of the Company or of a subsidiary of the Company, and shall have been
continuously so employed since the grant of his Option. Absence or leave
approved by the management of the Company shall not be considered an
interruption of employment for any purpose under the Plan.
(c) Subject to limitations contained herein as to the time for exercise of
an Option and the amount of Shares subject to such Option, and notwithstanding
subsection (b) above, each Option shall be exercisable in whole or in part or in
installments at such time or times and in such manner as the Committee may
prescribe and specify in granting the Option to the Optionee, which manner may
differ from the exercise periods otherwise prescribed in subsection (b) above.
No Shares shall be delivered pursuant to any exercise of an Option until the
requirements of such laws and regulations as may be deemed by the Committee to
be applicable to them have been satisfied, and further until receipt by the
Company of the full option price in cash for the Shares for which an Option is
exercised. In order to facilitate the accumulation of funds to enable employees
to exercise their Options, each Optionee shall have the right, if he or she so
elects, to direct the Company or subsidiary of the Company to withhold from his
or her compensation regular amounts to be applied toward the exercise of the
Options. Funds credited to the Stock Option accounts will be under the control
of the Company until applied to the payment of the option price at the direction
of the employee or returned to the employee in the event the amount is not used
for purchase of Shares under Option, and all funds received or held by the
Company under the Plan may be used for any corporate purpose, and no interest
shall be payable to the participant on account of any amounts so held. Such
amounts may be withdrawn by the employee at any time, in whole or in part, for
any reason.
4
<PAGE>
(d) No Optionee or his legal representative, legatees, or distributees, as
the case may be, will be, or will be deemed to be, a holder of any Shares
subject to an Option unless and until certificates for such Shares are issued to
him or them under the terms of the Plan. Except as otherwise provided herein, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
(e) Notwithstanding the provisions of subsection 7(c), (i) the exercise
price of the Shares subject to the Option may be paid, at the discretion of the
Board, by the tender of Shares already owned by the Optionee, or through a
combination of cash and Shares, or through such other means that the Board
determines are consistent with the Plan's purpose and applicable law. No
fractional Shares will be issued or accepted;
(ii) the exercise price of the Shares subject to the Option may be paid, at
the discretion of the Board, on a "cashless" basis, 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 of stock and deliver the sale or margin loans
proceeds directly to the Company to pay the exercise price; and
(iii) with respect to the number of Shares under an Option which exceed the
$100,000 annual vesting limit referred to in subsection 3(c) or which otherwise,
through no decision of the Optionee, do not qualify as ISO Shares, receipt of
those Shares otherwise issuable by the Company upon exercise of an Option by an
Optionee may by deferred under a program of delayed receipt adopted by the
Board, which program shall contain such rules governing eligibility to
participate, timing of elections to defer, forms of distribution of Shares and
the like as the Board shall determine.
8. Assignability. Each Option granted under this Plan shall be transferable
only by will or by the laws of descent and distribution and shall be
exercisable, during an Optionee's lifetime, only by the Optionee to whom the
Option is granted. Except as permitted by the preceding sentence, no Option
granted under the Plan or any of the rights and privileges thereby conferred
shall be transferred, assigned, pledged, or hypothecated in any way (whether by
operation of law or otherwise), and no such Option, right, or privilege shall be
subject to execution, attachment, or similar process. Upon any attempt so to
transfer, assign, pledge, hypothecate, or otherwise dispose of the Option or any
right or privilege conferred thereby, contrary to the provisions hereof, or upon
the levy of any attachment or similar process upon such Option, right, or
privilege, the Option and such rights and privileges shall immediately become
null and void.
9. Effect of Termination of Employment, Death, or Disability. (a)
Notwithstanding anything in this Plan to the contrary, in the event an
Optionee's employment shall be terminated by reason of the Optionee's retirement
at his Retirement Date (defined hereinafter), the Optionee shall have the right
to exercise such Option or Options held by him, to the extent that such Options
have not previously expired or been
5
<PAGE>
exercised, at any time within three months after such retirement; upon such
retirement, all Options held by such Optionee which have not been theretofore
exercised by him or otherwise expired shall be immediately exercisable in full,
notwithstanding Section 7(b) or (c) hereof.
(b) In the event that an Optionee shall die while employed by the Company
or any subsidiary of the Company, or shall die within three months after
retirement on or after his Retirement Date, any Option or Options granted to him
under this Plan which have not previously expired or been exercised shall be
exercisable by the estate of the Optionee (or by any person who acquired such
Option by bequest or inheritance from the Optionee) in full notwithstanding
Section 7(b) or (c) hereof, any time within one year after the death of the
Optionee. References herein to the Optionee shall be deemed to include any
person entitled to exercise the Option after the death of the Optionee under the
terms of this Section 9(b).
(c) In the event of an Optionee's termination of employment by reason of
the Optionee's disability, the Optionee shall have the right, notwithstanding
Section 7(b) or (c) hereof, to exercise all Options held by him to the extent
that such Options have not previously expired or been exercised, at any time
within one year after such termination; upon such disability, all Options held
by such Optionee which have not been theretofore exercised by him or otherwise
expired shall be immediately exercisable in full, notwithstanding Section 7(b)
or (c) hereof. The term "disability" shall, for the purposes of this Plan, be
defined in the same manner as such term is defined in Section 105(d)(4) of the
Code.
(d) For the purposes of this Plan, "Retirement Date" shall mean, any date
an employee is otherwise entitled to retire under any of the Company's or its
subsidiaries' retirement plans, or if no such retirement plans exist, then the
date on which the Optionee attains age 65.
10. Listing and Registration of Shares. Each Option shall be subject to the
requirement that if at any time the Committee shall determine, in its
description, that the listing, registration, or qualification of the Shares
covered thereby upon any securities exchange or any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Option
or the issue or purchase of Shares thereunder, such Option may not be exercised
in whole or in part unless and until such listing, registration, qualification,
consent, or approval shall have been effected or basined free of any conditions
not acceptable to the Committee. The Company shall not be required to issue or
deliver any certificate for Shares of its stock purchased upon the exercise of
any part of an Option before (i) the admission of such Shares to listing on any
stock exchange in which the stock of the Company may then be listed, (ii)
completion of any registration or other qualification of such governmental
regulatory body that the Company shall, in its sole discretion, determine is
necessary or advisable, and (iii) the Committee shall have
6
<PAGE>
been advised by counsel that all applicable legal requirements have been
complied with and satisfied.
11. Expiration and Termination of the Plan. Options may be granted under
the Plan at any time or from time to time so long as the total number of Shares
at any one time optioned and/or purchased under this Plan does not exceed
460,244 Shares. The Plan may be abandoned or terminated at any time by the Board
except with respect to any Options then outstanding under the Plan. No Option
shall be granted pursuant to the Plan after ten years from effective date of the
Plan.
12. Amendment of Plan. The Board may at any time and from time to time
modify and amend the Plan (including the form of any option agreement to be
executed pursuant hereto) in any respects; provided, however, that no such
amendment shall: (a) increase (except in accordance with Section 6 hereof) the
maximum number of Shares for which Options may be granted under the Plan either
in the aggregate or to any individual; (b) reduce (except in accordance with
Section 6 hereof) the minimum option prices which may be established under the
Plan; (c) extend the period or periods during which Options may be granted or
exercised; (d) change the provisions relating to the determination of
individuals to whom Options shall be granted and the number of Shares to be
covered by such Options; or (e) change the provisions relating to adjustments to
be made upon changes in capitalization. The termination or any modification or
amendment of the Plan shall not, without the consent if the Optionee, affect
such Optionee's rights under an Option theretofore granted to him.
13. Applicability of Plan to Outstanding Stock Options. This Plan shall not
affect the terms and conditions of any non-qualified stock options heretofore
granted to any individual by the Company or any of its predecessors under any
other plan or agreement relating to non-qualified stock options, nor shall it
affect any of the rights of any individual to whom such a non-qualified stock
option was granted.
14. Effective Date of Plan. This Plan shall become effective upon adoption
by the Board, subject to approval by the shareholders of the Company (or any of
its predecessors). This Plan shall not become effective unless such shareholder
approval shall be obtained within twelve months before or after the adoption of
the Plan by the Board.
15. Change in Control. In the event of a "change in control of the Company,
any option granted hereunder shall be deemed to be fully vested and immediately
exercisable, entitling the Optionee to immediately exercise the Option in full
and to purchase, prior to the effective date of any "change in control", the
full number of Shares subject to such option which he or she otherwise would
have been entitled to purchase during the remaining term of such option. The
Committee shall give each Optionee at least thirty (3) days prior written notice
of any event giving rise to an immediate purchase right under this Section 15.
7
<PAGE>
For purposes of this Section 15, the phrase "change-in-control means (1) any
"person" (as defined in Sections 13(d) and 14 (d) of the Securities Exchange Act
of 1934 (the "Exchange Act") becoming the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the Company's outstanding
securities having the right to vote at the election of directors, or (ii) 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 ", or (iii) a merger, consolidation or
sale of all or substantially all of the assets of the Company in which the
Company is not the surviving institution, or (iv) the distribution of a proxy
statement soliciting proxies from shareholders of the Company by someone other
than the current management of the company, seeking shareholder approval of a
plan of reorganization, merger or consolidation of, the Company or similar
transaction with one or more corporations as result of which the outstanding
shares of the class of securities then subject to the plan of reorganization are
exchanged for or converted into cash or property or securities not issued by the
Company, or (v) a tender offer is made for twenty percent (20%) or more of the
voting securities of the Company.
* As amended by the Board of Directors on November 18, 1997.
* As amended by the Board of Directors on August 19, 1997.
* As amended by the Board of Directors on February 23, 1995.
* As amended by the Shareholders on May 23, 1995
* As amended By the Board of Directors Compensation Committee on January 25,
1994.
* As amended by the Shareholders as of December 16, 1993.
8
TRIANGLE BANCORP, INC.
1988 NON-QUALIFIED STOCK OPTION PLAN
Triangle Bancorp, Inc. a bank holding company existing under the laws of
the State of North Carolina (herein referred to as "Company"), hereby adopts the
following Non-Qualified Stock Option Plan (the "Plan") for the directors, local
directors, and other individuals performing services for the Company or any of
its subsidiaries.
1. Purpose. This Plan is intended to advance the interests of the Company
by allowing directors, local board members, officers, and employees of the
Company or any of its subsidiaries, who have substantial responsibility for the
direction and management of the Company or any of its subsidiaries to acquire a
proprietary interest in the Company as an additional incentive to promote the
Company's success, and by encouraging such individuals to continue to provide
their services to the Company or any of its subsidiaries. These aims will be
effectuated by the granting of certain non-statutory, non-qualified stock
options. Options granted under this Plan are referred to hereinafter as
"Options."
2. Plan. The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors ("the Board") of the Company. Subject to
the provisions of the Plan, the Committee shall have full authority, in its
description, to (a) determine the individuals (from the class of individuals
eligible under Section 3 hereof to receive Options under the Plan) to whom
Options shall be granted; (b) determine the time or times at which Options shall
be granted; (c) determine the option price of the shares subject to each Option,
which price shall be not less than the minimum specified in accordance with
Section 5 hereof; (d) determine (subject to Sections 7 and 9 hereof) the time or
times when each Option shall become exercisable and the duration of the
exercise; and (e) interpret the Plan and prescribe, amend, and rescind rules and
regulations relating to it. The interpretation and construction of any provision
of the Plan by the Committee shall be final and conclusive. The Committee may
consult with counsel and other professional advisors, who may be counsel or
advisors to the Company, and shall not incur any liability for any action taken
in good faith in reliance upon the advice of such counsel or advisors.
3. Eligibility. (a) Options may be granted only to members of the Board,
members of the boards of directors or local boards of directors, or officers or
full-time employees of the Company or any of its subsidiaries. In determining
the eligibility of an individual to receive an Option as well as in determining
the number of shares to be optioned to any individual, the Committee shall
consider the position and responsibilities of the individual being considered,
the nature and value to the Company of such individual's services and
accomplishments, the person's present and potential contributions to the success
of the Company and such other factors as the Committee may deem relevant. A
person receiving an Option pursuant to this Plan shall sometimes be referred to
hereinafter as an "Optionee."
(b) Members of the Committee shall be entitled to receive Options under the
Plan to the same extent as other members of the Board. However, any grant of an
Option to a member of the Committee must be approved by a disinterested majority
of the remaining members of the Committee; such member must be excused from any
consideration of a grant of such Option and shall not participate in any manner
in such decision.
<PAGE>
4. Shares of Stock Subject to the Plan. There will be reserved for use upon
the exercise of Options to be granted from time to time under the Plan (subject
to the provisions of the provisions of Section 6 hereof) an aggregate of 388,002
as the Committee shall from time to time determine, may be in whole or in part
either authorized but unissued Shares, or issued Shares which shall have been
reacquired by the Company. Any Shares subject to an Option under the Plan, which
Option for any reason expires or is terminated unexercised as to such Shares,
may again be subjected to an Option under the Plan.
5. Option Price. The purchase price under each Option issued shall be
determined by the Committee at the time the Option is granted, but in no event
shall such purchase price be less then 100% of the fair market value of the
Company's Shares on the date of the grant. If the shares are traded in the
over-the-counter market, such fair market value shall be deemed to be the mean
between the asked and the bid prices on such day as reported by NASDAQ. If the
stock is traded on an exchange, such fair market value shall be deemed to be the
mean of the high and low prices at which it generally has the greatest trading
volume. In all cases, any determination hereunder by the Committee as to the
fair market value of the Shares for which Options are granted shall be made in
good faith and shall be determinative for all purposes of this Plan.
6. Adjustment for Dilution, Etc. In the event that there is (a) a
subdivision or consolidation of the Company's common stock or any other capital
adjustment of the Company's common stock, (b) the payment by the Company of a
stock dividend, or (c) any other increase or decrease in the outstanding common
stock of the Company effected without receipt of consideration by the Company,
then the number of Shares then covered by each outstanding Option granted
hereunder shall be adjusted proportionately with no adjustment in the total
purchase price of the Shares then so covered by such Option, and the number of
Shares reserved for the purpose of the Plan shall be adjusted by the same
proportion. All such adjustments shall be made by the Committee, whose
determination upon the same shall be final and binding upon the Optionees. No
fractional Shares shall be issued and any fractional Shares resulting from the
computation pursuant to the Section 6 shall be eliminated from the respective
Option. No adjustment shall be made for cash dividends or the issuance to
stockholders of rights to subscribe for additional Shares or other securities.
