INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
| o Preliminary Proxy Statement | o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| x Definitive Proxy Statement | ||
| o Definitive Additional Materials | ||
| o Soliciting Material under Rule 14a-12 | ||
SOUTH STREET FINANCIAL CORP.
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| o | Fee paid previously with preliminary materials. |
| o | 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: |
SOUTH STREET FINANCIAL CORP.
Post Office Box 489
155 West South Street
Albemarle, North Carolina 28001
(704) 982-9184
NOTICE OF 2003 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 19, 2003
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Stockholders (the “Annual Meeting”) of South Street Financial Corp. (the “Company”) will be held on May 19, 2003, at 4:00 p.m., Eastern Time, at the main office of the Company at 155 West South Street, Albemarle, North Carolina.
THE PURPOSES OF THE ANNUAL MEETING ARE:
| 1. | To elect six persons who will serve as directors of the Company for one-year terms or until their successors are duly elected and qualified; | ||
| 2. | To ratify the selection by the Audit Committee of Dixon Odom PLLC as the independent auditor for the Company for the fiscal year ending December 31, 2003; and | ||
| 3. | To transact such other business as may properly come before the Annual Meeting or any adjournments thereof. The Company’s Board of Directors (“Board of Directors”) is not aware of any other business to be considered at the Annual Meeting. |
The Board of Directors has established March 24, 2003, as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and 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/ David L. Smith | ||
| David L. Smith Secretary | ||
| Albemarle, North Carolina April 7, 2003 |
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.
SOUTH STREET FINANCIAL CORP.
Proxy Statement
2003 Annual Meeting of Stockholders
May 19, 2003
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
General
These proxy materials are delivered in connection with the solicitation by South Street Financial Corp.’s (the “Company”, “we” or “our”) Board of Directors of proxies to be voted at the 2003 Annual Meeting of Stockholders and at any adjournment or postponement. You are invited to attend our Annual Meeting on May 19, 2003, at 4:00 p.m., Eastern Time, at the main office of the Company at 155 West South Street, Albemarle, North Carolina. This Proxy Statement and form of proxy are being mailed starting April 10, 2003. The Company’s telephone number is (704) 982-9184.
Revocability of Proxy
A proxy may be revoked at any time before its exercise by (1) written notice to the Secretary of the Company, (2) timely delivery of a valid later-dated proxy or (3) voting by ballot at the Annual Meeting. However, if you are a beneficial owner of shares of the Company’s outstanding common stock that are not registered in your own name, you will need appropriate documentation from the holder of record of your shares to vote personally at the Annual Meeting.
Solicitation
The Company will pay the expenses of soliciting proxies. Proxies may be solicited on our behalf in person or by telephone, facsimile transmission or by telegram by the directors, officers and regular employees of the Company and its wholly-owned savings bank subsidiary, Home Savings Bank of Albemarle, Inc., S.S.B. (the “Bank”). We have requested brokerage houses and nominees to forward these proxy materials to the beneficial owners of shares held of record and, upon request, we will reimburse them for their reasonable out-of-pocket expenses.
Voting at the Annual Meeting
Regardless of how many shares of common stock you own, your vote is important to us. 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 proxy holders to represent those stockholders who cannot be present in person.
You are requested to vote by mail by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided by the Company. You may vote for, against, abstain or withhold authority to vote on matters to come before the Annual Meeting. The designated proxy holders will vote your shares in accordance with your instructions. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted as follows:
| • | FOR the nominees for election to the Board of Directors named in this Proxy Statement | ||
| • | FOR ratification of the Audit Committee’s selection of Dixon Odom PLLC, as the Company’s independent auditor for the fiscal year ending December 31, 2003 |
If instructions are given with respect to some but not all proposals, the proxy holders will follow the instructions given and will vote FOR the proposals on which no instructions are given. If matters not described in this Proxy Statement are presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. We are not now aware of any other matters to be presented except those described in the Proxy Statement. If the Annual Meeting is adjourned, your common stock may be voted by the proxy holders on the new meeting date as well, unless you have revoked your proxy instructions.
You are entitled to vote your common stock if our records showed that you held your shares as of March 24, 2003 (the “Record Date”). At the close of business on the Record Date, a total of 3,079,867 shares of common stock were outstanding and entitled to vote. Each share of common stock has 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 a majority of the votes entitled to be cast by the stockholders entitled to vote at the Annual Meeting is necessary to constitute a quorum. The Annual Meeting may be adjourned in order to permit the further solicitation of proxies if there is an insufficient number of stockholders present to constitute a quorum. Abstentions and broker “non-votes” are counted as present and entitled to vote for purposes of determining a quorum. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.
