<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
KS Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No Filing Fee needed.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11*
(4) Proposed maximum aggregate value of transaction:
- ---------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
KS Bancorp, Inc.
Post Office Box 219
207 West Second Street
Kenly, North Carolina 27542
(919) 284-4157
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 6, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of KS Bancorp, Inc. (the "Company") will be held on May 6,
1997, at 7:00 p.m., Eastern Time, at the offices of the Company at 207 West
Second Street, Kenly, North Carolina.
The Meeting is for the purpose of considering and voting upon the following
matters:
1. To elect three persons who will serve as directors of the Company until
the 2000 Annual Meeting of Stockholders or until their successors are
duly elected and qualify;
2. To ratify the selection of McGladrey & Pullen, LLP as the independent
auditor for the Company for the 1997 fiscal year; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof. The Board of Directors is not
aware of any other business to be considered at the Annual Meeting.
The Board of Directors has established March 20, 1997, as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and at any adjournments thereof. Only record holders of the
Common Stock of the Company as of the close of business on that date will be
entitled to vote at the Annual Meeting or any adjournments thereof. In the
event there are not sufficient shares present in person or by proxy to
constitute a quorum at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by the Company.
By Order of the Board of Directors
/s/ Joy B. Watson
Secretary
Kenly, North Carolina
March 27, 1997
A form of proxy is enclosed to enable you to vote your shares at the Annual
Meeting. You are urged, regardless of the number of shares you hold, to
complete, sign, date and return the proxy promptly. A return envelope, which
requires no postage if mailed in the United States, is enclosed for your
convenience.
<PAGE>
KS Bancorp, Inc.
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 1997
SOLICITATION AND VOTING OF PROXIES
General
This Proxy Statement is being furnished to stockholders of KS Bancorp,
Inc. (the "Company") in connection with the solicitation by the board of
directors of the Company (the "Board of Directors") of proxies to be used at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held on May
6, 1997, at 7:00 p.m., Eastern Time, at the offices of the Company at 207
West Second Street, Kenly, North Carolina, and at any adjournments thereof.
This Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on March 27, 1997.
Other than the matters listed on the attached Notice of 1997 Annual
Meeting of Stockholders, the Board of Directors knows of no matters that will
be presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxyholders discretionary authority to
vote the shares in accordance with their best judgment on such other
business, if any, that may properly come before the Annual Meeting or any
adjournments thereof.
Revocability of Proxy
A proxy may be revoked at any time prior to its exercise by the filing
of a written notice of revocation with the Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
beneficial owner of shares of the Company's common stock (the "Common Stock")
that are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual
Meeting.
Solicitation
The Company will pay the cost of preparing, assembling and mailing this
Proxy Statement and other proxy solicitation expenses, if any. In addition
to the use of the mail, proxies may be solicited personally or by telephone
or telegraph by directors, officers and regular employees of the Company and
its wholly-owned savings bank subsidiary, Kenly Savings Bank, Inc., SSB (the
"Bank"), without additional compensation therefor. Brokerage houses and
nominees have been requested to forward these proxy materials to the
beneficial owners of shares held of record by such
<PAGE>
persons and, upon request, the Company will reimburse such persons for their
reasonable out-of-pocket expenses in doing so.
Voting Securities and Vote Required for Approval
Regardless of the number of shares of Common Stock owned, it is
important that stockholders be present in person or represented by proxy at
the Annual Meeting. Stockholders are requested to vote by completing,
signing, dating and returning the enclosed proxy card in the provided
postage-paid envelope. Any shareholder may vote for, against, or abstain
from voting on any matter to come before the Annual Meeting. If the enclosed
proxy is properly marked, signed, dated and returned, and not revoked, it
will be voted in accordance with the instructions therein. If no
instructions are given, the proxy will be voted FOR the nominees for election
---
to the Board of Directors named in this Proxy Statement and for the other
matters described in this Proxy Statement calling for a vote of the
stockholders. If instructions are given with respect to some but not all
proposals, such instructions as are given will be followed, but the proxy
will be voted FOR the proposals on which no instructions are given.
---
The close of business on March 20, 1997, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof. As of the Record Date, the Company had
outstanding 663,263 shares of Common Stock. Each share of Common Stock
entitles its owner to one vote on each matter calling for a vote of
stockholders at the Annual Meeting.
The presence, in person or by proxy, of the holders of at least a
majority of shares of the Common Stock entitled to vote at the Annual Meeting
is necessary to constitute a quorum at the Annual Meeting. Since many of our
stockholders cannot attend the Annual Meeting, it is necessary that a large
number be represented by proxy. Accordingly, the Board of Directors has
designated proxies to represent those stockholders who cannot be present in
person and who desire to be so represented. In the event there are not
sufficient votes for a quorum or to approve or ratify any proposal at the
time of the Annual Meeting, the Annual Meeting may be adjourned in order to
permit the further solicitation of proxies.
In order to be elected, a nominee need only receive a plurality of the
votes cast in the election of directors. As a result, those persons
nominated who receive the largest number of votes will be elected as
directors. Accordingly, shares not voted for any reason respecting any one
or more nominees will not be counted as votes against such nominees.
As to other issues presented for a vote, the affirmative vote of the
holders of a majority of the shares of Common Stock present at the Meeting,
in person or by proxy and entitled to vote, is required to constitute
stockholder approval of such proposals.
2
<PAGE>
Abstentions will be counted for purposes of determining whether a quorum
is present at the Annual Meeting. Abstentions will not be counted in
tabulating the votes cast on any proposal submitted to the stockholders.
Broker non-votes will not be counted either for determining the existence of
a quorum or for tabulating votes cast on any proposal.