7. Duration and Exercise of Options. (a) All Options issued under the Plan
shall be for such period as the Board shall determine, but for not more the ten
years from the date of the grant thereof. The period of the Option, once it is
granted, may be reduced only as outlined in Section 9 hereof; provided, however,
that the Committee may, where the Company is involved in a merger,
consolidation, dissolution, or liquidation, accelerate the expiration date and
the dates on which any part of the Option may be exercisable for all the Shares
covered thereby, but the effectiveness of such acceleration, and exercise of the
Option pursuant thereto in excess of the number of Shares for which it would
have been exercisable in the absence of such acceleration, shall be conditioned
upon the consummation of the merger, consolidation, dissolution, or liquidation.
In no event may an Option be exercised after the expiration of its term.
(b) Except as otherwise modified by the Committee or as otherwise expressly
provided herein, Options granted under this Plan shall become exercisable as
they vest in accordance with this Section 7. An Optionee shall be entitled to
exercise the Option only as to the vested portion of the Shares subject to the
Option, determined in accordance with and based on the whole number of years of
the Optionee's continued service with the Company or any subsidiary of the
Company in said capacity from the date the Option is
2
<PAGE>
granted through the date of termination of such services, determined in
accordance with the following schedule:
Years of Vested Percentage
Continued Service of Shares
----------------- ---------
1 33.33%
2 33.33%
3 33.33%
Any Shares not vested in accordance with the chart described hereinabove shall
be forfeited upon the termination of Optionee's services for the Company or any
subsidiary of the Company in one of the capacities indicated in Section 3(a)
hereof, and the Optionee shall have no right to exercise any Options with
respect thereto. In each such case, such limitations shall be calculated, in the
case of any resulting fraction, to the nearest low whole number of Shares. Upon
the termination of an Optionee's services for the Company or any subsidiary of
the Company in one of the capacities indicated in Section 3(a) hereof, any
vested Option or Options granted to him under this Plan which have not
previously expired or been exercised shall be exercisable by the Optionee any
time within one year after such termination.
(c) Subject to limitations contained herein as to the time for exercise of
an Option and the amount of Shares subject to such Option, and notwithstanding
subsection (b) above, each Option shall be exercisable in whole or in part or in
installments at such time or times and in such manner as the Committee may
prescribe and specify in granting the Option to the Optionee, which manner may
differ from the exercise periods otherwise prescribed in subsection (b) above.
No Shares shall be delivered pursuant to any exercise of an Option until the
requirements of such laws and regulations as may be deemed by the Committee to
be applicable to them have been satisfied, and further until receipt by the
Company of the full option price in cash for the Shares for which an Option is
exercised.
(d) No Optionee or his legal representative, legatees, or distributees, as
the case may be, will be, or will be deemed to be, a holder of any Shares
subject to an Option unless and until certificates for such Shares are issued to
him or them under the terms of the plan. Except as otherwise provided herein, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
(e) (i) The exercise price of the Shares subject to the Option may be paid
in cash or, at the discretion of the Board, may also be paid by the tender of
Shares already owned by the Optionee, or through a combination of cash and
Shares, or through such other means that the Board determines are consistent
with the Plan's purpose and applicable law. No fractional Shares will be issued
or accepted.
(ii) The exercise price of the Shares subject to the Option may be paid, at
the discretion of the Board, on a "cashless" basis, 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 of stock and deliver the sale or margin loan
proceeds directly to the Company to pay the exercise price.
<PAGE>
(iii) Receipt of Shares otherwise issuable by the Company upon exercise of
an option by an Optionee may be deferred under a program of delayed receipt
adopted by the Board, which program shall contain such rules governing
eligibility to participate, timing of elections to defer, forms of distribution
of Shares and the like as the Board shall determine.
8. Assignability. Each Option granted under this Plan shall be transferable
only by will or by the laws of the descent and distribution and shall be
exercisable, during an Optionee's lifetime, only by the Optionee to whom the
Option is granted. Except as permitted by the preceding sentence, no Option
granted under the Plan or any of the rights and privileges thereby conferred
shall be transferred, assigned, pledged, or hypothecated in any way (whether by
operation of law or otherwise), and no such Option, right, or privilege shall be
subject to execution, attachment, or similar process. Upon any attempt so to
transfer, assign, pledge, hypothecate, or otherwise dispose of the Option or any
right or privilege conferred thereby, contrary to the provisions hereof, or upon
the levy of any attachment or similar process upon such Option, right, or
privilege, the Option and such rights and privileges shall immediately become
null and void.
9. Effect of Death or Disability. (a) Notwithstanding anything in this Plan
to the contrary, in the event an Optionee's services with the Company or any
subsidiary of the Company in a capacity described in Section 3(a) hereof shall
be terminated by reason of the Optionee's death or disability, all Options held
by such Optionee which have not been theretofore exercised or otherwise expired
shall be immediately exercisable in full, notwithstanding subsection 7(b) or (c)
hereof.
(b) Upon the death or disability of an Optionee, any Option or Options
granted to him under this Plan which have not previously expired or been
exercised shall be exercisable by the estate of the Optionee (or by any person
who acquired such Option by bequest or inheritance from the Optionee) in full,
notwithstanding Section 7(b) or (c) hereof, any time within one year after the
death of the Optionee. References herein to the Optionee shall be deemed to
include any person entitled to exercise the Option after the death of the
Optionee under the terms of this Section 9(b) . The term "disability" shall, for
the purposes of this Plan, be defined in the same manner as such term is defined
in Section 105(d)(4) of the Code.
10. Listing and Registration of Shares. Each Option shall be subject to the
requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration, or qualification of the Share
covered thereby upon any securities exchange or any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Option
or the issue or purchase of Shares thereunder, such Option may not be exercised
in whole or in part unless and until such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee. The Company shall not be required to issue or
deliver any certificate for Shares of its stock purchased upon the exercise of
any part of an Option before (i) the admission of such Shares to listing on any
stock exchange in which the stock of the Company may then be listed, (ii)
completion of any registration or other qualification of such Shares under any
state or federal law or ruling or regulation of any governmental regulatory body
that the Committee shall, in its sole discretion, determine is necessary or
advisable, and (iii) the Committee shall have been advised by counsel that all
applicable legal requirements have been complied with and satisfied.
11. Expiration and Termination of the Plan. Options may be granted under
the Plan at any time or from time to time so long as the total number of Shares
at any one
<PAGE>
time optioned and/or purchased under this Plan does not exceed 388,002 Shares.
The Plan may be abandoned or terminated at any time by the Board except with
respect to any Options then outstanding under the Plan. No Option shall be
granted pursuant to the Plan after ten years from effective date of the Plan.
12. Amendment of Plan. The Board may at any time and from time to time
modify and amend the Plan (including the form of any option agreement to be
executed pursuant hereto) in any respect: provided, however, that no such
amendment shall: (a) increase (except in accordance with Section 6 hereof) the
maximum number of Shares for such Options may be granted under the Plan either
in the aggregate or to any individual; (b) reduce (except in accordance with
Section 6 hereof) the minimum option prices which may be established under the
Plan; (c) extend the period or periods during which Options may be granted or
exercised; (d) change the provisions relating to adjustments to be made upon
changes in capitalization. The termination or any modification or amendment of
the Plan shall not, without the consent of the Optionee, affect such Optionee's
rights under an Option theretofore granted to him.
13. Applicability of Plan to Outstanding Stock Options. This Plan shall not
affect the terms and conditions of any non-qualified stock options heretofore
granted to any individual by the Company (or any of its predecessors), under any
other plan or agreement relating to non-qualified stock options, nor shall it
affect any of the rights of any individual to whom such a non-qualified stock
option was granted, except to the extent in either event that the individual
Optionee consents to the application of this Plan to his or her options, in
which case such options shall be considered Option granted under this Plan.
14. Effective Date of Plan. This Plan shall become effective upon adoption
by the Board, subject to approval by the shareholders of the Company (or any of
its predecessors). This Plan shall not become effective unless such shareholder
approval shall be obtained within twelve months before or after the adoption of
the Plan by the Board.
15. Change in Control. In the event of a "change in control of the Company,
any option granted hereunder shall be deemed to be fully vested and immediately
exercisable, entitling the Optionee to immediately exercise the Option in full
and to purchase, prior to the effective date of any "change in control", the
full number of Shares subject to such option which he or she otherwise would
have been entitled to purchase during the remaining term of such option. The
Committee shall give each Optionee at least thirty (3) days prior written notice
of any event giving rise to an immediate purchase right under this Section 15.
For purposes of this Section 15, the phrase "change-in-control means (1) any
"person" (as defined in Sections 13(d) and 14 (d) of the Securities Exchange Act
of 1934 (the "Exchange Act") becoming the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the Company's outstanding
securities having the right to vote at the election of directors, or (ii) 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 ", or (iii) a merger, consolidation or
sale of all or substantially all of the assets of the Company in which the
Company is not the surviving institution, or (iv) the distribution of a proxy
statement soliciting proxies from shareholders of the Company by someone other
than the current management of the company, seeking shareholder approval of a
plan of reorganization, merger or
<PAGE>
consolidation of, the Company or similar transaction with one or more
corporations as result of which the outstanding shares of the class of
securities then subject to the plan of reorganization are exchanged for or
converted into cash or property or securities not issued by the Company, or (v)
a tender offer is made for twenty percent (20%) or more of the voting securities
of the Company.
* Amended by the Board of Directors on November 18, 1997
* Amended by the Board of Directors on August 19, 1997
* Amended by the Board of Directors on February 23, 1995.
* Amended By Board of Directors' Compensation Committee as of January 25,
1994.
* Amended By Shareholders as of December 16, 1993.
* Amended By Board of Directors as of November 15, 1994.
TRIANGLE BANCORP, INC.
1998 OMNIBUS STOCK PLAN
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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
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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
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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
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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
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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).
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(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
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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
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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
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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 conditions (including performance requirements) on the
Award and the method by which restrictions or
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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.
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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
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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:
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(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.
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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.
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TRIANGLE BANCORP, INC.
1997 DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
ARTICLE I
DEFINITIONS
1.1 "Account" means the memorandum account for each Participant in the Plan
detailing the shares of Common Stock credited to the Participant.
1.2 "Administrator" means the administrative officer of the Company or such
other Company officer as shall be appointed by the Board to administer this
Plan.
1.3 "Annual Deferral" means the amount deferred by a Director during a Plan
Period.
1.4 "Beneficiary" means a person or persons, including estates and trusts,
entitled to receive any benefits under this Plan to which the Director or a
prior Beneficiary has become entitled but has not received.
1.5 "Benefit Rate" means an annual rate of interest based on the yield of
six month certificates of deposit of the Bank as of, and adjusted on, January 1
and July 1 of each calendar year.
1.6 "Board" means the Company's Board of Directors.
1.7 "Common Stock" means the common stock of the Company.
1.8 "Company" means Triangle Bancorp, Inc., a North Carolina bank holding
company.
1.9 "Compensation" means each Participant's compensation paid by the
Company for service as a Director, including retainer payments and amounts paid
for attendance at Board and Board committee meetings.
1.10 "Deferral Date" means January 1, 1997 and the January 1 of each
calendar year for which Compensation is deferred thereafter.
1.11 "Director" means a member of the Company's Board of Directors.
1.12 "Disability" is any physical or mental condition which in the opinion
of the Board makes continued service as a Director inadvisable.
1.13 "Participant" means a Director who participates in the Plan pursuant
to Article III.
<PAGE>
1.14 "Plan" means this 1997 Deferred Compensation Plan for Outside
Directors of the Company.
1.15 "Plan Period" means each 12-month period beginning on January 1 and
ending on December 31 thereafter.
ARTICLE II
ELIGIBILITY
Any Director who is a member of the Board on or after December 31, 1996 and
who is not also an employee of the Company or any of its subsidiaries, is
eligible to participate in the Plan.
ARTICLE III
DEFERRAL OF COMPENSATION
3.1 Deferral Opportunity. All Compensation paid by the Company to an
eligible Director for a Plan Period shall be deferred; provided, however, that
the Company retains the right in its sole discretion to provide Directors with
the right not to defer receipt of Compensation.
3.2 Deferral Election. If a Director is given the right to defer receipt of
his or her Compensation, an election to defer for a Plan Period shall be
effected by delivery to the Administrator of an election form provided by the
Administrator and signed by the participating Director. For fiscal year 1998 and
thereafter, the election must be made in December and shall be irrevocable for
the Plan Period commencing on the next following January 1. The election shall
state the amount of deferred Compensation to be credited to the Participant's
Account as shares of Common Stock.
Any election made pursuant to this Section shall remain in effect for all
subsequent Plan Periods unless a participating Director delivers, amends or
revokes the election by delivering a revised election form to the Administrator
by December 31 of the Plan Period preceding the Plan Period to which the revised
election applies.
3.3 Crediting of Account. The amount of Compensation that is deferred by a
Director under the Plan will be credited to his or her Account on December 31 of
each Plan Period. Effective as of the date the Company shall pay any cash
dividend in respect of its then outstanding shares of Common Stock, the number
of Shares of Common Stock credited to the Director's Account shall be increased
by the number of whole and fractional shares of Common Stock determined by
dividing (a) the trading price of the Common Stock on the trading day
immediately preceding the dividend payment date into (b) the amount of cash
dividend which would have been paid by the Company on the dividend payment date
in respect of the whole and fractional shares of Common Stock credited to the
Director's Account immediately prior to such dividend payment date had such
Common Stock been issued and outstanding on the record date for such dividend.
Dividends will be credited only on the shares of Common Stock recorded in a
Participant's Account on January 1 of each Plan Period.
2
<PAGE>
ARTICLE IV
PAYMENT OF BENEFIT
4.1 Right to Benefit. Subject to the provisions of Article VI, a
Participant (or his Beneficiary in the case of the Participant's death) shall be
entitled to payment of a benefit hereunder upon the first to occur of the
Participant's death, Disability or retirement as a Director.
4.2 Payment of Common Stock. Deferred Compensation shall be paid, in the
Company's sole discretion, either (a) by the Bank's transferring an equivalent
number of whole shares of Common Stock by issuing authorized but unissued shares
of Common Stock; or (b) by the trustee of a trust established by the Company in
connection with this Plan. Payment shall be made to the Participant within 60
days after the Participant becomes eligible to receive such benefits. The
Participant shall be paid for fractional shares at the value of such shares on
the date the Participant becomes eligible to receive benefits. For such
purposes, the value of such Common Stock shall be the last trading price of such
Common Stock on the last trading day immediately preceding the date on which the
Participant becomes eligible to receive such benefits.