Vote Required for Approval
A plurality of the votes cast is required for the election of directors. As a result, those persons nominated for election as directors who receive the largest number of votes will be elected directors. Abstentions and broker “non-votes” are not counted for purposes of the election of directors. No stockholder has the right to cumulatively vote his or her shares in the election of directors.
The affirmative vote of a majority of the votes cast is required to approve the Audit Committee’s appointment of Dixon Odom PLLC as the Company’s independent auditor for the fiscal year ending December 31, 2003. Abstentions and broker “non-votes” are not counted for purposes of approving this matter.
2
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 Company’s common stock notify the Securities and Exchange Commission (the “SEC”) and the Company. Following is 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.
| Amount and Nature of | Percentage | |||||||
| Name and Address | Beneficial Ownership(1) | of Class(2) | ||||||
| Caldwell A. Holbrook, Jr. (3), (4), (5) | 513,338 | 16.67 | % | |||||
| 1700 Bellamy Circle Albemarle, NC 28001 | ||||||||
| Joel A. Huneycutt (4), (5), (6) | 524,904 | 17.04 | % | |||||
| P. O. Box 167 Locust, NC 28097 | ||||||||
| Douglas Dwight Stokes (4), (5), (7) | 530,961 | 17.24 | % | |||||
| 1009 Ridge Street Albemarle, NC 28001 | ||||||||
| Greg E. Underwood (4), (5) | 512,904 | 16.65 | % | |||||
| 500 North Fourth Street Albemarle, NC 28001 | ||||||||
| Carl M. Hill (8) | 219,271 | 7.12 | % | |||||
| 1415 Melchor Road Albemarle, NC 28001 | ||||||||
| (1) | Voting and investment power is not shared unless otherwise indicated. Also, unless otherwise noted, all shares are owned directly or indirectly by the named individuals, by their spouses and minor children, or by other entities controlled by the named individuals. | |
| (2) | Based upon a total of 3,079,867 shares of common stock outstanding at the Record Date, plus the number of shares that such individual has the right to purchase pursuant to the options described in the footnotes below. | |
| (3) | Includes 3,434 shares for which Mr. Holbrook shares voting and investment power with his spouse. | |
| (4) | Includes 22,482 shares underlying options that have vested or are exercisable within 60 days under the Company’s Stock Option Plan. | |
| (5) | Mr. Holbrook, Mr. Huneycutt, Mr. Stokes and Mr. Underwood serve as a trustees of the Home Savings Bank of Albemarle, Inc., S.S.B. Employee Stock Ownership Plan (the “ESOP”), which holds 478,429 shares of the Company’s common stock. The trustees of the ESOP share certain voting and investment power of such shares. | |
| (6) | Includes 13,263 shares for which Mr. Huneycutt shares voting and investment power with his spouse. This number also includes 1,737 shares held by Mr. Huneycutt’s spouse. Mr. Huneycutt disclaims beneficial ownership of such shares. |
3
| (7) | Includes 16,535 shares for which Mr. Stokes shares voting and investment power with his spouse. | |
| (8) | Mr. Hill retired from his service on the Board on May 28, 2002. He retired from his service with the Company and Bank on December 31, 2001. This number includes 112,412 shares underlying options that have vested or are exercisable within 60 days under the Stock Option Plan. The number also includes 3,200 shares held by Mr. Hill’s spouse. Mr. Hill disclaims beneficial ownership of such shares. |
4
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 of the Company (including nominees for re-election at the Annual Meeting), each of the members of the board of directors of the Bank, each of the named executive officers of the Company and the Bank, and the directors and all executive officers of the Company and the Bank as a group.