Proxies solicited hereby will be returned to the Board of Directors and
will be tabulated by one or more inspectors of election designated by the
Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires that any person or group who acquires the beneficial ownership of
more than 5% of the Common Stock notify the Securities and Exchange
Commission (the "SEC") and the Company. The table below contains certain
information, as of the Record Date, regarding all persons or groups, as
defined in the Exchange Act, who held of record or who are known to the
Company to own beneficially, more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
Amount and Percentage
Nature of of
Beneficial Class/2/
Name and Address Ownership/1/ -------------
- ---------------- -------------
<S> <C> <C>
Salem Investment Counselors, Inc.
Post Office Box 25427
Winston-Salem, North Carolina 27114-5427 62,575/3/ 9.43%
Harold T. Keen 54,188/4/ 7.88%
Director, President and Chief
Executive Officer of the Bank and the
Company
1121 Boyette Road
Four Oaks, North Carolina 27524
James C. Woodard 51,391/5/ 7.71%
308 North Green Street
Selma, North Carolina 27576
R. Harold Hinnant 69,082/6/ 10.36%
200 Pope Avenue
Kenly, North Carolina 27542
H. Elwin Watson 58,539/7/ 8.77%
507 East Second Street
Kenly, North Carolina 27542
</TABLE>
3
<PAGE>
/1/ Voting and investment power is not shared unless otherwise indicated.
/2/ Based upon a total of 663,263 shares of Common Stock outstanding at the
Record Date and the shares underlying options that have vested or are
exercisable within 60 days under the Nonqualified Stock Option Plan for
Directors or the Employee Stock Option Plan in which the named
individual participates. Assumes exercise of only those options included
with respect to the designated recipients.
/3/ Based upon a Schedule 13G filed with the Company and dated February 4,
1997.
/4/ Based upon an amended Schedule 13D filed with the Company and dated
February 12, 1997. Includes 24,269 shares underlying stock options that
have vested or are exercisable within 60 days under the Company's
Employee Stock Option Plan. Additional shares become vested on December
29 of each year. In addition, options to purchase 6,067 shares become
immediately vested upon death, disability, retirement or a change in
control of the Company or the Bank. Includes shares owned by Mr. Keen's
spouse and minor children and other entities controlled by Mr. Keen,
over which shares Mr. Keen effectively exercises sole or shared voting
and investment power. Includes shares allocated to Mr. Keen under the
Kenly Savings Bank, Inc., SSB Employee Stock Ownership Plan (the
"ESOP").
/5/ Mr. Woodard, Mr. Hinnant and Mr. Watson serve as trustees of the ESOP
which holds 40,448 shares of the Company's Common Stock. The trustees of
such plan share certain voting and investment power of such shares. This
amount also includes 3,560 shares underlying stock options that have
vested or are exercisable within 60 days under the Nonqualified Stock
Option Plan for Directors. Additional options become vested annually on
December 29 of each year. These additional options to purchase an
aggregate amount of 889 shares become immediately vested upon death,
disability or retirement or a change in control of the Company or the
Bank.
/6/ Mr. Hinnant, Mr. Woodard and Mr. Watson serve as trustees of the ESOP
which holds 40,448 shares of the Company's Common Stock. The trustees of
such plan share certain voting and investment power of such shares. This
amount also includes 3,560 shares underlying stock options that have
vested or are exercisable within 60 days under the Nonqualified Stock
Option Plan for Directors. Additional options become vested annually on
December 29 of each year. These additional options to purchase an
aggregate amount of 889 shares become immediately vested upon death,
disability or retirement or a change in control of the Company or the
Bank.
/7/ Mr. Watson, Mr. Woodard and Mr. Hinnant serve as trustees of the ESOP
which holds 40,448 shares of the Company's Common Stock. The trustees of
such plan share certain voting and investment power of such shares. This
amount includes 3,884 shares underlying stock options that have vested
or are exercisable within 60 days under the Nonqualified Stock Option
Plan for Directors. Additional options become vested annually on
December 29 of each year. These additional options to purchase an
aggregate amount of 970 shares become immediately vested upon death,
disability or retirement or a change in control of the Company or the
Bank.
Set forth below is certain information as of the Record Date regarding
beneficial ownership of the Common Stock by each of the members of the Board of
Directors (including nominees for re-election at the Annual Meeting), each of
the members of the Board of Directors of the Bank, certain executive officers of
the Company and the Bank, and the directors and all executive officers of the
Company and the Bank as a group (all person listed are directors of the Company
and the Bank).
4
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature Percentage
of Beneficial of
Name and Address Ownership/1,2/ Class/3/
----------------------------- ------------------------- -----------
<S> <C> <C>
Robert E. Fields
203 Bailey Avenue
Kenly, North Carolina 27542 12,539/4/ 1.88%
R. Harold Hinnant
200 Pope Avenue
Kenly, North Carolina 27542 69,082/4,5/ 10.36%
Harold T. Keen
President and Chief Executive
Officer of the Bank
and the Company
1121 Boyette Road
Four Oaks, North Carolina 27524 54,188/6/ 7.88%
James C. Parker
117 Pineridge Lane
Goldsboro, North Carolina 27530 650 0.10%
R. Elton Parrish
805 North Webb Street
Selma, North Carolina 27576 17,734/4/ 2.66%
Ralph Edward Scott, Jr.
8934 Lefty Road
Kenly, North Carolina 27542 8,815/4/ 1.32%
H. Elwin Watson
507 East Second Street
Kenly, North Carolina 27542 58,539/5,7/ 8.77%
J. Hayden Wiggs,
201 North Green Street
Selma, North Carolina 27576 8,962/4/ 1.34%
James C. Woodard,
308 North Green Street
Selma, North Carolina 27576 51,391/4,5/ 7.71%
Directors and executive officers of
the Company
and the Bank as a group (9 persons) 201,004/8/ 28.20%
</TABLE>
5
<PAGE>
/1/ Voting and investment power is not shared unless otherwise indicated.
/2/ Unless otherwise indicated, all shares are owned directly by the named
individuals, by their spouses and minor children, or by other entities
controlled by the named individuals.