ARTICLE V
BENEFICIARY
5.1 Designation of Beneficiary. A Participant may designate a Beneficiary
to receive benefits under the Plan by delivery of a written designation to the
Administrator signed by the Participant. If more than one Beneficiary is named,
the share and precedence of each Beneficiary shall be indicated. A Participant
shall have the right to change the Beneficiary by submitting the change in
writing to the Administrator but no change of Beneficiary shall be effective
until acknowledged in writing by the Administrator.
If no Beneficiary is named pursuant to this Section 5.1, the Participant's
Beneficiary will be the Participant's spouse, if any, or the Participant's
estate, if the Participant has no spouse.
5.2 Payment to Beneficiary. If the Company has any doubt as to the proper
Beneficiary to receive payments under the Plan, the Company shall have the right
to withhold those payment until the matter is finally determined to the
satisfaction of the Administrator. Any payment made by the Company in good faith
and in accordance with this Plan shall fully discharge the Company from all
further obligations with respect to that payment.
In making any payment to or for the benefit of any minor or incompetent
Beneficiary, the Board, in its sole and absolute discretion, may make a
distribution to a legal or natural guardian or other relative of a minor or a
court appointed committee of such incompetent. The Board may also, in its sole
and absolute discretion, make a payment to any adult with whom the minor or
incompetent temporarily or permanently resides. The receipt by a guardian,
committee, relative or other person shall be a complete discharge of the
Company. Neither the Board nor the Company shall have any responsibility to see
to the proper application of any payments so made.
ARTICLE VI
RECAPITALIZATION; REORGANIZATION
6.1 Recapitalization or Stock Dividend. The number of shares of Common
Stock in a Participant's Account shall be proportionately adjusted for any
increase or decrease in the
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number of issued shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Company.
6.2 Reorganization. Notwithstanding any other provision of the Plan, in the
event of a dissolution or liquidation of the Company or a merger or a
consolidation in which the Company is not the surviving corporation, other than
a merger effected for the purpose of changing the Company's domicile, or the
sale of all or substantially all of the Company's assets, each Participant shall
be entitled to all benefits hereunder immediately prior to such dissolution,
liquidation, merger or consolidation.
6.3 Change in Control. In the event that any person (as such term is used
in Sections 13 (d) and 14 (d) (2) of the Securities Exchange Act of 1934) other
than the Company commences a tender or exchange offer for the issued and
outstanding shares of the Company's Common Stock that, if successful, would
result in the acquisition by such person of more than 50% of the total voting
power of all issued and outstanding Common Stock entitled to vote on the
election of Directors (when the shares of Common Stock to which such offer
extends are aggregated with any other shares of Common Stock owned by such
person at the time of commencement of such offer or otherwise acquired by such
person during the pendency of such offer), each Participant shall be immediately
entitled to all benefits hereunder.
6.4 Administration by Board. To the extent that the adjustments relate to
Common Stock or securities of the Company, the adjustments described in this
Article VI shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive.
ARTICLE VII
NATURE OF COMPANY'S OBLIGATION
The Company's obligation under this Plan shall be an unfunded and unsecured
promise to pay benefits in the form of Common Stock. The Company shall not be
obligated under any circumstances to fund its financial obligations under this
Plan. The Plan at all times shall be entirely unfunded as such term is defined
for purposes of the Employee Retirement Income Security Act ("ERISA"). The
Administrator may, however, in its sole discretion at any time make provision
for segregating assets of the Company for payment of any benefits hereunder by
establishing a trust to hold such assets.
All assets which the Company may acquire to help cover its financial
liabilities, whether or not held in trust, are and remain general assets of the
Company subject to the claims of its creditors. The Company does not give, and
the Plan does not give, any beneficial ownership interest in any asset of the
Company to a Participant or his or her Beneficiary. All rights of ownership in
any assets are and remain in the Company.
The Company's liability for payment of benefits shall be determined only
under the provisions of this Plan as it may be amended from time to time.
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<PAGE>
ARTICLE VIII
PARTICIPANT'S RIGHT TO ASSETS
8.1 Unsecured General Creditor Status. The rights of a Participant, any
Beneficiary or any other person claiming through the Participant shall be solely
those of an unsecured general creditor of the Company. Such persons shall have
the right to receive payments specified under this Plan only from the Company or
from any trust established in connection with the Plan and have no right to look
to any specific or special property separate from the Company to satisfy a claim
for benefit payments.
8.2 No Right to Specific Assets. A Participant, Beneficiary, or any other
person claiming through the Participant shall have no right, claim, security
interest, or any beneficial ownership interest whatsoever in any general asset
that the Company may acquire or use to help support its financial obligations
under this Plan. Any asset used or acquired by the Company in connection with
the liabilities it has assumed under this Plan shall not be deemed to be held
under a funded trust (for purposes of ERISA) for the benefit of the Participant
or his Beneficiary, and no general asset shall be considered security for the
performance of the obligations of the Company. Any such asset shall remain a
general unpledged and unrestricted asset of the Company. Notwithstanding the
above, a Participant or Beneficiary may assert his or her rights under the Plan
against a non-qualified trust established by the Company in connection with the
Plan, subject to the terms of such trust.
A Participant also understands and agrees that his participation in the
acquisition of any asset of the Company shall not constitute a representation to
the Participant, Beneficiary or any person claiming through the Participant or
Beneficiary that any of them has a special or beneficial interest in any asset.
ARTICLE IX
VOTING RIGHTS
No Director or Beneficiary shall be deemed to receive any voting rights or
any other rights and privileges enjoyed by shareholders of the Company by reason
of Common Stock being credited to his or her Account.
ARTICLE X
TERMINATION, AMENDMENT, MODIFICATION OR
SUPPLEMENTATION OF THE PLAN
The Board retains the sole and unilateral right to terminate, amend, modify
or supplement this Plan, in whole or in part, at any time, but only with respect
to future Plan Periods.
ARTICLE XI
RESTRICTION ON ALIENATION OF BENEFITS
No right or benefit under the Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be
void. No right or benefit hereunder shall in any manner be liable for or subject
to the debts, contracts, liabilities, or torts of the person entitled to
5
<PAGE>
the benefit. If any Participant or Beneficiary under the Plan should become
bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or
charge any right to a benefit under this Plan, then such right or benefit, in
the discretion of the Board, shall cease. In these circumstances, the Board may
hold or apply the benefit, or any part of it, for the benefit of the Participant
or Beneficiary, spouse, children, or other dependents of the Participant or
Beneficiary, or any of them, in such manner and in such portion as the Board may
deem proper.
ARTICLE XII
ARBITRATION
In the event a Participant or his or her Beneficiary disagrees with the
amount of benefit to be paid as determined by the Administrator and no
satisfactory settlement can be reached, then the claimant may submit the dispute
to binding arbitration under the rules of the American Arbitration Association
then in effect for Raleigh, North Carolina. The decisions of the arbitrator(s)
shall be binding on all parties to the arbitration, and their heirs, successors
and assigns.
ARTICLE XIII
GOVERNING LAW
This Plan shall be governed by the laws of the State of North Carolina.
IN WITNESS WHEREOF, Triangle Bancorp, Inc. does hereby adopt the Plan as of
this the 18th day of November, 1997.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
___________________________
Michael S. Patterson
President and CEO
ATTEST:
By: /s/ Susan C. Gilbert
___________________________
Susan C. Gilbert, Secretary
6
STATE OF NORTH CAROLINA
COUNTY OF WAKE
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (hereinafter referred to as this
"Agreement") is entered into as of June 18, 1996, by and among TRIANGLE BANCORP,
INC., a North Carolina corporation ("Triangle"), TRIANGLE BANK, a banking
corporation organized under the laws of North Carolina (the "Bank"), and Steven
R. Ogburn (the "Officer").
WHEREAS, the Officer has heretofore been employed by Triangle and the Bank
as Executive Vice President; and
WHEREAS, the services of the Officer, the Officer's experience and
knowledge of the affairs of Triangle and the Bank and reputation and contacts in
the industry are extremely valuable to Triangle and the Bank; and
WHEREAS, Triangle and the Bank wish to attract and retain such
well-qualified executives and it is in the best interest of Triangle and the
Bank and of the Officer to secure the continued services of the Officer
notwithstanding any change of control of Triangle or the Bank; and
WHEREAS, Triangle and the Bank consider the establishment and maintenance
of a sound and vital management team to be part of their overall corporate
strategy and to be essential to protecting and enhancing the best interest of
Triangle, the Bank and Triangle's shareholders; and
WHEREAS, the parties desire to enter into this Agreement to provide the
Officer with security in the event of a change of control of Triangle or the
Bank to ensure the continued loyalty of the Officer during any change of control
in order to maximize shareholder value as well as the continued safe and sound
operation of Triangle and the Bank.
<PAGE>
WHEREAS, the Officer, Triangle and the Bank acknowledge and agree that this
Agreement is not an employment agreement but is limited to circumstances giving
rise to a change of control of Triangle or the Bank as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants, and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Term. The initial term of this Agreement shall be for the period
commencing upon the effective date of this Agreement and ending two (2) calendar
years from the effective date of this Agreement. At each anniversary date of
this Agreement (i.e., June 18, 1998), the term automatically shall be extended
for an additional two (2) years on the same terms and conditions set forth
herein, unless Triangle and the Bank shall give written notice to the Officer of
their intention not to extend this Agreement for an additional two (2) years,
which notice shall be given at least thirteen (13) months prior to the next
anniversary date.
2. Change of Control.
(a) In the event of a termination of the Officer's employment in connection
with, or within twenty-four (24) months after, a "Change of Control" (as defined
in Subparagraph (e) below) of Triangle or the Bank, for reasons other than for
"cause" (as defined in Subparagraph (b) below), the Officer shall be entitled to
receive the sum set forth in Subparagraph (d) below. Said sum shall be payable
as provided in Subparagraph (f) below, provided, however, that the Officer is
employed on a full-time basis by the Bank at the effective time of the "Change
of Control, except as provided in Subparagraph (i) below.
(b) For purposes of this Agreement, termination for "cause" shall include
termination because of the Officer's personal dishonesty, incompetence, willful
misconduct, breach of
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<PAGE>
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation other than traffic
violations or similar offenses, or final cease-and-desist order.
(c) The Officer shall have the right to terminate this Agreement upon the
occurrence of any of the following events (the "Termination Events") within
twenty-four (24) months following a Change of Control of Triangle or the Bank:
(i) Officer is assigned any duties and/or responsibilities
that are inconsistent with his duties or responsibilities at
the time of the Change of Control;
(ii) Officer's annual base salary is reduced below the amount
in effect as of the effective date of a Change of Control;
(iii) Officer's life insurance, medical or hospitalization
insurance, disability insurance, stock option plans, stock
purchase plans, deferred compensation plans, management
retention plans, retirement plans, or similar plans or
benefits being provided by the Bank to the Officer as of the
effective date of the Change of Control are reduced in their
level, scope, or coverage, or any such insurance, plans, or
benefits are eliminated, unless such reduction or elimination
applies proportionately to all salaried employees of the Bank
who participated in such benefits prior to such Change of
Control; or
(iv) Officer is transferred to a location which is more than
fifty (50) miles from his current principal work location,
without the Officer's express written consent.
A Termination Event shall be deemed to have occurred on the date such
action or event is implemented or takes effect.
(d) In the event that the Officer terminates this Agreement pursuant to
this Paragraph 2, the Bank will be obligated (1) to pay or cause to be paid to
the Officer an amount equal to two (2) times (i) the Officer's then current
salary plus (ii) the average of the cash bonus paid to the Officer by the Bank
under the Bank's Cash Bonus Plan during the immediately preceding two (2) years,
and (2) to continue for a period of two (2) years after such termination all
benefits the Officer was
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<PAGE>
receiving and entitled to at such termination date under Triangle's and the
Bank's benefit programs and plans, including, but not limited to, medical,
disability, life and accident insurance coverage, automobile allowance,
professional qualification allowance, and club dues (or, at the Officer's
election, the Bank will pay the dollar equivalent of such benefits).
(e) For the purposes of this Agreement, the term Change of Control shall
mean any of the following events:
(i) After the effective date of this Agreement, any "person"
(as such term is defined Section 7(j)(8)(A) of the Change in
Bank Control Act of 1978), directly or indirectly, acquires
beneficial ownership of voting stock, or acquires irrevocable
proxies or any combination of voting stock and irrevocable
proxies, representing fifty percent (50%) or more of any
class of voting securities of Triangle or the Bank, or
acquires control of in any manner the election of a majority
of the directors of Triangle or the Bank;
(ii) Triangle or the Bank consolidates or merges with or into
another corporation, association, or entity, or is otherwise
reorganized, where Triangle or the Bank is not the surviving
corporation in such transaction and the holders of the voting
securities of Triangle or the Bank immediately prior to such
acquisition own less than a majority of the voting securities
of the surviving entity immediately after the transaction; or
(iii) All or substantially all of the assets of Triangle or
the Bank are sold or otherwise transferred to or are acquired
by any other corporation, association, or other person,
entity, or group.
Notwithstanding the other provisions of this Paragraph 2, a
transaction or event shall not be considered a Change of Control if,
prior to the consummation or occurrence of such transaction or event,
the Officer, Triangle and the Bank agree in writing that the same
shall not be treated as a Change of Control for purposes of this
Agreement.
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<PAGE>
(f) Amounts payable pursuant to this Paragraph 2 shall be paid,
at the option of the Officer, either in one lump sum or in twenty-four
(24) equal monthly payments.
(g) Following a Termination Event which gives rise to the
Officer's rights hereunder, the Officer shall have two (2) years from
the date of occurrence of the Termination Event to terminate this
Agreement pursuant to this Paragraph 2. Any such termination shall be
deemed to have occurred only upon delivery to the Bank or any
successor thereto, of written notice of termination which describes
the Change of Control and Termination Event. If the Officer does not
so terminate this Agreement within such two-year period, the Officer
shall thereafter have no further rights hereunder with respect to that
Termination Event, but shall retain rights, if any, hereunder with
respect to any other Termination Event as to which such period has not
expired.
(h) In the event any dispute shall arise between the Officer and
the Bank as to the terms or interpretation of this Agreement,
including this Paragraph 2, whether instituted by formal legal
proceedings or otherwise, including any action taken by the Officer to
enforce the terms of this Paragraph 2 or in defending against any
action taken by Triangle or the Bank, the Bank shall reimburse the
Officer for all costs and expenses, proceedings or actions, in the
event the Officer prevails in any such action.