| Amount and Nature of | Percentage | |||||||
| Name and Address | Beneficial Ownership(1) | Of Class(2) | ||||||
| Caldwell A. Holbrook, Jr. (3), (4), (5) | 513,338 | 16.67 | % | |||||
| Director 1700 Bellamy Circle Albemarle, NC 28001 | ||||||||
| Joel A. Huneycutt (4), (5), (6) | 524,904 | 17.04 | % | |||||
| Director P. O. Box 167 Renee Ford Road Locust, NC 28097 | ||||||||
| Douglas Dwight Stokes (4), (5), (7) | 530,961 | 17.24 | % | |||||
| Director 1009 Ridge Street Albemarle, NC 28001 | ||||||||
| Greg E. Underwood (4),(5) | 512,904 | 16.65 | % | |||||
| Director 500 North Fourth Street Albemarle, NC 28001 | ||||||||
| J. Banks Garrison, Jr. | 720 | 0.02 | % | |||||
| Director 1209 Belvedere Drive Albemarle, NC 28001 | ||||||||
| Carl M. Hill (8) | 219,271 | 7.12 | % | |||||
| Retired Director; Retired President and Chief Executive Officer of the Company; Retired President and Chief Executive Officer of the Bank 1415 Melchor Road Albemarle, NC 28001 | ||||||||
| R. Ronald Swanner (9) | 108,923 | 3.54 | % | |||||
| Director; President and Chief Executive Officer of the Company; President and Chief Executive Officer of the Bank 500 Muirfield Drive Albemarle, NC 28001 | ||||||||
| Directors and all executive officers as a group (10 persons) (10), (11) | 1,042,207 | 33.84 | % | |||||
5
| (1) | Voting and investment power is not shared unless otherwise indicated. Unless otherwise noted all shares are owned directly or indirectly by the named individuals, by their spouses or minor children, or by other entities controlled by the named individuals. | |
| (2) | Based upon a total of 3,079,867 shares of the common stock outstanding at the Record Date, plus the number of shares that such individual has the right to purchase pursuant to the options described in the footnotes hereto. | |
| (3) | Includes 3,434 shares for which Mr. Holbrook shares voting and investment power with his spouse. | |
| (4) | Includes 22,482 shares underlying options that have vested or are exercisable within 60 days under the Company’s Stock Option Plan. | |
| (5) | Mr. Holbrook, Mr. Huneycutt, Mr. Stokes and Mr. Underwood serve as a trustees of the Home Savings Bank of Albemarle, Inc., S.S.B. Employee Stock Ownership Plan (the “ESOP”), which holds 478,429 shares of the Company’s common stock. The trustees of the ESOP share certain voting and investment power of such shares. | |
| (6) | Includes 11,526 shares for which Mr. Huneycutt shares voting and investment power with his spouse. This number also includes 1,737 shares held by Mr. Huneycutt’s spouse. Mr. Huneycutt disclaims beneficial ownership of such shares. | |
| (7) | Includes 6,845 shares for which Mr. Stokes shares voting and investment power with his spouse. | |
| (8) | Mr. Hill retired from his service on the Board on May 28, 2002. He retired from his service with the Company and Bank on December 31, 2001. This number includes 112,412 shares underlying options that have vested or are exercisable within 60 days under the Stock Option Plan. The number also includes 3,200 shares held by Mr. Hill’s spouse. Mr. Hill disclaims beneficial ownership of such shares. | |
| (9) | Includes 10,000 shares for which Mr. Swanner shares voting and investment power with his spouse. This number also includes 89,930 shares underlying options that have vested or are exercisable within 60 days under the Stock Option Plan. | |
| (10) | In addition to the directors and executive officers listed, includes (i) Christopher F. Cranford, Treasurer and Chief Financial Officer of the Bank and Treasurer and Chief Financial Officer of the Company, (ii) David L. Smith, Executive Vice President of the Bank and Secretary of the Company, and (iii) Cris D. Turner, Executive Vice President of the Bank and Vice President of the Company. | |
| (11) | The 478,429 shares held by the ESOP for which the trustees, Messrs. Holbrook, Huneycutt, Stokes and Underwood, share voting and investment power, and the 268,758 shares, in the aggregate, allocated under the ESOP and held by the Bank’s executive officers, have been included only once in the total number of shares owned beneficially by the directors and executive officers as a group. This number includes 317,097 shares underlying options that have vested or are exercisable within 60 days under the Stock Option Plan. |
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
6
ownership with the SEC. Executive officers, directors and greater than ten percent 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, 2002, except as noted below, all of its executive officers and directors and greater than ten percent beneficial owners complied with all applicable Section 16(a) filing requirements.
PROPOSAL 1
ELECTION OF DIRECTORS
General
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 15. The exact number of directors shall be fixed or changed from time to time by the Board of Directors. The Board of Directors currently has fixed the size of the Board at six members.