/3/ Based upon a total of 663,263 shares of Common Stock outstanding at the
Record Date and the shares underlying options that have vested or are
exercisable within 60 days under the Nonqualified Stock Option Plan for
Directors or the Employee Stock Option Plan in which the named
individual participates. Assumes exercise of only those options included
with respect to the designated recipients.
/4/ Includes 3,560 shares underlying stock options that have vested or are
exercisable within 60 days under the Nonqualified Stock Option Plan for
Directors. Additional options become vested annually on December 29 of
each year. These additional options to purchase an aggregate amount of
889 shares become immediately vested upon death, disability or
retirement or a change in control of the Company or the Bank.
/5/ Includes 40,448 shares held by the Bank's ESOP. Mr. Hinnant, Mr. Woodard
and Mr. Watson are trustees of such Plan and share certain voting and
investment power of such shares.
/6/ Includes 24,269 shares underlying stock options that have vested or are
exercisable within 60 days under the Employee Stock Option Plan.
Additional options become vested annually on December 29 of each year.
These additional options to purchase an aggregate amount of 6,067 shares
become immediately vested upon death, disability or retirement or a
change in control of the Company or the Bank.
/7/ Includes 3,884 shares underlying stock options that have vested or are
exercisable within 60 days under the Nonqualified Stock Option Plan for
Directors. Additional options become vested annually on December 29 of
each year. These additional options to purchase an aggregate amount of
970 shares become immediately vested upon death, disability or
retirement or a change in control of the Company or the Bank.
/8/ Includes 49,513 shares underlying stock options for directors and
executive officers that have vested or are exercisable within 60 days
under the Nonqualified Stock Option Plan for Directors and Employee
Stock Option Plan. This amount does not include options to purchase
12,371 shares issued to directors and executive officers which become
immediately vested upon death, disability or retirement or a change in
control of the Company or Bank. The 40,448 shares held by the ESOP for
which the trustees, Mr. Hinnant, Mr. Woodard and Mr. Watson, share
certain voting and investment power have been included only once in the
total number of shares owned beneficially by the directors and executive
officers as a group.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of the
Common Stock, to file reports of ownership and changes in ownership with the
SEC. Executive officers, directors and greater than 10% beneficial owners
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to
the Company and written representations from the Company's executive officers
and directors, the Company believes that during the fiscal year ended
December 31, 1996, all but one of its executive officers and directors and
greater than 10% beneficial owners complied with all applicable Section 16(a)
filing requirements. James C. Parker was elected in 1996 to fill a vacancy
on the Board of Directors; however, Mr. Parker's Initial Statement of
Beneficial Ownership on SEC Form 3 was filed on March 12, 1997.
Additionally, Mr. Parker's Annual Statement of Beneficial Ownership of
Securities on SEC Form 5 for two small acquisition of shares of Common Stock
dated June 1996 and December 1996 was filed on March 12, 1997.
6
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company provide that the number of
directors of the Company shall not be less than five nor more than fifteen.
The exact number of directors may be fixed or changed from time to time by
the Board of Directors. The Board of Directors has currently fixed the size
of the Board at nine members.
So long as the total number of directors is nine or more, the directors
shall be divided into three classes, as nearly equal as possible in number.
Each class of directors shall be elected for terms of three years each, or
until their earlier death, resignation, retirement, removal or
disqualification or until their successors shall be elected and shall
qualify.
The Board of Directors has nominated Robert E. Fields, James C. Parker
and James C. Woodard for election as directors to serve until the 2000 Annual
Meeting of Stockholders or until their earlier death, resignation,
retirement, removal or disqualification or until their successors shall be
elected and shall qualify.
The persons named in the accompanying form of proxy intend to vote any
shares of Common Stock represented by valid proxies received by them to elect
these three nominees for such terms, unless authority to vote is withheld or
such proxies are revoked. Each of the nominees for election is currently a
member of the Board of Directors. In the event that any of the nominees
should become unavailable to accept nomination or election, it is intended
that the proxyholders will vote to elect in his stead such other person as
the present Board of Directors may recommend. The present Board of Directors
has no reason to believe that any of the nominees named herein will be unable
to serve if elected to office. In order to be elected as a director, a
nominee need only receive a plurality of the votes cast. Accordingly, shares
not voted for any reason respecting any one or more nominees will not be
counted as votes against such nominees. No stockholder has the right to
cumulatively vote his or her shares in the election of directors.
The Company's bylaws provide that, in order to be eligible for
consideration at the annual meeting of stockholders, all nominations of
directors, other than those made by the Company's Board of Directors, must be
made in writing and must be delivered to the Secretary of the Company not
less than 30 days nor more than 50 days prior to the meeting at which such
nominations will be made; provided, however, if less than 21 days notice of
the meeting is given to stockholders, such nominations must be delivered to
the Secretary of the Company not later than the close of business on the
seventh day following the day on which the notice of meeting was mailed.
The Board of Directors recommends a vote FOR all of the following
---
nominees for election as directors.
7
<PAGE>
The following table sets forth as to each nominee and each director
whose term is continuing, his name, age, principal occupation during the last
five years, the year he was first elected as a director and the year in which
his existing term of office expires.
<TABLE>
<CAPTION> Principal
Age on Occupation Existing
December 31, During Director Term
Name 1996 Last Five Years Since /1/ Expires
- ---- ------------ ---------------- --------- --------
NOMINEES
<S> <C> <C> <C> <C>
Robert E. Fields 68 Real estate 1977 1997
appraiser;
owner of Fields
Appraisal, Inc.
James C. Parker 45 Certified public 1996 1997
accountant;
Partner of
Parker &
Parker, P.A.,
CPA
James C. Woodard 81 Real estate 1967 1997
appraiser;
owner of F. &
J. Appraisal,
Inc.