(i) It is further agreed that the payment agreed in this
Paragraph 2 to be paid by the Bank to the Officer shall be due and
paid to the Officer should a Change of Control (as defined above) be
agreed to by Triangle and/or the Bank or be consummated within six (6)
months of the Officer's involuntary termination of employment with the
Bank for reasons other than for "cause" as such term is defined in
Subparagraph 2(b) hereof.
3. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon any corporate or other successor of
Triangle or the Bank which shall acquire, directly
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<PAGE>
or indirectly, by conversion, merger, consolidation, purchase, or otherwise, all
or substantially all of the assets of Triangle or the Bank.
4. Modification; Waiver; Amendments. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Officer, Triangle and the Bank, except as
herein otherwise provided. No waiver by any party hereto, at any time, of any
breach by any party hereto, or compliance with, any condition or provision of
this Agreement to be performed by such party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No amendments or additions to this Agreement shall be binding unless in
writing and signed by the parties, except as herein otherwise provided.
5. Applicable Law. This Agreement shall be governed in all respects whether
as to validity, construction, capacity, performance, or otherwise, by the laws
of North Carolina, except to the extent that federal law shall be deemed to
apply.
6. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provisions shall not affect the
validity or enforceability of the other provision hereof.
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<PAGE>
IN TESTIMONY WHEREOF, Triangle and the Bank have caused this Agreement to
be executed under seal and in such form as to be binding, all by authority of
their Board of Directors first duly given, and the individual party hereto has
set said party's hand hereto and has adopted as said party's seal the
typewritten word "SEAL" appearing beside said party's name, this the day and
year first above written.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
_____________________
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
- ---------------------------
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
TRIANGLE BANK
By: /s/ Michael S. Patterson
_________________________
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
- ---------------------------
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
/s/ Steven R. Ogburn
__________________________(SEAL)
Steven R. Ogburn
- 7 -
STATE OF NORTH CAROLINA
COUNTY OF WAKE
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (hereinafter referred to as this
"Agreement") is entered into as of June 18, 1996, by and among TRIANGLE BANCORP,
INC., a North Carolina corporation ("Triangle"), TRIANGLE BANK, a banking
corporation organized under the laws of North Carolina (the "Bank"), and Debra
L. Lee (the "Officer").
WHEREAS, the Officer has heretofore been employed by Triangle and the Bank
as Executive Vice President; and
WHEREAS, the services of the Officer, the Officer's experience and
knowledge of the affairs of Triangle and the Bank and reputation and contacts in
the industry are extremely valuable to Triangle and the Bank; and
WHEREAS, Triangle and the Bank wish to attract and retain such
well-qualified executives and it is in the best interest of Triangle and the
Bank and of the Officer to secure the continued services of the Officer
notwithstanding any change of control of Triangle or the Bank; and
WHEREAS, Triangle and the Bank consider the establishment and maintenance
of a sound and vital management team to be part of their overall corporate
strategy and to be essential to protecting and enhancing the best interest of
Triangle, the Bank and Triangle's shareholders; and
WHEREAS, the parties desire to enter into this Agreement to provide the
Officer with security in the event of a change of control of Triangle or the
Bank to ensure the continued loyalty of the Officer during any change of control
in order to maximize shareholder value as well as the continued safe and sound
operation of Triangle and the Bank.
<PAGE>
WHEREAS, the Officer, Triangle and the Bank acknowledge and agree that this
Agreement is not an employment agreement but is limited to circumstances giving
rise to a change of control of Triangle or the Bank as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants, and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Term. The initial term of this Agreement shall be for the period
commencing upon the effective date of this Agreement and ending two (2) calendar
years from the effective date of this Agreement. At each anniversary date of
this Agreement (i.e., June 18, 1998), the term automatically shall be extended
for an additional two (2) years on the same terms and conditions set forth
herein, unless Triangle and the Bank shall give written notice to the Officer of
their intention not to extend this Agreement for an additional two (2) years,
which notice shall be given at least thirteen (13) months prior to the next
anniversary date.
2. Change of Control.
(a) In the event of a termination of the Officer's employment in connection
with, or within twenty-four (24) months after, a "Change of Control" (as defined
in Subparagraph (e) below) of Triangle or the Bank, for reasons other than for
"cause" (as defined in Subparagraph (b) below), the Officer shall be entitled to
receive the sum set forth in Subparagraph (d) below. Said sum shall be payable
as provided in Subparagraph (f) below, provided, however, that the Officer is
employed on a full-time basis by the Bank at the effective time of the "Change
of Control, except as provided in Subparagraph (i) below.
(b) For purposes of this Agreement, termination for "cause" shall include
termination because of the Officer's personal dishonesty, incompetence, willful
misconduct, breach of
- 2 -
<PAGE>
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation other than traffic
violations or similar offenses, or final cease-and-desist order.
(c) The Officer shall have the right to terminate this Agreement upon the
occurrence of any of the following events (the "Termination Events") within
twenty-four (24) months following a Change of Control of Triangle or the Bank:
(i) Officer is assigned any duties and/or responsibilities
that are inconsistent with her duties or responsibilities at
the time of the Change of Control;
(ii) Officer's annual base salary is reduced below the amount
in effect as of the effective date of a Change of Control;
(iii) Officer's life insurance, medical or hospitalization
insurance, disability insurance, stock option plans, stock
purchase plans, deferred compensation plans, management
retention plans, retirement plans, or similar plans or
benefits being provided by the Bank to the Officer as of the
effective date of the Change of Control are reduced in their
level, scope, or coverage, or any such insurance, plans, or
benefits are eliminated, unless such reduction or elimination
applies proportionately to all salaried employees of the Bank
who participated in such benefits prior to such Change of
Control; or
(iv) Officer is transferred to a location which is more than
fifty (50) miles from her current principal work location,
without the Officer's express written consent.
A Termination Event shall be deemed to have occurred on the date
such action or event is implemented or takes effect.
(d) In the event that the Officer terminates this Agreement pursuant to
this Paragraph 2, the Bank will be obligated (1) to pay or cause to be paid to
the Officer an amount equal to two (2) times (i) the Officer's then current
salary plus (ii) the average of the cash bonus paid to the Officer by the Bank
under the Bank's Cash Bonus Plan during the immediately preceding two (2) years,
and (2) to continue for a period of two (2) years after such termination all
benefits the Officer was
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<PAGE>
receiving and entitled to at such termination date under Triangle's and the
Bank's benefit programs and plans, including, but not limited to, medical,
disability, life and accident insurance coverage, automobile allowance,
professional qualification allowance, and club dues (or, at the Officer's
election, the Bank will pay the dollar equivalent of such benefits).
(e) For the purposes of this Agreement, the term Change of Control shall
mean any of the following events:
(i) After the effective date of this Agreement, any "person"
(as such term is defined Section 7(j)(8)(A) of the Change in
Bank Control Act of 1978), directly or indirectly, acquires
beneficial ownership of voting stock, or acquires irrevocable
proxies or any combination of voting stock and irrevocable
proxies, representing fifty percent (50%) or more of any
class of voting securities of Triangle or the Bank, or
acquires control of in any manner the election of a majority
of the directors of Triangle or the Bank;
(ii) Triangle or the Bank consolidates or merges with or into
another corporation, association, or entity, or is otherwise
reorganized, where Triangle or the Bank is not the surviving
corporation in such transaction and the holders of the voting
securities of Triangle or the Bank immediately prior to such
acquisition own less than a majority of the voting securities
of the surviving entity immediately after the transaction; or
(iii) All or substantially all of the assets of Triangle or
the Bank are sold or otherwise transferred to or are acquired
by any other corporation, association, or other person,
entity, or group.
Notwithstanding the other provisions of this Paragraph 2, a transaction or
event shall not be considered a Change of Control if, prior to the consummation
or occurrence of such transaction or event, the Officer, Triangle and the Bank
agree in writing that the same shall not be treated as a Change of Control for
purposes of this Agreement.
- 4 -
<PAGE>
(f) Amounts payable pursuant to this Paragraph 2 shall be paid, at the
option of the Officer, either in one lump sum or in twenty-four (24) equal
monthly payments.
(g) Following a Termination Event which gives rise to the Officer's rights
hereunder, the Officer shall have two (2) years from the date of occurrence of
the Termination Event to terminate this Agreement pursuant to this Paragraph 2.
Any such termination shall be deemed to have occurred only upon delivery to the
Bank or any successor thereto, of written notice of termination which describes
the Change of Control and Termination Event. If the Officer does not so
terminate this Agreement within such two-year period, the Officer shall
thereafter have no further rights hereunder with respect to that Termination
Event, but shall retain rights, if any, hereunder with respect to any other
Termination Event as to which such period has not expired.
(h) In the event any dispute shall arise between the Officer and the Bank
as to the terms or interpretation of this Agreement, including this Paragraph 2,
whether instituted by formal legal proceedings or otherwise, including any
action taken by the Officer to enforce the terms of this Paragraph 2 or in
defending against any action taken by Triangle or the Bank, the Bank shall
reimburse the Officer for all costs and expenses, proceedings or actions, in the
event the Officer prevails in any such action.
(i) It is further agreed that the payment agreed in this Paragraph 2 to be
paid by the Bank to the Officer shall be due and paid to the Officer should a
Change of Control (as defined above) be agreed to by Triangle and/or the Bank or
be consummated within six (6) months of the Officer's involuntary termination of
employment with the Bank for reasons other than for "cause" as such term is
defined in Subparagraph 2(b) hereof.
3. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon any corporate or other successor of Triangle or the Bank which
shall acquire, directly
- 5 -
<PAGE>
or indirectly, by conversion, merger, consolidation, purchase, or otherwise, all
or substantially all of the assets of Triangle or the Bank.
4. Modification; Waiver; Amendments. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Officer, Triangle and the Bank, except as
herein otherwise provided. No waiver by any party hereto, at any time, of any
breach by any party hereto, or compliance with, any condition or provision of
this Agreement to be performed by such party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No amendments or additions to this Agreement shall be binding unless in
writing and signed by the parties, except as herein otherwise provided.
5. Applicable Law. This Agreement shall be governed in all respects whether
as to validity, construction, capacity, performance, or otherwise, by the laws
of North Carolina, except to the extent that federal law shall be deemed to
apply.
6. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provisions shall not affect the
validity or enforceability of the other provision hereof.
- 6 -
<PAGE>
IN TESTIMONY WHEREOF, Triangle and the Bank have caused this Agreement to
be executed under seal and in such form as to be binding, all by authority of
their Board of Directors first duly given, and the individual party hereto has
set said party's hand hereto and has adopted as said party's seal the
typewritten word "SEAL" appearing beside said party's name, this the day and
year first above written.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
__________________________
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
___________________________
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
TRIANGLE BANK
By: /s/ Michael S. Patterson
__________________________
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
___________________________
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
/s/ Debra L. Lee
_________________________(SEAL)
Debra L. Lee
- 7 -
STATE OF NORTH CAROLINA
COUNTY OF WAKE
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of October 24, 1996, by and between TRIANGLE
BANK (hereinafter referred to as "Triangle") and BILLY N. QUICK, SR.
(hereinafter referred to as "Quick")
W I T N E S S E T H:
WHEREAS, Quick heretofore has been employed as the President and Chief
Executive Officer of Granville United Bank (the "Bank") and in such position has
provided continued leadership and guidance in the Bank's growth and development;
and,
WHEREAS, as of the date hereof, the Bank has been acquired by and merged
into Triangle; and,
WHEREAS, Triangle desires to retain the advantage of Quick's knowledge of
the Bank's operations and affairs, and his knowledge of and experience, standing
and reputation in Triangle's market area formerly served by the Bank; and,
WHEREAS, for the reasons described above, Triangle desires to retain
Quick's services as an employee of Triangle for the period specified herein, and
Quick is willing to serve as an employee of Triangle for such period; and the
parties desire to enter into this Agreement to set forth the terms and
conditions of Quick's employment with Triangle.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants and conditions hereinafter set forth, and other good and
valuable considerations, the receipt and sufficiency of which hereby are
acknowledged, Triangle and Quick hereby agree as follows:
1. Employment. Triangle hereby agrees to employ Quick, and Quick hereby
agrees to serve as an employee of Triangle, all upon the terms and
conditions stated herein. As an employee of Triangle, Quick will (i) serve
as an Executive Vice President of Triangle, (ii) provide such assistance to
Triangle as it may reasonably request from time to time regarding matters
involving the former customers and employees of the Bank, loan quality
control and review, product conversion and other tasks relating to the
former operations of the Bank, (iii) promote the business of Triangle, and
advise Triangle on strategic direction, local board cultivation and
business development activities in the Bank's former market area, and (iv)
have such other duties and responsibilities, and render to Triangle such
other management services, as are customary for persons in Quick's position
with Triangle or as shall otherwise be reasonably assigned to him from time
to time by Triangle.
Quick shall faithfully and diligently discharge his duties and
responsibilities under this Agreement and shall use his best efforts to
implement the policies established by Triangle.
<PAGE>
Quick hereby agrees to devote such number of hours of his working time
and endeavors to the employment granted hereunder as Quick and Triangle
shall deem to be necessary to discharge his duties hereunder, and, for so
long as employment hereunder shall exist, Quick shall not engage in any
other occupation which requires a significant amount of Quick's personal
attention during Triangle's regular business hours or which otherwise
interferes with Quick's attention to or performance of his duties and
responsibilities as an employee of Triangle hereunder except with the prior
written consent of Triangle. However, subject to Paragraph 5(a) below,
nothing herein contained shall restrict or prevent Quick from personally,
and for Quick's own account, trading in stocks, bonds, securities, real
estate or other forms of investment for Quick's own benefit so long as said
activities do not interfere with Quick's attention to or performance of his
duties and responsibilities as an employee of Triangle hereunder.
During the term of this Agreement, Quick shall be allowed, in his sole
discretion, to maintain his primary work location as Granville County,
North Carolina.
2. Compensation. For all services rendered by Quick to Triangle under this
Agreement, Triangle shall pay Quick a base salary at a rate of One Hundred
Five Thousand and No/100 Dollars ($105,000. 00) per annum. Salary paid
under this Agreement shall be payable in cash not less frequently than
monthly. All compensation hereunder shall be subject to customary
withholding taxes and such other employment taxes as are required by law.