The Board of Directors has nominated the six persons named below for election as directors for terms of one year or until their earlier death, resignation, retirement, removal or disqualification or until their successors are elected and qualified.
The persons named in the accompanying form of proxy intend to vote any shares of the common stock represented by valid proxies received by them to elect the six nominees listed below as directors, unless authority to vote is withheld or such proxies are revoked. In the event that any of the nominees should become unavailable to accept nomination or election, it is intended that the proxy holders will vote to elect in his stead such other person as the present Board of Directors may recommend or to reduce the number of directors to be elected at the Annual Meeting by the number of such persons unable or unwilling to serve (subject to the requirements of the Company’s Articles of Incorporation). 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 shareholder has the right cumulatively to vote his or her shares in the election of directors.
The Board of Directors recommends a vote FOR all of the following nominees for election as directors.
The following table sets forth as to each nominee, his name, age, principal occupation during the last five years and the year he was first elected as a director of the Bank and the Company.
7
| Age on | ||||||||||||||||||
| December 31, | Principal Occupation | Term | Director of Bank | Director of Company | ||||||||||||||
| Name | 2002 | During Last Five Years | Expires | Since | Since | |||||||||||||
| Caldwell A. Holbrook, Jr. | 55 | Partner, D.A. Holbrook & Sons, General Contractors | 2003 | 1985 | 1996 | |||||||||||||
| Joel A. Huneycutt | 60 | President, Locust Lumber Company, Inc. | 2003 | 1984 | 1996 | |||||||||||||
| Douglas Dwight Stokes | 57 | Owner and President, Stokes Construction Company | 2003 | 1988 | 1996 | |||||||||||||
| R. Ronald Swanner | 54 | President and Chief Executive Officer of the Bank since May 28, 2002; President and Chief Executive Officer of the Company since May 28, 2002; President and Chief Operating Officer of the Bank prior to May 28, 2002; Executive Vice President and Secretary of the Company prior to May 28, 2002 | 2003 | 1981 | 1996 | |||||||||||||
| Greg E. Underwood | 40 | CPA in private practice; Owner, Carolina Oil Co. of Albemarle, Inc. and Barefoot Oil Co. of Albemarle, Inc.; Secretary/Treasurer of Southeastern Floral Corp. | 2003 | 1995 | 1996 | |||||||||||||
| J. Banks Garrison, Jr. | 53 | Vice President, South Central Oil Company | 2003 | 2002 | 2002 | |||||||||||||
Meetings of the Board and Committees of the Board
The Board of Directors is scheduled to meet quarterly and may have additional meetings as needed. During fiscal year 2002, the Board of Directors held 5 meetings. All directors attended at least 75% of the aggregate number of meetings of the Board of Directors and committees of the Board on which they served during the year ended December 31, 2002.
Report of the Audit Committee
The Board of Directors of the Company has one standing committee—the Audit Committee. The Audit Committee of the Board consists of Douglas Dwight Stokes, Greg E. Underwood and Joel A. Huneycutt. The Board of Directors has determined that these members are “independent” as defined in Rule 4200(a)(15) of the National Association of Securities Dealers’ (“NASD”) listing standards and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the SEC’s rules and regulations. In accordance with its written charter adopted by the Board of Directors on June 19, 2000, the Audit Committee, for the fiscal year ending December 31, 2002, met on an as-needed basis and (i) oversaw the independent auditing of
8
the Company and the Bank; (ii) arranged for periodic reports from the independent auditors, from management of the Company and the Bank, and from the internal auditor of the Company in order to assess the impact of significant regulatory and accounting changes and developments; (iii) advised the Board of Directors regarding significant accounting and regulatory developments; (iv) reviewed the Company’s and the Bank’s policies regarding compliance with laws and regulations, conflicts of interest, and employee misconduct, and reviewed situations related thereto; (v) developed and implemented the Company’s and the Bank’s policies regarding internal and external auditing and appointed, met with and oversaw the performance of those employed in connection therewith; and (vi) performed such other duties as were assigned to it by the Board of Directors. The Audit Committee met two times during the fiscal year ended December 31, 2002. The Audit Committee understands, and is taking steps to comply with, the new requirements for its Audit Committee under Sarbanes-Oxley. The Company’s Audit Committee now pre-approves all audit and non-audit-related services provided by the independent auditors. In addition, the Audit Committee intends to meet at least quarterly with the Company’s independent auditors.