DIRECTORS CONTINUING IN OFFICE
J. Hayden Wiggs 84 Retired 1970 1998
R. Harold Hinnant 66 Owner of Kenly 1988 1998
Motors and Parts
R. Elton Parrish 68 Owner of 1990 1998
Parrish Funeral
Home, a funeral
service provider
Harold T. Keen 48 President and 1990 1999
Chief Executive
Officer of the
Bank since
1990; President
and Chief
Executive
Officer of the
Company since
1993
H. Elwin Watson 81 Owner of Watson 1957 1999
Hardware & Oil
Company, a
heating and air
conditioning
business
Ralph Edward Scott, Jr. 44 Farmer 1987 1999
</TABLE>
/1/ Includes service on the Board of Directors of the Bank prior to the
formation of the Company.
Mr. Wiggs and Mr. Woodard are first cousins. Mr. Scott is a distant
cousin of Mr. Hinnant.
8
<PAGE>
Meetings of the Board and Committees of the Board
The Board of Directors conducts its business through meetings of the
Board of Directors and through activities of its committees. The Board of
Directors meets quarterly and may have additional meetings as needed. During
fiscal 1996, the Board of Directors of the Company held 6 meetings. All of the
existing directors of the Company, including the nominees for election listed
above, attended at least 75 percent of the aggregate number of meetings of the
Board of Directors and committees of the Board on which they served during
1996.
The Board of Directors of the Company has two standing committees--the
Audit Committee and the Stock Option Committee.
The Audit Committee of the Board consists of H. Elwin Watson, Ralph
Edward Scott, Jr. and James C. Woodard. The Audit Committee meets on an as
needed basis and (i) oversees the independent auditing of the Company; (ii)
arranges for periodic reports from the independent auditors and from management
of the Company and the Bank in order to assess the impact of significant
regulatory and accounting changes and developments; (iii) advises the Board of
Directors regarding significant accounting and regulatory developments; (iv)
reviews corporate policies regarding compliance with laws and regulations,
conflicts of interest and employee misconduct and reviews situations related
thereto; (v) develops and implements the Company's policies regarding internal
and external auditing and appoints, meets with and oversees the performance of
those employed in connection therewith; and (vi) performs such other duties as
may be assigned to it by the Board of Directors. The Audit Committee met one
time during fiscal 1996.
The Stock Option Committee consists of R. Harold Hinnant, James C.
Parker, and H. Elwin Watson. This committee administers the KS Bancorp, Inc.
Employee Stock Option Plan and the KS Bancorp, Inc. Nonqualified Stock Option
Plan for Directors. The Stock Option Committee met one time during fiscal 1996.
In addition, the Board of Directors appoints a nominating committee each
year prior to the annual meeting of stockholders to nominate persons for
election to the Board of Directors. The composition of this committee varies
from year to year.
Board of Directors of the Bank
The Bank also has a nine member board of directors which is composed of
the same persons who are now directors of the Company.
9
<PAGE>
Directors' Compensation
Directors' Fees. Members of the Board of Directors receive no fees or
compensation for serving on the Board of Directors of the Company. However, all
members of the Company's Board of Directors are also directors of the Bank.
Each member of the Bank's board of directors receives $700 per month for their
service in that capacity, except for Mr. Watson, the Chairman of the Bank's
board of directors, who receives $900 per month. Board fees are subject to
adjustment annually. Members receive no additional compensation for serving on
any committee of the board of directors of the Bank. Directors Robert E. Fields
and James C. Woodard receive additional compensation for services rendered to
the Bank in conducting appraisals. During the fiscal year ended December 31,
1996, Mr. Fields and Mr. Woodard received $24,500 and $45,100, respectively,
for such appraisal services.
The Bank has adopted a deferred compensation plan for its directors to
be paid in the form of death benefits. The plan provides for the payment of
death benefits ranging from $2,000 to $20,000, depending upon each director's
years of service to the Bank. As of December 31, 1996, the Bank had accrued
$63,866 in expense, representing the present value of the death benefits based
upon each director's life expectancy.
Directors Stock Option Plan. The Board of Directors of the Company has
adopted the KS Bancorp, Inc. Nonqualified Stock Option Plan for Directors (the
"Directors Plan"). Members of the Board of Directors and the Bank's board of
directors are eligible recipients under the Directors Plan. Pursuant to the
Directors Plan, 40,446 shares of Common Stock have been reserved for issuance
upon the exercise of stock options which have been granted to present and
former nonemployee directors of the Bank. Of this amount, options to purchase
4,854 shares of Common Stock have been granted to Mr. Watson, Chairman of the
Bank's board of directors, and options to purchase 4,449 shares of Common Stock
have been granted to each of the remaining directors of the Bank who were
serving at the time the Directors Plan was adopted (all directors except Mr.
Parker), other than Mr. Keen, who received no options under the Directors Plan.
The options were granted to directors of the Bank in recognition of their past
service to the Bank and as an incentive for their continued performance. No
cash consideration was paid for the options.
Options granted under the Directors Plan have an exercise price of
$10.00 per share, which was the fair market value of the Common Stock on the
date the options were granted. Options granted under the Directors Plan have a
term of ten years, are not transferable except upon death and have a vesting
schedule pursuant to which 20% of the options vested on the date they were
granted and 20% will vest each year thereafter so that the options will be
completely vested four years after the date of the grant. The options become
immediately vested upon death, disability or retirement. In addition, in the
event of a "change in control" of the Company or the Bank, options
automatically vest and may be exchanged for cash payments equal to the
difference between the market value of the shares subject to option and the
option price. The definition of "change in control" is similar to that
described below under "Management Compensation -- Employment Agreement." The
Board of Directors can amend the Directors Plan at any time; however, the Board
of Directors cannot make any change which would deprive an existing option
holder of any of his rights without his or her consent.