3. Participation in Retirement and Employee Benefit Plans; Fringe Benefits.
Subject to the terms and conditions of this Agreement and of that certain
Agreement and Plan of Reorganization and Merger dated June 7, 1996 among
the Bank, Triangle Bancorp, Inc. and Triangle, Quick shall be entitled to
participate in any and all employee benefit programs and compensation plans
from time to time maintained by Triangle and available to all employees of
Triangle, all in accordance with the terms and conditions (including
eligibility requirements) of such programs and plans of Triangle,
resolutions of Triangle's Board of Directors establishing such programs and
plans, and Triangle's normal practices and established policies regarding
such programs and plans. Quick shall be entitled to paid vacation leave in
accordance with the policy of Triangle for similarly positioned employees
now or hereafter in effect. During the term hereof, Quick also shall be
entitled to participate in Triangle's Management Incentive Compensation
Plan which provides for an annual incentive opportunity of 15% of base
salary.
In addition to the other compensation and benefits described in this
Agreement, Triangle shall promptly reimburse Quick for all reasonable
expenses incurred by him in the performance of his duties under this
Agreement and documented to the reasonable satisfaction of Triangle or
appropriate officers of Triangle pursuant to established procedures.
Triangle shall provide Quick an automobile for use by Quick on business of
Triangle. Quick may use the automobile for personal reasons provided Quick
prepares and provides to Triangle the appropriate documentation so that the
personal use can be
<PAGE>
reported for state and federal income tax purposes.
4. Term. Unless extended or sooner terminated as provided in this Agreement
and subject to the right of either Quick or Triangle to terminate Quick's
employment at any time as provided herein, the term of this Agreement and
Quick's employment with Triangle hereunder shall be for a period commencing
on the date hereof and continuing for a period of five (5) years. At each
anniversary date of this Agreement (i.e., October 25 of each year,
beginning October 25, 2001), the term automatically shall be extended for
an additional one (1) year on the same terms and conditions set forth
herein, unless either party hereto shall give written notice to the other
of their intention not to extend this Agreement for an additional one (1)
year, which notice shall be given at least three (3) months prior to the
next anniversary date. For example, if neither party has given notice of
its intention not to extend by October 25, 2001, then the term of this
Agreement would automatically be extended by one (1) year to October 25,
2002. Such extension shall not exceed a total of five (5) years.
5. Noncompetition; Confidentiality. Quick hereby acknowledges and agrees
that (i) the Bank has made a significant investment in the development of
its business in the geographic area identified below as the "Relevant
Market" and that, by virtue of Triangle's acquisition of the Bank, Triangle
has a valuable economic interest in its and the Bank's business in the
Relevant Market which it is entitled to protect; (ii) in the course of his
service as an officer of the Bank and Triangle, he has gained and will gain
substantial knowledge of and familiarity with the Bank's and Triangle's
customers and their dealings with them, and other information concerning
the Bank's and Triangle's business, all of which constitutes valuable
assets and privileged information that is particularly sensitive due to the
fiduciary responsibilities inherent in the banking business; and (iii) in
order to protect Triangle's interest in and to assure it the benefit of its
succession to the Bank's business, it is reasonable and necessary to place
certain restrictions on Quick's ability to compete against Triangle and on
his disclosure of information about Triangle's and the Bank's business and
customers. For that purpose, and in consideration of Triangle's agreements
contained herein, Quick covenants and agrees as provided below.
(a) Covenant Not to Compete. During any period during which Quick is
receiving any compensation from Triangle, whether pursuant to this
Agreement or any other agreement, plan or other arrangement, Quick will not
"Compete" (as defined below) , directly or indirectly, with Triangle in the
geographic area consisting of (i) Granville County, North Carolina, and
(ii) any county contiguous to Granville County, North Carolina (the
"Relevant Market").
Quick acknowledges and agrees that the Relevant Market and Restriction
Period are limited in scope to the geographic territory and period of time
reasonably necessary to protect Triangle's economic interest.
For the purposes of this Paragraph 5 (a) ,the following terms shall
have the meanings set forth below:
<PAGE>
Compete. The term "Compete" means: (i) soliciting or securing deposits
from any Person residing in the Relevant Market for any Financial
Institution; (ii) soliciting any Person residing in the Relevant Market to
become a borrower from any Financial Institution, or assisting (other than
through the performance of ministerial or clerical duties) any Financial
Institution in making loans to any such Person; (iii) inducing or
attempting to induce any Person who was a Customer of the Bank on the date
of its acquisition by Triangle, or who was a Customer of Triangle on the
date of termination of this Agreement or Quick's employment with Triangle,
to change such Customer's depository, loan and/or other banking
relationship from the Bank or Triangle to another Financial Institution;
(iv) acting as a consultant, officer, director, independent contractor, or
employee of any Financial Institution that has its main or principal office
in the Relevant Market, or, in acting in any such capacity with any other
Financial Institution, to maintain an office or be employed at or assigned
to or to have any direct involvement in the management, business or
operation of any office of such Financial Institution located in the
Relevant Market; or (v) communicating to any Financial Institution the
names or addresses or any financial information concerning any Person who
was a Customer of the Bank at the date of its merger with Triangle, or who
was a Customer of Triangle at the date of the termination of this Agreement
or Quick's employment with Triangle for any reason except as required by
law or any regulatory agency or in the performance of his duties or
responsibilities of employment.
Customer. The term "Customer" means any Person with whom, as of the
effective date of termination of this Agreement or Quick's employment with
Triangle for any reason, Triangle has or has had a depository, loan and/or
other banking relationship.
Financial Institution. The term "Financial Institution" means any
federal or state chartered bank, savings bank, savings and loan association
or credit union, or any holding company for or corporation that owns or
controls any such entity, or any other Person engaged in the business of
making loans of any type or receiving deposits, other than Triangle.
Person. The term "Person" means any natural person or any corporation,
partnership, proprietorship, joint venture, limited liability company,
trust, estate, governmental agency or instrumentality, fiduciary,
unincorporated association or other entity.
(b) Confidentiality Covenant. Quick covenants and agrees that any and
all data, figures, projections, estimates, lists, files, records,
documents, manuals or other such materials or information (financial or
otherwise) relating to Bank or Triangle and their respective banking
businesses, regulatory examinations, financial results and condition,
lending and deposit operations, customers (including lists of Bank's
customers and information regarding their accounts and business dealings
with Bank) , policies and procedures, computer systems and software,
shareholders, employees, officers and directors (herein referred to as
"Confidential Information") are proprietary to Triangle and are valuable,
special and unique assets of Triangle's business to which Quick has had
<PAGE>
access as an officer of the Bank and will have access during his employment
with Triangle. Quick agrees that (i) all such Confidential Information
shall be considered and kept as the confidential, private and privileged
records and information of Triangle, and (ii) at all times during the term
of his employment with Triangle and following the termination of this
Agreement or his employment with Triangle for any reason, and except as
shall be required in the course of the performance by Quick of his duties
on behalf of Triangle or otherwise pursuant to the direct, written
authorization of Triangle, Quick will not: divulge any such Confidential
Information to any other Person or Financial Institution; remove any such
Confidential Information in written or other recorded form from Triangle's
premises; or make any use of any Confidential Information for his own
purposes or for the benefit of any Person or Financial Institution other
than Triangle. However, following the termination of this Agreement or
Quick's employment with Triangle, this subparagraph (b) shall not apply to
any Confidential Information which then is in the public domain (provided
that Quick was not responsible, directly or indirectly, for permitting such
Confidential Information to enter the public domain without Triangle's
consent), or which is obtained by Quick from a third party which or who is
not obligated under an agreement of confidentiality with respect to such
information.
(c) Remedies for Breach. Quick understands and agrees that a breach or
violation by him of the covenants contained in Paragraphs 5 (a) and 5 (b)
of this Agreement will be deemed a material breach of this Agreement and
will cause irreparable injury to Triangle, and that it would be difficult
to ascertain the amount of monetary damages that would result from any such
violation. In the event of Quick's actual or threatened breach or violation
of the covenants contained in either such Paragraph, Triangle shall be
entitled to bring a civil action seeking an injunction restraining Quick
from violating or continuing to violate those covenants or from any
threatened violation thereof, or for any other legal or equitable relief
relating to the breach or violation of such covenant. Quick agrees that, if
Triangle institutes any action or proceeding against Quick seeking to
enforce any of such covenants or to recover other relief relating to an
actual or threatened breach or violation of any of such covenants, Quick
shall be deemed to have waived the claim or defense that Triangle has an
adequate remedy at law and shall not urge in any such action or proceeding
the claim or defense that such a remedy at law exists. However, the
exercise by Triangle of any such right, remedy, power or privilege shall
not preclude Triangle or its successors or assigns from pursuing any other
remedy or exercising any other right, power or privilege available to it
for any such breach or violation, whether at law or in equity, including
the recovery of damages, all of which shall be cumulative and in addition
to all other rights, remedies, powers or privileges of Triangle.
Notwithstanding anything contained herein to the contrary, Quick
agrees that the provisions of Paragraph 5(b) above and the remedies
provided in this Paragraph 5(c) for a breach by Quick shall be in addition
to, and shall not be deemed to supersede or to otherwise restrict, limit or
impair the rights of Triangle under the Trade Secrets Protection Act
contained in Article 24, Chapter 66 of the North Carolina General Statutes,
or any other state or federal law or regulation dealing with or providing a
remedy for the
<PAGE>
wrongful disclosure, misuse or misappropriation of trade secrets or other
proprietary or confidential information.
(d) Survival of Covenants. Quick's covenants and agreements and
Triangle's rights and remedies provided for in this Paragraph 5 shall
survive any termination of this Agreement or Quick's employment with
Triangle.
6. Standards. Quick, in the execution of his duties under this Agreement,
shall at all times and in all respects comply with the Triangle Bank Code
of Business Conduct (the "Code of Conduct") and the Triangle Bank Code of
Ethics (the "Code of Ethics"), as each of the same is in effect as of the
date hereof and as each shall be amended or supplemented subsequent
hereto),and with all applicable statutes, rules, regulations,
administrative orders, statements of policy and other pronouncements or
standards promulgated thereunder.
7. Termination and Termination Pay.
(a) Quick,s employment under this Agreement may be terminated at any
time by Quick upon sixty (60) days' written notice to Triangle. Upon such
termination, Quick shall be entitled to receive compensation through the
effective date of such termination; provided, however, that Triangle, in
its sole discretion, may elect for Quick not to serve out part or all of
said notice period.
(b) Quick's employment under this Agreement shall be terminated upon
the death of Quick during the term of this Agreement. If Quick's death
occurs between October 25, 1996 and October 24, 1997, Triangle shall pay to
Quick's estate an amount equal to Seventy-One Thousand Three Hundred and
no/100 Dollars ($71,300.00) . If Quick's death occurs between October 25,
1997 and October 24, 1998, Triangle shall pay to Quick's estate an amount
equal to Thirty-Five Thousand Seven Hundred and no/100 Dollars
($35,700.00). If Quick's death occurs after October 25, 1998, Quick's
estate shall be entitled to receive any compensation that Quick shall have
earned prior to the date of his death but which remains unpaid.
(c) In the event Quick becomes disabled during the term of his
employment hereunder and it is determined by Triangle that Quick is
permanently unable to perform his duties under this Agreement, Triangle
shall continue to compensate Quick at the level of compensation described
in Paragraph 2 above, and shall continue to provide Quick each of the other
benefits set forth or described in this Agreement, for the remaining term
of this Agreement, less any other payments provided under any disability
income plan of Triangle which is applicable to Quick. In the event of any
disagreement between Quick and Triangle as to whether Quick is physically
or mentally incapacitated such as will result in the termination of Quick's
employment pursuant to this Paragraph 7 (c) , the question of such
incapacity shall be submitted to an impartial and reputable physician for
determination, selected by mutual agreement of Quick and Triangle or,
failing such agreement, by two (2) physicians (one (1) of whom shall be
selected by Triangle and the
<PAGE>
other by Quick), and such determination of the question of such incapacity
by such physician or physicians shall be final and binding on Quick and
Triangle. Triangle shall pay the reasonable fees and expenses of such
physician or physicians in making any determination required under this
Paragraph 7(c).
(d) Triangle may terminate Quick's employment at any time for any
reason with or without "Cause" (as defined below) , but any termination by
Triangle other than termination for "Cause" (as defined below) shall not
prejudice Quick's right to compensation or other benefits under this
Agreement for its remaining term. Following any termination of Quick's
employment by Triangle for "Cause" Quick shall have no further rights under
this Agreement (including any right to receive compensation or other
benefits for any period after such termination).
For purposes of this Paragraph 7 (d) , Triangle shall have "Cause" to
terminate Quick's employment upon:
(i) A determination by Triangle's Board of Directors or its Executive
Committee, in good faith, that Quick (A) has breached in any material
respect any of the terms or conditions of this Agreement or of the Code of
Conduct or the Code of Ethics, or (B) is engaging or has engaged in willful
misconduct or conduct which is detrimental to the business prospects of
Triangle or which has had or likely will have a material adverse effect on
Triangle's business or reputation. Prior to any termination by Triangle of
Quick, s employment for a breach, failure to perform or conduct described
in this subparagraph (i), Triangle shall give Quick written notice which
describes such breach, failure to perform or conduct and if during a period
of five (5) days following such notice Quick cures or corrects the same to
the reasonable satisfaction of Triangle, then this Agreement shall remain
in full force and effect. However, notwithstanding the above, if Triangle
has given written notice to Quick on a previous occasion of the same or a
substantially similar breach, failure to perform or conduct, or of a
breach, failure to perform or conduct which Triangle's Board of Directors
or its Executive Committee determines in good faith to be of substantially
similar import, or if Triangle's Board of Directors or its Executive
Committee determines in good faith that the then current breach, failure to
perform or conduct is not reasonably curable, then termination under this
subparagraph (i) shall be effective immediately and Quick shall have no
right to cure such breach, failure to perform or conduct.