For the fiscal year ending December 31, 2002, the Audit Committee reviewed and discussed with the independent auditors all matters required by generally accepted auditing standards, including those described in Statement on Auditing Standards No. 61, as amended, and reviewed and discussed the audited financial statements of the Company, both with and without management present. In addition, the Audit Committee obtained from the independent auditors a formal written statement describing all relationships between the auditors and the Company that might bear on the auditors’ independence consistent with Independence Standards Board Standard No. 1, “Independent Discussions with Audit Committees,” and discussed with the auditors any relationships that may impact their objectivity and independence and satisfied itself as to the auditors’ independence. Based upon the Audit Committee’s review and discussions with management and the independent auditors referenced above, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in its annual report on Form 10-KSB for the fiscal year ended December 31, 2002, to be filed with the SEC.
| Audit Committee | ||
| Douglas Dwight Stokes Greg E. Underwood Joel A. Huneycutt |
The Bank’s board of directors has appointed five standing committees to which certain responsibilities have been delegated – the Loan Committee, the Audit Committee, the Nominating Committee, the Proxy Committee and the Compensation Committee. The members of the Company’s Audit Committee also make up the Bank’s Audit Committee.
The Bank’s Nominating Committee, composed of Messrs. Holbrook, Huneycutt and Underwood, serves in that capacity for the Company’s Board of Directors. The Board of Directors has determined that these directors are “independent” as defined in Rule 4200(a)(15) of the NASD’s listing standards. The Bank’s Nominating Committee generally meets on an annual basis and met one time during the fiscal year ended December 31, 2002.
The Bank’s Compensation Committee, composed of Messrs. Huneycutt, Holbrook and Stokes, also serves as the Company’s compensation committee. The Bank’s Compensation Committee meets on an annual basis and met one time during the fiscal year ended December 31, 2002. The Board of
9
Directors has determined that these directors are “independent” as defined in Rule 4200(a)(15) of the NASD’s listing standards.
In addition, the Bank’s board of directors appoints other committees of its members to perform certain more limited functions from time to time.
Directors’ Compensation
Directors’ Fees.Members of the Board of Directors receive no fees or compensation for their service. However, all members of the Board of Directors also are directors of the Bank, and are compensated for that service. For their service on the Bank’s board of directors, members of the board, including Mr. Swanner, receive a retainer of $2,500 per year and an additional $600 per regular monthly board meeting attended. Mr. Stokes and Mr. Holbrook receive an additional $300 per month for their service on the Loan Committee.
Bank Deferred Compensation Agreements with Directors.1985 Retirement Payment Agreements.Mr. Swanner, as well as two non-employee directors and three retired directors of the Bank, participate in a deferred compensation plan established in 1985 under which such directors, or their designated beneficiaries, would be paid specified amounts over a ten-year period beginning at age 65 (or in one case, age 70) in return for the deferral of certain amounts of the director’s fees over a five-year period. J. Banks Garrison, Jr. does not participate in the 1985 Agreement. If a director dies while serving as a director but before receiving all of his benefits under the agreement, payments will be made to his designated beneficiary, or if none, to his estate.
As a condition of the agreement, each director has agreed not to engage in activities in competition with the Bank and to provide consulting services to the Bank during the period the retirement benefits are payable.
1995 Retirement Payment Agreements.In 1995, the Bank entered into additional deferred compensation arrangements with all of its directors. J. Banks Garrison, Jr. does not participate in the 1995 Agreement. Under the agreements, the Bank will pay each director a specified amount per month for a period of ten years upon the director’s attainment of age 65 (or in Mr. Hill’s case, beginning in 2002), in return for the deferral of certain amounts of the director’s fees over a five-year period.
If a director dies while serving as a director but before receiving all of his benefits under the agreement, payments will be made to his designated beneficiary, or if none, to his estate, unless the death is by suicide within two years of the execution of the agreement (in which case the deferred fees will be returned, with interest). If a director becomes disabled while serving as a director, but prior to attaining age 65, the Bank will pay the same benefits that would be payable in the event of the director’s death. If a director terminates his service to the Bank for reasons other than death or disability, he or his beneficiary shall be entitled to receive at age 65 or his prior death only the vested portion of the benefit due under the agreement. All benefits have vested under the 1995 agreements.
As a condition of the agreement, each director has agreed not to engage in activities in competition with the Bank and to provide consulting services to the Bank during the period that the retirement benefits are payable.