10
<PAGE>
Options granted pursuant to the Directors Plan do not qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") and are therefore nonqualified stock options. In
general, the holder of a nonqualified stock option will recognize compensation
income equal to the amount by which the fair market value of the Common Stock
received on the date of exercise exceeds the sum of the exercise price and any
amount paid for the nonqualified stock option. If the optionee elects to pay
the exercise price in whole or in part with Common Stock, the optionee
generally will not recognize any gain or loss on the Common Stock surrendered
in payment of the exercise price. The Company generally will not recognize any
income or be entitled to claim any deduction upon the grant of a nonqualified
stock option. At the time the optionee is required to recognize compensation
income upon the exercise of the nonqualified stock option, the Company
generally will be entitled to claim a deduction in the amount equal to such
compensation income.
Holders of options under the Directors Plan are also entitled to receive
bonus compensation under the Bank's Bonus Compensation Plan. See "Management
Compensation--Bonus Compensation Plan."
Executive Officers
The following table sets forth certain information with respect to the
persons who are executive officers of either the Company or the Bank or both.
<TABLE>
<CAPTION>
Age on Employed By
December 31, Positions and the Bank or
------------ Occupations the Company
Name 1996 During Last Five Years Since
- ---- ---- ------------------------ -------
<S> <C> <C> <C>
Harold T. Keen 48 President and Chief 1990
Executive Officer of
the Company and the
Bank; formerly Vice
President of Raleigh
Federal Savings Bank,
Raleigh, North Carolina
William C. Clarke 40 Senior Vice President 1986
of the Company and the
Bank
Kevin J. Jorgenson 49 Senior Vice President 1993
of the Bank; formerly
Vice President of
Operations and Lending
for First Federal
Savings and Loan
Association, Durham,
North Carolina
</TABLE>
11
<PAGE>
Helen B. Pollock 48 Treasurer and Assistant 1984
Secretary of the
Company and the Bank
Management Compensation
Summary Compensation Table. The executive officers of the Company are
not paid any cash compensation by the Company. However, the executive officers
of the Company are also executive officers of the Bank and receive cash
compensation from the Bank. The following table shows, for the fiscal years
ending December 31, 1996, 1995 and 1994, the cash compensation paid by the
Bank, as well as certain other compensation paid or accrued for those years, to
the Chief Executive Officer of the Bank. No other executive officer of the Bank
received cash compensation in excess of $100,000 for services rendered in all
capacities to the Bank in fiscal 1996.
12
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------------
Other Annual
Name and Compensation
Principal Position Year Salary/(1)/ Bonus /(2)/ ($)/(3)/
- ------------------ ---- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Harold T. Keen, 1996 $96,446 $36,403 ---
President, Chief Executive 1995 $92,253 $30,336 ---
Officer and Director of 1994 $82,230 $15,084 ---
the Company and the Bank
- -------------------------------
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------------------------------
Awards Payouts
--------------------------- --------------------------
Securities
Underlying
Options/Stock
Appreciation
Name and Restricted Rights LTIP All Other
Principal Position Stock Awards (in shares) Payouts Compensation/(4)/
- ------------------ ------------ ------------- ------- -----------------
<S> <C> <C> <C> <C>
Harold T. Keen, --- --- --- $10,526
President, Chief Executive --- --- --- $10,899
Officer and Director of the --- --- --- $98,952
Company and the Bank
- -----------------------------
</TABLE>
/(1)/ Includes directors' fees from the Bank in the amount of $6,000 in 1994,
and $8,400 for 1995 and 1996.
/(2)/ Represents a cash payment under the Bank's Bonus Compensation Plan. In
1994, this amount includes a discretionary cash performance bonus of
$7,500 in addition to a cash payment of $7,584 under the Bank's Bonus
Compensation Plan.
/(3)/ Under the "Other Annual Compensation" category, perquisites did not
exceed the lesser of $50,000 or 10% of salary and bonus as reported for
Mr. Keen.
/(4)/ For 1996 the total amount includes $5,283 contributed by the Bank for
Mr. Keen pursuant to the Bank's defined contribution, money purchase
pension plan and $880 contributed by the Bank for Mr. Keen to the Bank's
401(K) plan and $3,982 accrued pursuant to the retirement agreement
entered into with Mr. Keen and $381 accrued pursuant to the deferred
compensation plan adopted for directors. In 1994 the amount included a
cash payment of $87,205 to Mr. Keen as reimbursement for the tax
liability associated with restricted stock awards made to him in
December 1993.
13
<PAGE>
Stock Option Plan. The Board of Directors has adopted the KS Bancorp,
Inc. Employee Stock Option Plan (the "Employees Plan"). Pursuant to the
Employees Plan 80,896 shares of Common Stock were reserved for issuance upon
the exercise of options granted under the Employees Plan. During the fiscal
year ended December 31, 1993, seven officers of the Bank were granted options
to purchase such 80,896 shares of Common Stock.
All of the stock options granted under the Employees Plan are intended
to be incentive stock options under Section 422 of the Code. In the case of
an incentive stock option, an optionee is not deemed to have received taxable
income upon the grant or exercise of the stock option, provided the shares
are not disposed of by the optionee for at least one year after the date of
exercise and two years after the date of grant. No compensation deduction
may be taken by the issuing company as a result of the grant or exercise of
an incentive option, assuming these holding periods are satisfied. In the
case of a nonqualified stock option, an optionee is deemed to receive
ordinary income upon exercise of the stock option in an amount equal to the
amount by which the exercise price is exceeded by the fair market value of
the stock plus any amount paid for the option. The amount of any ordinary
income deemed to be received by the optionee upon the exercise of a
nonqualified stock option is a deductible expense of the issuing company for
tax purposes.