(ii) The violation by Quick of any applicable federal or state law, or
any applicable rule, regulation, order or statement of policy promulgated
by any governmental agency or authority having jurisdiction over Triangle
or any of its affiliates or subsidiaries (a "Regulatory Authority",
including without limitation the Federal Deposit Insurance Corporation, the
North Carolina Commissioner of Banks, the Federal Reserve Board or any
other banking regulator), which results from Quick's gross negligence,
willful misconduct or intentional disregard of such law, rule, regulation,
order or policy statement and results in any substantial damage, monetary
or otherwise, to Triangle or any of its affiliates or subsidiaries or to
Triangle's reputation;
<PAGE>
(iii) The commission in the course of Quick's employment with Triangle
of an act of fraud, embezzlement, theft or proven personal dishonesty
(whether or not resulting in criminal prosecution or conviction);
(iv) The conviction of Quick of any felony or any criminal offense
involving dishonesty or breach, of trust, or the occurrence of any event
described in Section 19 of the Federal Deposit Insurance Act or any other
event or circumstance which disqualifies Quick from serving as an employee
or executive officer of, or a party affiliated with, Triangle or its bank
holding company;
(v) Quick becomes unacceptable to, or is removed, suspended or
prohibited from participating in the conduct of Triangle's affairs (or if
proceedings for that purpose are commenced) by, any Regulatory Authority;
and,
(vi) The occurrence of any event believed by Triangle, in good faith,
to have resulted in Quick being excluded from coverage, or having coverage
limited as to Quick as compared to other covered officers or employees,
under Triangle's then current "blanket bond" or other fidelity bond or
insurance policy covering its directors, officers or employees.
8. Additional Regulatory Requirements. Notwithstanding anything contained
in this Agreement to the contrary, it is understood and agreed that Bank
(or its successors in interest) shall not be required to make any payment
or take any action under this Agreement if (a) Triangle is declared by any
Regulatory Authority to be insolvent, in default or operating in an unsafe
or unsound manner, or if (b) in the opinion of counsel to Triangle such
payment or action (i) would be prohibited by or would violate any provision
of state or federal law applicable to Triangle, including without
limitation the Federal Deposit Insurance Act and Chapter 53 of the North
Carolina General Statutes as now in effect or hereafter amended, (ii) would
be prohibited by or would violate any applicable rules, regulations, orders
or statements of policy, whether now existing or hereafter promulgated, of
any Regulatory Authority, or (iii) otherwise would be prohibited by any
Regulatory Authority.
9. Successors and Assigns. (a) This Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of Triangle which
shall acquire, directly or indirectly, by conversion, merger,
consolidation, purchase or otherwise, all or substantially all of the
assets of Triangle. (b) Triangle is contracting for the unique and personal
skills of Quick. Therefore, Quick shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the
written consent of Triangle.
10. Modification; Waiver; Amendments. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the parties hereto. No
waiver by either party hereto, at any time, of any breach by the other
party hereto of, or compliance with, any condition or provision
<PAGE>
of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No amendments or additions to this Agreement
shall be binding unless in writing and signed by both parties, except as
herein otherwise provided.
11. Applicable Law. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or otherwise,
by the laws of North Carolina, except to the extent that federal law shall
be deemed to apply.
12. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
13. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the transactions described herein and supersedes
any and all other oral or written agreement(s) heretofore made, and there
are no representations or inducements by or to, or and agreements between,
any of the parties hereto other than those contained herein in writing.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal and
in such form as to be binding as of the day and year first hereinabove written.
ATTEST:
/s/ Susan C. Gilbert
- ---------------------------
Secretary
[Corporate Seal]
TRIANGLE BANK
/s/ Michael S. Patterson
-------------------------------
By: Michael S. Patterson
President
/s/ Billy N. Quick, Sr. (SEAL)
------------------------
Billy N. Quick, Sr.
STATE OF NORTH CAROLINA
COUNTY OF WAKE
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (hereinafter referred to as this
"Agreement") is entered into as of December 23, 1997, by and among TRIANGLE
BANCORP, INC., a North Carolina corporation ("Triangle"), TRIANGLE BANK, a
banking corporation organized under the laws of North Carolina (the "Bank"), and
Edward O. Wessell (the "Officer").
WHEREAS, the Officer has heretofore been employed by Triangle and the Bank
as Executive Vice President; and
WHEREAS, the services of the Officer, the Officer's experience and
knowledge of the affairs of Triangle and the Bank and reputation and contacts in
the industry are extremely valuable to Triangle and the Bank; and
WHEREAS, Triangle and the Bank wish to attract and retain such
well-qualified executives and it is in the best interest of Triangle and the
Bank and of the Officer to secure the continued services of the Officer
notwithstanding any change of control of Triangle or the Bank; and
WHEREAS, Triangle and the Bank consider the establishment and maintenance
of a sound and vital management team to be part of their overall corporate
strategy and to be essential to protecting and enhancing the best interest of
Triangle, the Bank and Triangle's shareholders; and
WHEREAS, the parties desire to enter into this Agreement to provide the
Officer with security in the event of a change of control of Triangle or the
Bank to ensure the continued loyalty of the Officer during any change of control
in order to maximize shareholder value as well as the continued safe and sound
operation of Triangle and the Bank; and
<PAGE>
WHEREAS, the Officer, Triangle and the Bank acknowledge and agree that this
Agreement is not an employment agreement but is limited to circumstances giving
rise to a change of control of Triangle or the Bank as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants, and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Term. The initial term of this Agreement shall be for the period
commencing upon the effective date of this Agreement and ending two (2) calendar
years from the effective date of this Agreement. At each anniversary date of
this Agreement (i.e., December 23, 1999), the term automatically shall be
extended for an additional two (2) years on the same terms and conditions set
forth herein, unless Triangle and the Bank shall give written notice to the
Officer of their intention not to extend this Agreement for an additional two
(2) years, which notice shall be given at least thirteen (13) months prior to
the next anniversary date.
2. Change of Control.
(a) In the event of a termination of the Officer's employment in connection
with, or within twenty-four (24) months after, a "Change of Control" (as defined
in Subparagraph (e) below) of Triangle or the Bank, for reasons other than for
"cause" (as defined in Subparagraph (b) below), the Officer shall be entitled to
receive the sum set forth in Subparagraph (d) below. Said sum shall be payable
as provided in Subparagraph (f) below, provided, however, that the Officer is
employed on a full-time basis by the Bank at the effective time of the "Change
of Control", except as provided in Subparagraph (i) below.
(b) For purposes of this Agreement, termination for "cause" shall include
termination because of the Officer's personal dishonesty, incompetence, willful
misconduct, breach of
- 2 -
<PAGE>
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation other than traffic
violations or similar offenses, or final cease-and-desist order.
(c) The Officer shall have the right to terminate this Agreement upon the
occurrence of any of the following events (the "Termination Events") within
twenty-four (24) months following a Change of Control of Triangle or the Bank:
(i) Officer is assigned any duties and/or responsibilities that are
inconsistent with his duties or responsibilities at the time of the
Change of Control;
(ii) Officer's annual base salary is reduced below the amount in
effect as of the effective date of a Change of Control;
(iii) Officer's life insurance, medical or hospitalization insurance,
disability insurance, stock option plans, stock purchase plans,
deferred compensation plans, management retention plans, retirement
plans, or similar plans or benefits being provided by the Bank to the
Officer as of the effective date of the Change of Control are reduced
in their level, scope, or coverage, or any such insurance, plans, or
benefits are eliminated, unless such reduction or elimination applies
proportionately to all salaried employees of the Bank who participated
in such benefits prior to such Change of Control; or
(iv) Officer is transferred to a location which is more than fifty
(50) miles from his current principal work location, without the
Officer's express written consent.
A Termination Event shall be deemed to have occurred on the date such
action or event is implemented or takes effect.
(d) In the event that the Officer terminates this Agreement pursuant to
this Paragraph 2, the Bank will be obligated (1) to pay or cause to be paid to
the Officer an amount equal to two (2) times (i) the Officer's then current
salary plus (ii) the average of the cash bonus paid to the Officer by the Bank
under the Bank's Cash Bonus Plan during the immediately preceding two (2) years,
and (2) to continue for a period of two (2) years after such termination all
benefits the Officer was
- 3 -
<PAGE>
receiving and entitled to at such termination date under Triangle's and the
Bank's benefit programs and plans, including, but not limited to, medical,
disability, life and accident insurance coverage, automobile allowance,
professional qualification allowance, and club dues (or, at the Officer's
election, the Bank will pay the dollar equivalent of such benefits).
(e) For the purposes of this Agreement, the term Change of Control shall
mean any of the following events:
(i) After the effective date of this Agreement, any "person" (as such
term is defined Section 7(j)(8)(A) of the Change in Bank Control Act
of 1978), directly or indirectly, acquires beneficial ownership of
voting stock, or acquires irrevocable proxies or any combination of
voting stock and irrevocable proxies, representing fifty percent (50%)
or more of any class of voting securities of Triangle or the Bank, or
acquires control of in any manner the election of a majority of the
directors of Triangle or the Bank;
(ii) Triangle or the Bank consolidates or merges with or into another
corporation, association, or entity, or is otherwise reorganized,
where Triangle or the Bank is not the surviving corporation in such
transaction and the holders of the voting securities of Triangle or
the Bank immediately prior to such acquisition own less than a
majority of the voting securities of the surviving entity immediately
after the transaction; or
(iii) All or substantially all of the assets of Triangle or the Bank
are sold or otherwise transferred to or are acquired by any other
corporation, association, or other person, entity, or group.
Notwithstanding the other provisions of this Paragraph 2, a transaction or
event shall not be considered a Change of Control if, prior to the consummation
or occurrence of such transaction or event, the Officer, Triangle and the Bank
agree in writing that the same shall not be treated as a Change of Control for
purposes of this Agreement.
- 4 -
<PAGE>
(f) Amounts payable pursuant to this Paragraph 2 shall be paid, at the
option of the Officer, either in one lump sum or in twenty-four (24) equal
monthly payments.
(g) Following a Termination Event which gives rise to the Officer's rights
hereunder, the Officer shall have two (2) years from the date of occurrence of
the Termination Event to terminate this Agreement pursuant to this Paragraph 2.
Any such termination shall be deemed to have occurred only upon delivery to the
Bank or any successor thereto, of written notice of termination which describes
the Change of Control and Termination Event. If the Officer does not so
terminate this Agreement within such two-year period, the Officer shall
thereafter have no further rights hereunder with respect to that Termination
Event, but shall retain rights, if any, hereunder with respect to any other
Termination Event as to which such period has not expired.
(h) In the event any dispute shall arise between the Officer and the Bank
as to the terms or interpretation of this Agreement, including this Paragraph 2,
whether instituted by formal legal proceedings or otherwise, including any
action taken by the Officer to enforce the terms of this Paragraph 2 or in
defending against any action taken by Triangle or the Bank, the Bank shall
reimburse the Officer for all costs and expenses, proceedings or actions, in the
event the Officer prevails in any such action.
(i) It is further agreed that the payment agreed in this Paragraph 2 to be
paid by the Bank to the Officer shall be due and paid to the Officer should a
Change of Control (as defined above) be agreed to by Triangle and/or the Bank or
be consummated within six (6) months of the Officer's involuntary termination of
employment with the Bank for reasons other than for "cause" as such term is
defined in Subparagraph 2(b) hereof.
3. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon any corporate or other successor of Triangle or the Bank which
shall acquire, directly
- 5 -
<PAGE>
or indirectly, by conversion, merger, consolidation, purchase, or otherwise, all
or substantially all of the assets of Triangle or the Bank.
4. Modification; Waiver; Amendments. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Officer, Triangle and the Bank, except as
herein otherwise provided. No waiver by any party hereto, at any time, of any
breach by any party hereto, or compliance with, any condition or provision of
this Agreement to be performed by such party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No amendments or additions to this Agreement shall be binding unless in
writing and signed by the parties, except as herein otherwise provided.
5. Applicable Law. This Agreement shall be governed in all respects whether
as to validity, construction, capacity, performance, or otherwise, by the laws
of North Carolina, except to the extent that federal law shall be deemed to
apply.
6. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provisions shall not affect the
validity or enforceability of the other provision hereof.
- 6 -
<PAGE>
IN TESTIMONY WHEREOF, Triangle and the Bank have caused this Agreement to
be executed under seal and in such form as to be binding, all by authority of
their Board of Directors first duly given, and the individual party hereto has
set said party's hand hereto and has adopted as said party's seal the
typewritten word "SEAL" appearing beside said party's name, this the day and
year first above written.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
------------------------------
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
- ---------------------------
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
TRIANGLE BANK
By: /s/ Michael S. Patterson
------------------------------
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
- ---------------------------
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
/s/ Edward O. Wessell (SEAL)
---------------------------
Edward O. Wessell
- 7 -
TRIANGLE BANK
SUPPLEMENTAL EMPLOYEE
RETIREMENT PLAN
----------
Effective as of January 1, 1998
<PAGE>
TRIANGLE BANK
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
----------
ARTICLE I
INTRODUCTION
1.01. In General. This Plan is an optional deferred compensation plan that
is intended to provide supplemental retirement benefits to Michael S. Patterson,
President and Chief Executive Officer of Triangle Bank ("Participant") to
encourage Participant to remain as an employee of Triangle Bank and to reward
him for contributing materially to the success of Triangle Bank. The Plan shall
be construed and interpreted for purposes of the Code and the Act as an unfunded
plan maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees within the meaning
of Section 201(2) of the Act.
1.02 Name. This Plan shall be known as the Triangle Bank Supplemental
Employee Retirement Plan (herein referred to as the "Plan").
1.03 Effective Date. The Plan is effective as of January 1, 1998.
ARTICLE II
DEFINITIONS
2.01 "Actuarial Equivalence" means present values calculated using the
interest rate on 30-year treasury securities for the month prior to the first
day of the plan year.
2.02 "Act" means the Employee Retirement Income Security Act of 1974 as it
may be amended from time to time.
2.03 "Beneficiary" means the Participant's spouse, if living and not
legally separated from the Participant.
2.04 "Board" means the Board of Directors of the Company.
2.05 "Change in Control" means, for purposes of this Agreement, that a
change shall have occurred upon any purchase, assignment, merger, consolidation,
pledge or transfer of any kind (e.g., voluntary, involuntary or by operation of
law) of the voting securities of the Company, or an increase in percentage of
ownership of the Company resulting from a redemption of voting securities (any
of the foregoing transactions hereinafter referred to as an "Acquisition") if,
after the Acquisition, (i) the acquiring party (or parties acting in concert)
owns, controls, or holds the power to vote fifty percent (50%) or more of any
class of voting securities of the Company, (ii) the Company is not the surviving
entity and holders of the voting securities of the Company
<PAGE>
immediately prior to such Acquisition own less than a majority of the voting
securities of the surviving entity immediately after the Acquisition, (iii) the
directors of the Company constitute less than a majority of the Board of
Directors of the surviving entity, or (iv) an agreement, plan, contract or other
arrangement is entered into providing for any occurrence which as defined in
this Agreement would constitute a Change in Control, or the entering into by the
Company of serious negotiations or receipt by the Company of an offer for the
sale of substantially all of the assets or stock, or a merger of the Company
with another institution, or any such similar type of transaction, and the
occurrence of any of the events described in (i) through (iii) above within
twelve (12) months thereafter, even if the event resulting in the Change in
Control is not consummated with the same group, institution or entity with whom
initial negotiations were commenced.