Bank Directors Retirement Plan. In 1995, the Bank adopted a retirement plan for directors after determining that such a plan would help it attract and retain qualified directors. J. Banks Garrison,
10
Jr. does not participate in the retirement plan. Under the plan all directors will be paid $1,000 per month over a ten-year period beginning after the director attains 70 years of age (the “Normal Retirement Date”). If a director dies while serving as a director but before receiving all of his benefits under the plan, payments will be made to his designated beneficiary in a lump sum or installments at the Bank’s option, unless the death is by suicide within two years of the execution of the agreement. If a director becomes disabled while serving as a director, but prior to his Normal Retirement Date, the Bank will pay the benefits due under the plan, either in installments over the ten-year period or in a lump sum payment. If a director terminates his service to the Bank before his Normal Retirement Date for reasons other than death or disability, he or his beneficiary shall be entitled at the Normal Retirement Date or his prior death to receive only the vested portion of the benefits due under the plan. All benefits have vested under the 1995 retirement plan agreements.
As a condition of the agreement, each director has agreed not to engage in activities in competition with the Bank and to provide consulting services to the Bank during the period the retirement benefits are payable.
The Bank has purchased life insurance on the lives of its directors to fund its obligations under the deferred compensation and directors’ retirement plan agreements described above. Total expenses related to the above-described agreements were approximately $182,000 for the fiscal year ended December 31, 2002. The Bank’s accrued liability for obligations under the plans amounted to $1,551,000 on December 31, 2002.
2003 Supplemental Director Retirement Plan.In February 2003, the Bank adopted a non-tax qualified retirement plan for the members of the Board of Directors. The adopted plan replaces the 1985 and 1995 supplemental director retirement plans that were in place as of December 31, 2002, and provides an additional long-term care policy. Through the purchase of life insurance policies, the bank is able to recover or offset the cost of providing these benefits. Following the participant’s retirement, the retirement benefits will continue to accrue and be paid throughout the participant’s life.
Stock Option Plan. On October 15, 1997, the stockholders of the Company approved the South Street Financial Corp. Stock Option Plan (the “Stock Option Plan” or the “Plan”). The Company has reserved 449,650 shares of its common stock for issuance upon the exercise of options that have been granted under the Stock Option Plan. All directors, officers and employees of the Company, the Bank, and any of the Bank’s subsidiaries are eligible for participation in the Plan. J. Banks Garrison, Jr. does not participate in the Stock Option Plan. Options to purchase 449,650 shares of the common stock were granted on January 20, 1998. Of this amount, options to purchase 22,482 shares of the common stock were granted to each non-employee director, options to purchase 112,413 shares were granted to Mr. Hill, options to purchase 89,931 shares were granted to Mr. Swanner, and options to purchase 157,374 shares were granted to other employees. Twenty-five percent of the aggregate number of options granted to executive officers and employees of the Company and the Bank vested and became exercisable on the date of grant and 25% of the aggregate number of such options granted vested and became exercisable on each of the next three annual anniversary dates thereafter. All options have now vested and are nonforfeitable. No option has yet been exercised. Nonqualified stock options granted to the nonemployee directors of the Company and the Bank vested immediately and are nonforfeitable.
No cash consideration was paid for the options. The option exercise price is $12.00, the fair market value of the common stock on the date of grant based on the average high and low selling prices of the common stock on the Nasdaq National Market (“Nasdaq”), as provided in the Plan. Based on the closing market price per share paid on December 31, 2002, the fair market value of the common stock underlying the options is $7.49 per share. The exercise price may be paid in cash or cash equivalent or, if
11
permitted by the Stock Option Committee, by delivery of shares of common stock with a market value equal to the exercise price.
The Stock Option Plan provides that the Company’s Board of Directors shall have the discretionary authority to authorize cash payments to the holders of unexercised options equal to the amount of dividends that would have been paid on shares subject to options if the options had been exercised. No such payment may be made in connection with dividends or other distributions that result in a reduction in the option exercise price.
In the event of a stock split, reverse stock split or stock dividend, the number of shares of common stock under the Stock Option Plan, the number of shares to which any option relates and the exercise price per share under any option shall be adjusted to reflect such increase or decrease in the total number of shares of common stock outstanding. In addition, in the event the Company declares a special cash dividend or return of capital, the per share exercise price of all previously granted options which remain unexercised as of the date of such declaration may be adjusted to give effect to such special cash dividend or return of capital.