The Employees Plan is administered by a committee appointed by the Board
of Directors of the Company. This committee has the power to designate those
officers and employees of the Bank and the Company who are eligible to
receive grants of options and to determine the amount of options to be
granted to such persons. All officers and employees of the Bank and the
Company who are considered "key employees" as defined in the Employees Plan,
are eligible to receive grants of options under the Employees Plan. At this
time, seven employees of the Bank and the Company are eligible to participate
under the Employees Plan. No cash consideration is paid for options granted
pursuant to the Employees Plan. Options granted under the Employees Plan
have an option exercise price of not less than the fair market value of the
Common Stock on the effective date the option is granted. The exercise price
of the options previously granted is $10.00 per share, which was the price at
which the Common Stock of the Company was sold in the conversion of the Bank
from mutual to stock form. Options granted under the Employees Plan have a
term of no more than ten years, and options are not transferable except upon
death. Options granted under the Employees Plan have a vesting schedule
pursuant to which 20% of the options vested on the date the options were
granted and 20% vest each year thereafter, so that the options are completely
vested four years after the date of the grant. The options become
immediately vested upon death, disability or retirement. In addition, in the
event of a "change in control" of the Company or the Bank, options
automatically vest and may be exchanged for cash payments equal to the
difference between the market value of the shares subject to option and the
option price. The definition of "change in control" is similar to that
described above under "Management Compensation -- Employment Agreement."
14
<PAGE>
The following table provides certain information with respect to the
number of shares of Common Stock represented by outstanding stock options
held by Harold T. Keen as of December 31, 1996. Also reported are the value
for "in-the-money" options, which represents the positive spread between the
exercise price of any such existing stock options and the last sales price of
the Common Stock as of December 31, 1996 as reported on the Nasdaq. No
options were exercised by Mr. Keen in fiscal 1996.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised
Underlying Unexercised in-the-Money
Shares Acquired Value Options/SARs at Options/SARs at
Name on Exercise Realized Fiscal Year End/(1)/ Fiscal Year End/(2)/
--------------- --------------- -------- ------------------------------ -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harold T. Keen 0 0 24,277 6,069 $482,505 $120,621
</TABLE>
- ------------------------
/(1)/ Eighty percent of the options were vested as of December 31, 1996.
/(2)/ The exercise price of the options is $10.00. On December 31, 1996, the
last sale price for the Common Stock of the Company as reported on Nasdaq
was $19.875.
Bonus Compensation Plan. The Bank has adopted a bonus compensation plan
(the "Bonus Compensation Plan") which provides that incentive compensation
will be payable to those directors and employees who hold unexercised options
issued pursuant to the Directors Plan and the Employees Plan. Under the
Bonus Compensation Plan, incentive compensation is paid soon after the close
of each of the Bank's fiscal quarters. The amount of incentive compensation
awarded under the Incentive Compensation Plan is equal to the number of
shares subject to unexercised options granted under the Directors Plan and
the Employees Plan times the amount of dividends awarded per share of Common
Stock outstanding during such immediately preceding fiscal quarter.
Employee Stock Ownership Plan. The Bank has established the Kenly
Savings Bank, Inc., SSB Employee Stock Ownership Plan (the "ESOP") for
eligible employees of the Bank. Employees with 1,000 hours of employment
with the Bank and who have attained age 21 are eligible to participate. The
ESOP has borrowed funds from the Company and used the funds to purchase
40,448 shares of Common Stock. Collateral for the loan is the Common Stock
purchased by the ESOP which has not been allocated to participants. The loan
is being repaid principally from the Bank's discretionary contributions to
the ESOP. Dividends, if any, paid on shares held by the ESOP may also be
used to reduce the loan. The loan has not been guaranteed by the Bank.
Shares purchased by the ESOP are held in a suspense account for allocation
among participants as the loan is repaid.
15
<PAGE>
Contributions to the ESOP and shares released from the suspense account
in an amount proportional to the repayment of the ESOP loan will be allocated
among ESOP participants on the basis of compensation in the year of
allocation. Benefits generally become 20% vested each year, becoming 100%
vested after five years of credited service. Prior to the completion of five
years of credited service, a participant who terminates employment for
reasons other than death, retirement (or early retirement), or disability
will receive only vested benefits under the ESOP. Forfeitures will be
reallocated among remaining participating employees in the same proportion as
contributions. Benefits are payable upon death, retirement, early retirement,
disability or separation from service. The Bank's contributions to the ESOP
are not fixed, so benefits payable under the ESOP cannot be estimated.
The Bank's ESOP committee may instruct the ESOP trustees regarding
investment of funds contributed to the ESOP. Participating employees shall
instruct the trustees as to the voting of all shares allocated to their
respective accounts held in the ESOP. The unallocated shares held in the
suspense account, and all allocated shares for which voting instructions are
not received, will be voted by the trustees in their discretion subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
The ESOP may be considered an "anti-takeover" device since the ESOP may
control a sufficient percentage of the total outstanding Common Stock of the
Company so that the vote or decision whether to tender shares of the ESOP may
be used as a defense in a contested takeover.
Retirement Plan. The Bank maintains a defined contribution, money
purchase pension plan for the benefit of all of its employees who have
completed six months of service with the institution and who are at least 21
years of age. Under the plan, the Bank contributes an amount equal to 6% of
each participant's compensation during the plan year, plus an additional 5.4%
of each participant's compensation during the plan year in excess of 80% of
the Social Security wage base. For purposes of the plan, compensation means a
participant's basic rate of annual compensation for the current calendar
year, including commissions, overtime pay, bonuses and other extra
compensation.
Participants are fully vested in amounts the Bank contributes to the
plan on their behalf after seven years of service, as follows: 1 year of
service, 0%; 2 years, 0%; 3 years, 20%; 4 years, 40%; 5 years, 60%; 6 years,
80%; 7 years or more, 100%.
Benefits under the plan are payable in the event the participant's
retirement, death, disability or termination of employment. Normal
retirement age under the plan is 65 years of age. The plan also offers early
retirement to participants who are at least 60 years of age.
As of December 31, 1996, Harold T. Keen had six years of service under
the retirement plan.
401(k) Profit Sharing Plan. The Bank also maintains a contributory
savings plan for substantially all of its employees, which meets the
requirements of section 401(k) of the Code.