2.06 "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereof, as interpreted by the rules and regulations issued
thereunder, in each case as in effect from time to time.
2.07 "Company" means, as the context of this Plan requires, Triangle Bank,
a North Carolina banking corporation with its principal office in the State of
North Carolina, and/or Triangle Bank's parent holding company, Triangle Bancorp,
Inc., a North Carolina corporation with its principal office in the State of
North Carolina, or any company or organization that (i) succeeds Triangle Bank
or Triangle Bancorp, Inc. by merger of consolidation, or (ii) acquires
substantially all of the operating assets of Triangle Bank or Triangle Bancorp,
Inc.
2.08 "Early Retirement Date" means the first day of the month (prior to the
Normal Retirement Date) coinciding or next following the date on which the
Participant or former Participant attains his 55th birthday ("Early Retirement
Age").
2.09 "Employer" means the Company, and any entity required to be aggregated
with the Company by Sections 414(b), (c), (m), or (o) of the Code.
2.10 "Normal Form of Payment" means a monthly annuity payable in 180
installments, to be paid to the Participant, or, in the case of the
Participant's death, his Beneficiary.
2.11 "Normal Retirement Date" means the first day of the month coinciding
or next following the Participant's 65th birthday ("Normal Retirement Age").
2.12 "Plan" means this instrument, including all amendments thereto.
2.13 "Vested" means that the benefit payable under this Plan with respect
to the Participant is nonforfeitable in accordance with Section 3.3.
2
<PAGE>
ARTICLE III
DEFERRED COMPENSATION
3.01 Normal Retirement. Upon retirement on or after his Normal Retirement
Age, the Employer shall pay Participant the Vested portion of an annual
supplemental retirement benefit (which benefit is herein called his Normal
Retirement Benefit), of Sixty Six Thousand Six Hundred Sixty Seven and no/100
dollars ($66,667.00), without any reduction or offset for any reason.
Participant shall become Vested in his Normal Retirement Benefit in accordance
with Section 3.3. The Normal Retirement Benefit shall be payable over fifteen
(15) years according to the Normal Form of Payment and shall be paid, at the
Participant's election, on either the first regular payroll day (A) in the month
following his retirement or (B) in January beginning with the first January
after the Participant's retirement.
3.02 Early Retirement. Upon retirement on or after his Early Retirement Age
but prior to his Normal Retirement Date, the Employer shall pay Participant, in
lieu of a Normal Retirement Benefit, the Vested portion (in accordance with
Section 3.3) of an annual supplemental retirement benefit (which benefit is
herein called his Early Retirement Benefit), of a certain percentage of the
Normal Retirement Benefit, to be determined as follows:
Early Retirement Benefit as a
Age at Retirement Percentage of Normal Retirement
----------------- -------------------------------
55 72%
56 75
57 78
58 81
59 84
60 87
61 90
62 93
63 96
64 99
The Early Retirement Benefit shall be payable according to the Normal Form of
Payment commencing on the first regular payroll day of the month following the
Participant's retirement on or after his Early Retirement Date.
3.03 Vested Benefit. Participant shall become Vested in his Normal
Retirement Benefit at a rate of ten percent (10%) per year on each December 31,
beginning on December 31, 1998, and shall be fully Vested on the earlier of
December 31, 2007 or attainment of Normal Retirement Age. Upon termination of
employment from the Employer at any time before age 55 (for any reason other
than death, disability or a Change in Control), then Participant shall not be
entitled to any benefits under this Agreement.
3
<PAGE>
3.04 Death Benefit. If the Participant dies before the commencement of the
payment of benefits payable under Section 3.1, 3.2, 3.5, or 3.6, the Employer
shall pay to the Participant's Beneficiary the Vested portion of the
Participant's Normal Retirement Benefit under Section 3.1 earned up to
immediately prior to Participant's death, payable in the Normal Form of Payment
(or as then payable under Section 3.6) commencing on the first regular payroll
day of the month following the date of the Participant's death. If Participant
dies after the commencement of the payment of benefits payable under Section
3.1, 3.2, 3.5 or 3.6, the Employer shall pay to the Participant's Beneficiary
the remaining installments of the applicable benefit payable to the Participant
immediately prior to his or her death, payable in the Normal Form of Payment (or
as then payable under Section 3.6) commencing on the first regular payroll day
of the month following the date of the Participant's death. No benefit shall be
payable to the Participant's Beneficiary following the date of the Beneficiary's
death, notwithstanding anything herein to the contrary
3.05 Benefit Payable on Disability. In the event of the Participant's total
and permanent disability, Participant shall be fully vested in his or her Early
Retirement Benefit or Normal Retirement Benefit, as the case may be, but the
Participant must attain Early Retirement Age before any payment shall begin. The
Participant may elect to begin receiving payment as provided in Section 3.2 upon
attainment of whatever Early Retirement Age the Participant elects to begin
receiving payment or as provided in Section 3.1 upon attainment of
Normal Retirement Age. If the Participant has reached Normal Retirement Age at
the time of his or her disability, the Participant shall be paid the Normal
Retirement Benefit, payable under the Normal Form of Payment commencing on
the first regular payroll day of the month following the date of the
Participant's disability.
3.06 Benefit Payable on Change in Control. If a Change in Control of the
ownership of the Company occurs, Participant shall be fully Vested in his or her
Normal Retirement Benefit and without regard to the age limitations of Section
3.2. At the Participant's election, (A) the Normal Retirement Benefit shall be
payable in the Normal Form of Payment beginning on the first regular payroll day
in January in the year subsequent to the year in which the Participant reaches
Normal Retirement Age, or (B) the Normal Retirement Benefit will be converted to
a lump sum by multiplying the Normal Retirement Benefit by the present value of
one dollar paid at the beginning of each year for fifteen (15) years, using the
Actuarial Equivalence interest rate for the plan year in which distribution
occurs. The lump sum amount is then payable to the Participant in either one or
two annual installments, at the Participant's election, to be paid on the first
regular payroll day in a month selected by the Participant, beginning in either
the year in which the Change in Control occurs or the following year, at the
Participant's election. If, when a Change in Control occurs, payment of the
Participant's benefit hereunder has already begun, or the Participant or his or
her Beneficiary is eligible for payment on account of the Participant's
disability, retirement or death, the Participant (or the Participant's
Beneficiary, if the Participant has died) may elect for benefits to be paid or
continue to be paid as provided in, as applicable, Section 3.1, 3.2, 3.4 or 3.5,
or for the applicable benefit to be converted into a lump sum, using the
Actuarial Equivalence interest rate for the plan year in which the Change in
Control occurs, payable in either one or two annual installments at the
Participant's election (or that of his or her Beneficiary, if the Participant
has died) beginning with the year in which the Change in Control occurs.
4
<PAGE>
ARTICLE IV
MISCELLANEOUS
4.01 Indemnification of Board. In addition to such other rights of
indemnification as they may have as directors of the Company or as members of
the Compensation Committee of the Board, the members of the Board or the
Compensation Committee shall be indemnified by the Employer against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceedings, or
in connection with any appeal therein, to which they or any of them may be a
part by reason of any action taken in connection with this Plan, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit, or
proceeding that such member is liable for negligence or misconduct in the
performance of his duties; provided that within sixty (60) days after
institution of any such action, suit, or proceeding a Board or Compensation
Committee member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
4.02 Amendments. The Company may from time to time amend or terminate, in
whole or in part, any or all of the provisions of the Plan; provided, however,
no such action shall adversely affect the existing or future rights or interests
of any Participant under this Plan without his written consent. Any such action
shall be adopted by formal action of the Board and executed by an officer,
director, or person authorized to act on behalf of the Company.
4.03 Nonalienation. Except insofar as applicable law may otherwise require,
(i) no amount payable to or in respect of any Participant at any time shall be
subject in any manner to alienation by such Participant or Beneficiary by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment,
charge, or encumbrance of any kind, any attempt to so alienate, sell, transfer,
assign, pledge, attach, charge, or otherwise encumber any such amount, whether
presently or thereafter payable, shall be void; and (ii) the Employer shall in
no manner be liable for or subject to the debts, liabilities, contracts,
engagements, or torts of any Participant or Beneficiary.
4.04 Employment Relationship. Nothing contained in this Plan shall be
deemed to give any Participant or employee the right to be retained in the
service of the Employer, or to interfere with the right of the Employer to
discharge any Participant or employee at any time regardless of the effect which
such discharge shall have upon him as the Participant under this Plan.
4.05 Participation in Other Employee Benefit Plans. Nothing contained in
this Plan shall in any manner modify, impair, or affect the existing or future
rights or interests of any Participant (i) to receive any employee benefits to
which he would otherwise be entitled, or (ii) to participate in any present or
future "employee benefit plan" (as defined in Section 3(3) of the Act) of the
Employer. Any deferred compensation payable under this Plan shall not be deemed
salary
5
<PAGE>
or other compensation to any Participant for the purpose of computing benefits
to which he may be entitled under any "employee benefit plan" of the Employer.
4.06 Relationship. Notwithstanding any other provision of this Plan, this
Plan and action taken pursuant to it shall not be deemed or construed to
establish a trust or fiduciary relationship of any kind between or among the
Company, Participant, beneficiaries, or any other persons. The Plan is intended
to be unfunded for purposes of the Code and the Act. The right of Participant
and his Beneficiary to receive payment of deferred compensation is strictly a
contractual right to payment, and this Plan does not grant nor shall it be
deemed to grant Participant, his Beneficiary, or any other person any interest
in or right to any of the funds, property, or assets of the Company other than
as an unsecured general creditor of the Company.
4.07 Construction of Plan. This Plan shall be construed and enforced
according to the laws of the State of North Carolina applicable to contracts
made in North Carolina, without reference to doctrines of conflict or choice of
laws, regardless of the Participant's domicile, and, to the extent applicable,
federal law. Whenever any words are used herein in the singular or plural form,
they shall be construed as though they were also used in the other form in all
cases where they would so apply. The use of any gender pronoun shall be deemed
to include all other genders or refer to the other gender, as the context
requires. The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
IN WITNESS WHEREOF, this Plan has been executed as of the 1st day of January,
1998.
TRIANGLE BANK
By:
------------------------------
------------------------------
Attest:
- ---------------------------
Susan C. Gilbert, Secretary
[Corporate Seal]
PARTICIPANT:
(SEAL)
---------------------------
Michael S. Patterson
6
TRIANGLE BANK
SUPPLEMENTAL EMPLOYEE
RETIREMENT PLAN
--------------------------
Effective as of January 1, 1998
<PAGE>
TRIANGLE BANK
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
-----------------------
ARTICLE I
INTRODUCTION
1.01. In General. This Plan is an optional deferred compensation plan that
is intended to provide supplemental retirement benefits to __________________,
Executive Vice President of Triangle Bank ("Participant") to encourage
Participant to remain as an employee of Triangle Bank and to reward him for
contributing materially to the success of Triangle Bank. The Plan shall be
construed and interpreted for purposes of the Code and the Act as an unfunded
plan maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees within the meaning
of Section 201(2) of the Act.
1.02 Name. This Plan shall be known as the Triangle Bank Supplemental
Employee Retirement Plan (herein referred to as the "Plan").
1.03 Effective Date. The Plan is effective as of January 1, 1998.
ARTICLE II
DEFINITIONS
2.01 "Actuarial Equivalence" means present values calculated using the
interest rate on 30-year treasury securities for the month prior to the first
day of the plan year.
2.02 "Act" means the Employee Retirement Income Security Act of 1974 as it
may be amended from time to time.
2.03 "Beneficiary" means the Participant's spouse, if living and not
legally separated from the Participant.
2.04 "Board" means the Board of Directors of the Company.
2.05 "Change in Control" means, for purposes of this Agreement, that a
change shall have occurred upon any purchase, assignment, merger, consolidation,
pledge or transfer of any kind (e.g., voluntary, involuntary or by operation of
law) of the voting securities of the Company, or an increase in percentage of
ownership of the Company resulting from a redemption of voting securities (any
of the foregoing transactions hereinafter referred to as an "Acquisition") if,
after the Acquisition, (i) the acquiring party (or parties acting in concert)
owns, controls, or holds the power to vote fifty percent (50%) or more of any
class of voting securities of the Company, (ii) the Company is not the surviving
entity and holders of the voting securities of the Company immediately prior to
such Acquisition own less than a majority of the voting securities of the
<PAGE>
surviving entity immediately after the Acquisition, (iii) the directors of the
Company constitute less than a majority of the Board of Directors of the
surviving entity, or (iv) an agreement, plan, contract or other arrangement is
entered into providing for any occurrence which as defined in this Agreement
would constitute a Change in Control, or the entering into by the Company of
serious negotiations or receipt by the Company of an offer for the sale of
substantially all of the assets or stock, or a merger of the Company with
another institution, or any such similar type of transaction, and the occurrence
of any of the events described in (i) through (iii) above within twelve (12)
months thereafter, even if the event resulting in the Change in Control is not
consummated with the same group, institution or entity with whom initial
negotiations were commenced.
2.06 "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereof, as interpreted by the rules and regulations issued
thereunder, in each case as in effect from time to time.
2.07 "Company" means, as the context of this Plan requires, Triangle Bank,
a North Carolina banking corporation with its principal office in the State of
North Carolina, and/or Triangle Bank's parent holding company, Triangle Bancorp,
Inc., a North Carolina corporation with its principal office in the State of
North Carolina, or any company or organization that (i) succeeds Triangle Bank
or Triangle Bancorp, Inc. by merger of consolidation, or (ii) acquires
substantially all of the operating assets of Triangle Bank or Triangle Bancorp,
Inc.
2.08 "Early Retirement Date" means the first day of the month (prior to the
Normal Retirement Date) coinciding or next following the date on which the
Participant or former Participant attains his 55th birthday ("Early Retirement
Age").
2.09 "Employer" means the Company, and any entity required to be aggregated
with the Company by Sections 414(b), (c), (m), or (o) of the Code.
2.10 "Normal Form of Payment" means a monthly annuity payable in 180
installments, to be paid to the Participant, or, in the case of the
Participant's death, his Beneficiary.
2.11 "Normal Retirement Date" means the first day of the month coinciding
or next following the Participant's 65th birthday ("Normal Retirement Age").