16
<PAGE>
Employees who have completed six months of service and who are least 21 years
of age may elect to contribute up to 15% of their compensation to the plan
each year, subject to certain maximums imposed by federal law. The Bank will
match 25% of each participant's contribution, up to a maximum employer
contribution of 1% of the participant's compensation. From time to time, the
Bank may also make discretionary profit sharing contributions to the plan,
which are allocated among participants' accounts on the basis of
compensation. For purposes of the 401(k) plan, compensation means a
participant's total compensation received from the employer.
Participants are fully vested in amounts they contribute to the plan.
Participants are fully vested in amounts the Bank contributes to the plan on
their behalf as employer matching contributions and as profit sharing
contributions after seven years of service as follows: 1 year of service,
0%; 2 years, 0%; 3 years, 20%; 4 years, 40%; 5 years, 60%; 6 years, 80%; 7 or
more years, 100%.
Retirement Agreement For Mr. Keen. The Bank has entered into a
Retirement Agreement with Harold T. Keen, President and Chief Executive
Officer, providing for the payment of $1,250 per month for 10 years upon Mr.
Keen's retirement after age 65. If Mr. Keen should die after his retirement,
his beneficiary would be entitled to receive payments under the agreement.
If Mr. Keen should die before his retirement, his beneficiary would receive a
death benefit of $142,000. If Mr. Keen voluntarily terminates his employment
with the Bank or if he is discharged for cause, benefits under the agreement
would be forfeited. If Mr. Keen should be terminated without cause, he would
be entitled to a vested percentage of the benefits under the agreement which
would be computed using a 15-year vesting schedule.
The Bank has purchased a life insurance policy on Mr. Keen's life which
will fund the benefits payable under the agreement. The Bank's deferred
compensation expense with respect to this agreement amounted to $3,982,
$3,757 and $3,544 for the fiscal years ended December 31, 1996, 1995 and
1994, respectively.
Employment Agreement. The Bank has entered into an employment agreement
with Mr. Keen in order to establish his duties and compensation and to
provide for his continued employment with the Bank. The agreement provided
for an initial term of employment of three years. Commencing on the first
anniversary date and continuing on each anniversary date thereafter, the
agreement will be extended for an additional year so that the remaining term
will be three years unless written notice of non-renewal is given by the
Bank's board of directors after conducting a performance evaluation of the
employee. Mr. Keen's agreement now provides for an annual base salary of
$93,418. The agreement also provides that the base salary shall be reviewed
by the Board of Directors not less often than annually. In the event of a
change in control (as defined below), the employee's base salary must be
increased by at least 6% annually. In addition, the employment agreement
provides for profitability and discretionary bonuses and participation in
other pension, profit-sharing or retirement plans maintained by the Bank and
the Company, as well as fringe benefits normally associated with such
employee's office. The employment agreement provides that
17
<PAGE>
it may be terminated by the Bank for cause, as defined in the agreement, and
that it may otherwise be terminated by the Bank (subject to vested rights) or
by the employee.
The employment agreement provides that if employment is terminated in
connection with, or within 24 months after, a change in control or if the
nature of the employee's compensation, duties or benefits are diminished
following a change in control of the Bank or the Company, and Mr. Keen
terminates his employment, he will be entitled to receive compensation equal
to 2.99 times his average annual compensation for income tax purposes for the
most recent five tax years prior to the change in control, payable in a lump
sum or in equal monthly payments. For purposes of the employment agreement,
a change in control generally will occur if (i) after the effective date of
the employment agreement, any "person" (as such term is defined in Sections
3(a)(9) and 13(d)(3) of the Exchange Act) directly or indirectly, acquires
beneficial ownership of voting stock, or acquires irrevocable proxies or any
combination of voting stock and irrevocable proxies, representing 25% or more
of any class of voting securities of either the Company or the Bank, or
acquires in any manner control of the election of a majority of the directors
of either the Company or the Bank, (ii) either the Company or the Bank
consolidates or merges with or into another corporation, association or
entity, or is otherwise reorganized, where neither the Company nor the Bank
is the surviving corporation in such transaction, or (iii) all or
substantially all of the assets of either the Company or the Bank are sold or
otherwise transferred to or are acquired by any other entity or group.
Payments under the employment agreement in the event of a change in
control may constitute an excess parachute payment under Section 280G of the
Code resulting in the imposition of an excise tax on the recipient and denial
of a deduction to the Bank for all amounts in excess of the executive's
average annual compensation for the five tax years preceding the change in
control. The agreement provides that benefits payable to the officer as a
result of a change in control will be modified or reduced to the extent
deemed to be necessary by the Bank's board of directors to avoid the
imposition of excise taxes on the employee or the disallowance of a deduction
to the Company.
Report of Compensation Committee. The Board of Directors of the
Company does not have a compensation committee. The board of directors of
the Bank has a compensation committee which is now composed of R. Harold
Hinnant, H. Elwin Watson and J. Hayden Wiggs. The compensation committee
meets on an as needed basis to review Kenly's salary program and to make
recommendations to the Bank's board of directors regarding compensation of
the Bank's executive officers. The Bank's board of directors ultimately
determines such compensation. The salaries of each of the executive officers
is determined based upon the executive officer's contributions to the Bank's
overall profitability, maintenance of regulatory compliance standards,
professional leadership, and management effectiveness in meeting the needs of
day to day operations. The compensation committee also compares the
compensation of the Bank's executive officers with compensation paid to
executives of comparable financial institutions in North Carolina and
executives of other businesses in the Bank's market area. These factors were
considered in establishing the compensation of Harold T. Keen, the Bank's
President and Chief Executive Officer during the 1996 fiscal year. In
addition, all of the executive officers of the Bank, including Mr. Keen, are
eligible to receive discretionary bonuses declared by the Bank's board of
directors. The
18
<PAGE>
amount of such bonuses is based upon the net income of the Bank and the
increase in the market value of the Company.
Compensation Committee Interlocks and Insider Participation. No member
of the Bank's compensation committee is now, or formerly was, an officer or
employee of the Company or the Bank. Harold T. Keen, President and Chief
Executive Officer of the Bank and the Company, makes recommendations to the
compensation committee regarding compensation of the Bank's executive
officers. Mr. Keen participates in the deliberations, but not the decisions,
of the compensation committee regarding compensation of executive officers
other than himself. He does not participate in the committee's discussions
or decisions regarding his own compensation.
Performance Graph. The following graph compares the Company's
cumulative stockholder return on its Common Stock with the Nasdaq Stock
Market (U.S. companies) index and with a savings institution peer group whose
stock is quoted on Nasdaq. The graph was prepared using data as of December
31, 1996.
19
<PAGE>
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
KS Bancorp, Inc.
Prepared by the Center for Research in Security Prices
Produced on 02/25/97 including data to 12/31/96
[LINE GRAPH APPEARS HERE]
Legend
<TABLE>
<CAPTION>
Symbol CRSP Total Returns Index for: 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
- ------ ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------ KS Bancorp, Inc. 92.6 108.4 145.1 173.5
..--.. Nasdaq Stock Market (US Companies) 75.7 88.1 101.2 98.9 139.8 172.0
...... NASDAQ Stocks (SIC 6030-6039 US Companies) 46.1 72.0 101.0 103.0 154.4 198.0
Savings Institutions
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/29/93.
20
<PAGE>
Certain Indebtedness and Transactions of Management
The Bank makes loans to its executive officers and directors in the
ordinary course of its business. These loans are currently made on
substantially the same terms, including interest rates and collateral, as
those then prevailing for comparable transactions with nonaffiliated persons,
and do not involve more than the normal risk of collectibility or present any
other unfavorable features. Applicable regulations prohibit the Bank from
making loans to its executive officers and directors at terms more favorable
than could be obtained by persons not affiliated with the Bank. The Bank's
policy concerning loans to executive officers and directors currently
complies with such regulations.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
McGladrey & Pullen, LLP, the Company's and the Bank's independent
auditor for the year ended December 31, 1996, has been selected as the
Company's and the Bank's independent auditor for the 1997 fiscal year. Such
selection is being submitted to the Company's stockholders for ratification.
A representative of McGladrey & Pullen, LLP is expected to attend the Annual
Meeting and will be afforded an opportunity to make a statement, if he so
desires, and to respond to appropriate questions from stockholders.
The Board of Directors recommends that the stockholders vote FOR this
---
proposal.
DATE FOR RECEIPT OF STOCKHOLDERS' PROPOSALS
It is presently anticipated that the 1998 Annual Meeting of Stockholders
will be held in May of 1998. In order for stockholder proposals to be
included in the proxy materials for that meeting, such proposals must be
received by the Secretary of the Company at the Company's principal executive
office not later than November 28, 1997, and meet all other applicable
requirements for inclusion therein.
OTHER MATTERS
Management knows of no other matters to be presented for consideration
at the Meeting or any adjournments thereof. If any other matters shall
properly come before the Meeting, it is intended that the proxyholders named
in the enclosed form of proxy will vote the shares represented thereby in
accordance with their judgment, pursuant to the discretionary authority
granted therein.
21
<PAGE>
MISCELLANEOUS
The Annual Report of the Company for the year ended December 31, 1996,
which includes financial statements audited and reported upon by the
Company's independent auditor, is being mailed along with this Proxy
Statement; however, it is not intended that the Annual Report be a part of
this Proxy Statement or a solicitation of proxies.
THE FORM 10-K FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, WILL
BE PROVIDED FREE OF CHARGE UPON WRITTEN REQUEST DIRECTED TO: KS BANCORP,
INC., POST OFFICE BOX 219, 207 WEST SECOND STREET, KENLY, NORTH CAROLINA
27542, ATTENTION: HAROLD T. KEEN.
By Order of the Board of Directors,
/s/ Joy B. Watson
Joy B. Watson
Secretary
Kenly, North Carolina
March 27, 1997
22
<PAGE>
REVOCABLE PROXY
KS BANCORP, INC.
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 1997
- --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of KS Bancorp, Inc.
(the "Company"), with full power of substitution, as attorneys and proxies for
the undersigned, to vote all shares of common stock of the Company, which the
undersigned is entitled to vote at the Annual Meeting of Stockholders, to be
held at the offices of the Company at 207 West Second Street, Kenly, North
Carolina, on Tuesday, May 6, 1997, at 7:00 p.m., Eastern Time, and at any and
all adjournments thereof, as follows:
FOR VOTE WITHHELD
--- -------------
1. The election as directors of all nominees [_] [_]
listed below for the terms stated:
Term ending as of the 2000 Annual Meeting --
Robert E. Fields, James Canady Parker, James
C. Woodard
INSTRUCTIONS: To withhold authority to vote for
any individual nominee, write that nominee's
name in the space provided below.
-----------------------------------------------
-----------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of the selection of McGladrey & [_] [_] [_]
Pullen, LLP as the independent auditor for the
Company for the 1997 fiscal year.
The Board of Directors recommends a vote "FOR" the above proposals.
- --------------------------------------------------------------------------------
<PAGE>
IF PROPERLY MARKED, DATED, SIGNED AND RETURNED, THIS PROXY WILL BE VOTED AS
DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
PROPOSALS STATED. IF INSTRUCTIONS ARE GIVEN WITH RESPECT TO SOME BUT NOT ALL
PROPOSALS, SUCH INSTRUCTIONS AS ARE GIVEN WILL BE FOLLOWED, BUT THE PROXY WILL
BE VOTED "FOR" THE PROPOSALS AS TO WHICH NO INSTRUCTIONS ARE GIVEN. IF ANY
OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE
NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
A PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE BY THE FILING OF A
WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY OF THE COMPANY, BY DELIVERING TO
THE COMPANY A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY ATTENDING THE
ANNUAL MEETING AND VOTING IN PERSON.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders and of a
Proxy Statement dated March 27, 1997.
Dated: ______________________, 1997
- ---------------------------------- ------------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ---------------------------------- ------------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign, but only one signature
is required.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