2.12 "Plan" means this instrument, including all amendments thereto.
2.13 "Vested" means that the benefit payable under this Plan with respect
to the Participant is nonforfeitable in accordance with Section 3.3.
2
<PAGE>
ARTICLE III
DEFERRED COMPENSATION
3.01 Normal Retirement. Upon retirement on or after his Normal Retirement
Age, the Employer shall pay Participant the Vested portion of an annual
supplemental retirement benefit (which benefit is herein called his Normal
Retirement Benefit), of Fifty Thousand and no/100 dollars ($50,000.00), without
any reduction or offset for any reason. Participant shall become Vested in his
Normal Retirement Benefit in accordance with Section 3.3. The Normal Retirement
Benefit shall be payable over fifteen (15) years according to the Normal Form of
Payment and shall be paid, at the Participant's election, on either the first
regular payroll day (A) in the month following his retirement or (B) in January
beginning with the first January after the Participant's retirement.
3.02 Early Retirement. Upon retirement on or after his Early Retirement Age
but prior to his Normal Retirement Date, the Employer shall pay Participant, in
lieu of a Normal Retirement Benefit, the Vested portion (in accordance with
Section 3.3) of an annual supplemental retirement benefit (which benefit is
herein called his Early Retirement Benefit), of a certain percentage of the
Normal Retirement Benefit, to be determined as follows:
Early Retirement Benefit as a
Age at Retirement Percentage of Normal Retirement
----------------- -------------------------------
55 72%
56 75
57 78
58 81
59 84
60 87
61 90
62 93
63 96
64 99
The Early Retirement Benefit shall be payable according to the Normal Form of
Payment commencing on the first regular payroll day of the month following the
Participant's retirement on or after his Early Retirement Date.
3.03 Vested Benefit. Participant shall become Vested in his Normal
Retirement Benefit at a rate of ten percent (10%) per year on each December 31,
beginning on December 31, 1998, and shall be fully Vested on the earlier of
December 31, 2007 or attainment of Normal Retirement Age. Upon termination of
employment from the Employer at any time before age 55 (for any reason other
than death, disability or a Change in Control), then Participant shall not be
entitled to any benefits under this Agreement.
3
<PAGE>
3.04 Death Benefit. If the Participant dies before the commencement of the
payment of benefits payable under Section 3.1, 3.2, 3.5, or 3.6, the Employer
shall pay to the Participant's Beneficiary the Vested portion of the
Participant's Normal Retirement Benefit under Section 3.1 earned up to
immediately prior to Participant's death, payable in the Normal Form of Payment
(or as then payable under Section 3.6) commencing on the first regular payroll
day of the month following the date of the Participant's death. If Participant
dies after the commencement of the payment of benefits payable under Section
3.1, 3.2, 3.5 or 3.6, the Employer shall pay to the Participant's Beneficiary
the remaining installments of the applicable benefit payable to the Participant
immediately prior to his or her death, payable in the Normal Form of Payment (or
as then payable under Section 3.6) commencing on the first regular payroll day
of the month following the date of the Participant's death. No benefit shall be
payable to the Participant's Beneficiary following the date of the Beneficiary's
death, notwithstanding anything herein to the contrary.
3.05 Benefit Payable on Disability. In the event of the Participant's total
and permanent disability, Participant shall be fully vested in his or her Early
Retirement Benefit or Normal Retirement Benefit, as the case may be, but the
Participant must attain Early Retirement Age before any payment shall begin. The
Participant may elect to begin receiving payment as provided in Section 3.2 upon
attainment of whatever Early Retirement Age the Participant elects to begin
receiving payment or as provided in Section 3.1 upon attainment of
Normal Retirement Age. If the Participant has reached Normal Retirement Age at
the time of his or her disability, the Participant shall be paid the Normal
Retirement Benefit, payable under the Normal Form of Payment commencing on
the first regular payroll day of the month following the date of the
Participant's disability.
3.06 Benefit Payable on Change in Control. If a Change in Control of the
ownership of the Company occurs, Participant shall be fully Vested in his or her
Normal Retirement Benefit and without regard to the age limitations of Section
3.2. At the Participant's election, (A) the Normal Retirement Benefit shall be
payable in the Normal Form of Payment beginning on the first regular payroll day
in January in the year subsequent to the year in which the Participant reaches
Normal Retirement Age, or (B) the Normal Retirement Benefit will be converted to
a lump sum by multiplying the Normal Retirement Benefit by the present value of
one dollar paid at the beginning of each year for fifteen (15) years, using the
Actuarial Equivalence interest rate for the plan year in which distribution
occurs. The lump sum amount is then payable to the Participant in either one or
two annual installments, at the Participant's election, to be paid on the first
regular payroll day in a month selected by the Participant, beginning in either
the year in which the Change in Control occurs or the following year, at the
Participant's election. If, when a Change in Control occurs, payment of the
Participant's benefit hereunder has already begun, or the Participant or his or
her Beneficiary is eligible for payment on account of the Participant's
disability, retirement or death, the Participant (or the Participant's
Beneficiary, if the Participant has died) may elect for benefits to be paid or
continue to be paid as provided in, as applicable, Section 3.1, 3.2, 3.4 or 3.5,
or for the applicable benefit to be converted into a lump sum, using the
Actuarial Equivalence interest rate for the plan year in which the Change in
Control occurs, payable in either one or two annual installments at the
Participant's election (or that of his or her Beneficiary, if the Participant
has died) beginning with the year in which the Change in Control occurs.
4
<PAGE>
ARTICLE IV
MISCELLANEOUS
4.01 Indemnification of Board. In addition to such other rights of
indemnification as they may have as directors of the Company or as members of
the Compensation Committee of the Board, the members of the Board or the
Compensation Committee shall be indemnified by the Employer against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceedings, or
in connection with any appeal therein, to which they or any of them may be a
part by reason of any action taken in connection with this Plan, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit, or
proceeding that such member is liable for negligence or misconduct in the
performance of his duties; provided that within sixty (60) days after
institution of any such action, suit, or proceeding a Board or Compensation
Committee member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
4.02 Amendments. The Company may from time to time amend or terminate, in
whole or in part, any or all of the provisions of the Plan; provided, however,
no such action shall adversely affect the existing or future rights or interests
of any Participant under this Plan without his written consent. Any such action
shall be adopted by formal action of the Board and executed by an officer,
director, or person authorized to act on behalf of the Company.
4.03 Nonalienation. Except insofar as applicable law may otherwise require,
(i) no amount payable to or in respect of any Participant at any time shall be
subject in any manner to alienation by such Participant or Beneficiary by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment,
charge, or encumbrance of any kind, any attempt to so alienate, sell, transfer,
assign, pledge, attach, charge, or otherwise encumber any such amount, whether
presently or thereafter payable, shall be void; and (ii) the Employer shall in
no manner be liable for or subject to the debts, liabilities, contracts,
engagements, or torts of any Participant or Beneficiary.
4.04 Employment Relationship. Nothing contained in this Plan shall be
deemed to give any Participant or employee the right to be retained in the
service of the Employer, or to interfere with the right of the Employer to
discharge any Participant or employee at any time regardless of the effect which
such discharge shall have upon him as the Participant under this Plan.
4.05 Participation in Other Employee Benefit Plans. Nothing contained in
this Plan shall in any manner modify, impair, or affect the existing or future
rights or interests of any Participant (i) to receive any employee benefits to
which he would otherwise be entitled, or (ii) to participate in any present or
future "employee benefit plan" (as defined in Section 3(3) of the Act) of the
Employer. Any deferred compensation payable under this Plan shall not be deemed
salary
5
<PAGE>
or other compensation to any Participant for the purpose of computing benefits
to which he may be entitled under any "employee benefit plan" of the Employer.
4.06 Relationship. Notwithstanding any other provision of this Plan, this
Plan and action taken pursuant to it shall not be deemed or construed to
establish a trust or fiduciary relationship of any kind between or among the
Company, Participant, beneficiaries, or any other persons. The Plan is intended
to be unfunded for purposes of the Code and the Act. The right of Participant
and his Beneficiary to receive payment of deferred compensation is strictly a
contractual right to payment, and this Plan does not grant nor shall it be
deemed to grant Participant, his Beneficiary, or any other person any interest
in or right to any of the funds, property, or assets of the Company other than
as an unsecured general creditor of the Company.
4.07 Construction of Plan. This Plan shall be construed and enforced
according to the laws of the State of North Carolina applicable to contracts
made in North Carolina, without reference to doctrines of conflict or choice of
laws, regardless of the Participant's domicile, and, to the extent applicable,
federal law. Whenever any words are used herein in the singular or plural form,
they shall be construed as though they were also used in the other form in all
cases where they would so apply. The use of any gender pronoun shall be deemed
to include all other genders or refer to the other gender, as the context
requires. The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
IN WITNESS WHEREOF, this Plan has been executed as of the 1st day of January,
1998.
TRIANGLE BANK
By:
--------------------------------
Michael S. Patterson, President
Attest:
- ---------------------------
Susan C. Gilbert, Secretary
[Corporate Seal]
PARTICIPANT:
(SEAL)
-----------------------------
6
EXHIBIT 21
SUBSIDIARIES OF TRIANGLE BANCORP, INC.
1. Triangle Bank
(owned 100% by Triangle Bancorp, Inc.)
A. Triangle Investment Services, Inc.
(owned 100% by Triangle Bank)
B. TriCorp, Inc.
(owned 100% by Triangle Bank)
2. Bank of Mecklenburg
(owned 100% by Triangle Bancorp, Inc.)
A. BomCorp, Inc.
(owned 100% by Bank of Mecklenburg)
3. Coastal Leasing LLC
(owned 100% by Triangle Bancorp, Inc.)
A. East Coast Financial, Inc.
(owned 100% by Coastal Leasing LLC)
B. Coastal Funding Services, Inc.
(owned 100% by East Coast Financial, Inc.)
4. Triangle Capital Trust
(owned 100% by Triangle Bancorp, Inc.)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Triangle Bancorp, Inc. on Forms S-8 (File Nos. 33-82020, 33-82022, 333-17511,
333-23131, 333-30091 and 333-40931) of our report dated January 19, 1998, on our
audits of the consolidated financial statements of Triangle Bancorp, Inc. as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, which report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Raleigh, North Carolina
March 26, 1998
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<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 50,398 50,398
<INT-BEARING-DEPOSITS> 23,027 23,027
<FED-FUNDS-SOLD> 1,549 1,549
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 411,920 411,920
<INVESTMENTS-CARRYING> 94,793 94,793
<INVESTMENTS-MARKET> 95,946 95,946
<LOANS> 956,395 956,395
<ALLOWANCE> 13,800 13,800
<TOTAL-ASSETS> 1,605,012 1,605,012
<DEPOSITS> 1,191,926 1,191,926
<SHORT-TERM> 255,006 255,006
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<INTEREST-TOTAL> 106,548 29,041
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<INTEREST-EXPENSE> 52,962 14,411
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<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 34,977 41,858 49,157
<INT-BEARING-DEPOSITS> 124 8,326 33,234
<FED-FUNDS-SOLD> 4,170 350 9,930
<TRADING-ASSETS> 54,447 53,440 0
<INVESTMENTS-HELD-FOR-SALE> 244,009 232,574 286,971
<INVESTMENTS-CARRYING> 91,396 104,526 101,196
<INVESTMENTS-MARKET> 91,440 105,117 102,654
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<TOTAL-ASSETS> 1,294,844 1,345,780 1,489,319
<DEPOSITS> 1,075,654 1,049,184 1,221,657
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0 0 0
0 0 0
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<INTEREST-LOAN> 18,632 20,117 21,318
<INTEREST-INVEST> 5,339 5,271 5,547
<INTEREST-OTHER> 183 245 855
<INTEREST-TOTAL> 24,154 25,633 27,720
<INTEREST-DEPOSIT> 10,465 10,985 11,450
<INTEREST-EXPENSE> 11,718 12,605 14,228
<INTEREST-INCOME-NET> 12,436 13,028 13,492
<LOAN-LOSSES> 544 935 1,105
<SECURITIES-GAINS> 378 593 475
<EXPENSE-OTHER> 8,489 8,433 9,043
<INCOME-PRETAX> 5,894 8,527 6,316
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<EXTRAORDINARY> 0 0 0
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<NET-INCOME> 3,675 5,367 4,137
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<EPS-DILUTED> 0.28 0.40 0.31
<YIELD-ACTUAL> 4.36 4.33 4.04
<LOANS-NON> 2,012 2,121 2,007
<LOANS-PAST> 4,359 3,712 5,710
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<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 10,890 11,928 12,599
<CHARGE-OFFS> 159 623 1,389
<RECOVERIES> 368 359 163
<ALLOWANCE-CLOSE> 11,928 12,599 13,398
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<ALLOWANCE-UNALLOCATED> 0 0 0
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<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 38,752 39,482 53,247 40,178
<INT-BEARING-DEPOSITS> 774 798 701 879
<FED-FUNDS-SOLD> 0 0 0 2,558
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0 0 0 0
0 0 0 0
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<PERIOD-END> DEC-31-1995
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<FED-FUNDS-SOLD> 7,910
<TRADING-ASSETS> 0
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<INVESTMENTS-CARRYING> 89,452
<INVESTMENTS-MARKET> 92,968
<LOANS> 649,215
<ALLOWANCE> 9,658
<TOTAL-ASSETS> 1,054,045
<DEPOSITS> 844,878
<SHORT-TERM> 99,713
<LIABILITIES-OTHER> 12,584
<LONG-TERM> 0
0
0
<COMMON> 76,423
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<TOTAL-LIABILITIES-AND-EQUITY> 1,054,045
<INTEREST-LOAN> 56,497
<INTEREST-INVEST> 16,590
<INTEREST-OTHER> 637
<INTEREST-TOTAL> 73,724
<INTEREST-DEPOSIT> 31,288
<INTEREST-EXPENSE> 34,269
<INTEREST-INCOME-NET> 39,455
<LOAN-LOSSES> 523
<SECURITIES-GAINS> 284
<EXPENSE-OTHER> 33,601
<INCOME-PRETAX> 13,776
<INCOME-PRE-EXTRAORDINARY> 13,776
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,114
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.72
<YIELD-ACTUAL> 4.58
<LOANS-NON> 1,533
<LOANS-PAST> 1,033
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<LOANS-PROBLEM> 0
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<CHARGE-OFFS> 2,062
<RECOVERIES> 1,036
<ALLOWANCE-CLOSE> 9,658
<ALLOWANCE-DOMESTIC> 9,658
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