Management Recognition Plan. On October 15, 1997, the stockholders of the Company approved the Home Savings Bank of Albemarle, Inc., S.S.B. Management Recognition Plan and Trust (the “MRP”). Effective October 29, 1997, restricted stock awards of 179,860 shares of the common stock were made to 41 directors, officers and employees of the Bank. J. Banks Garrison, Jr. does not participate in the MRP. On October 29, 1997, non-employee directors each received an award of 8,993 shares of restricted stock; Mr. Hill received an award of 44,965 shares and Mr. Swanner received an award of 35,972 shares. The shares awarded under the MRP were issued from authorized but unissued shares of common stock. Shares issued under the MRP were issued at no cost to recipients. The MRP awards are completely vested and are not forfeitable.
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.
| Age on | Positions and | |||||||||||||||||
| December 31, | Occupations During | Employed by | Employed by the | |||||||||||||||
| Name | 2002 | Last Five Years | the Bank Since | Company Since | ||||||||||||||
| R. Ronald Swanner | 54 | President and Chief Executive Officer of the Bank since May 28, 2002; President and Chief Executive Officer of the Company since May 28, 2002; President and Chief Operating Officer of the Bank prior to May 28, 2002; Executive Vice President and Secretary of the Company prior to May 28, 2002 | 1974 | 1996 | ||||||||||||||
12
| Age on | Positions and | |||||||||||||||||
| December 31, | Occupations During | Employed by | Employed by the | |||||||||||||||
| Name | 2002 | Last Five Years | the Bank Since | Company Since | ||||||||||||||
| Christopher F. Cranford | 47 | Chief Financial Officer and Treasurer of the Bank; Chief Financial Officer and Treasurer of the Company since May 28, 2002; Controller and Treasurer of the Company prior to May 28, 2002 | 1987 | 1996 | ||||||||||||||
| David L. Smith | 38 | Executive Vice President of the Bank since May 28, 2002; Secretary of the Company since May 28, 2002; Senior Vice President of the Bank prior to May 28, 2002 | 1994 | 1996 | ||||||||||||||
| Cris D. Turner | 46 | Executive Vice President of the Bank since May 28, 2002; Vice President of the Company since May 28, 2002; Senior Vice President of the Bank from December 1998 to May 28, 2000; Vice President and City Executive of Central Carolina Bank prior to December 1998 | 1998 | 1998 | ||||||||||||||
Executive Compensation
The executive officers of the Company are not paid any cash compensation by the Company. However, the executive officers of the Company also are executive officers of the Bank and receive cash compensation from the Bank.
The following table sets forth for the fiscal year ended December 31, 2002 certain information as to the cash compensation received by and the amounts accrued for the benefit of both the retired and current President and Chief Executive Officer of the Bank and President and Chief Executive Officer of the Company, Mr. Carl M. Hill and Mr. R. Ronald Swanner respectively. No other executive officer of the Bank had cash compensation during the year ended December 31, 2002 that exceeded $100,000 for services rendered in all capacities to the Bank.
| Annual Compensation | Long Term Compensation Awards | |||||||||||||||||||||||||||
| Securities from | ||||||||||||||||||||||||||||
| Name and | Options/Stock | |||||||||||||||||||||||||||
| Principal | Other Annual | Restricted Stock | Appreciation Rights | All Other | ||||||||||||||||||||||||
| Position | Year | Salary(2) | Bonus | Compensation(3) | Awards | ("SARs") (in shares) | Compensation | |||||||||||||||||||||
| Carl M. Hill | 2002 | $ | 3,000 | $ | 22,482 | $ | 31,115 | (4) | ||||||||||||||||||||
| (Retired CEO)(1) | 2001 | $ | 191,260 | $ | 57,674 | — | — | — | $ | 70,500 | (5) | |||||||||||||||||
13
| Annual Compensation | Long Term Compensation Awards | |||||||||||||||||||||||||||
| Securities from | ||||||||||||||||||||||||||||
| Name and | Options/Stock | |||||||||||||||||||||||||||
| Principal | Other Annual | Restricted Stock | Appreciation Rights | All Other | ||||||||||||||||||||||||
| Position | Year | Salary(2) | Bonus | Compensation(3) | Awards | ("SARs") (in shares) | Compensation | |||||||||||||||||||||
| 2000 | $ | 191,260 | $ | 181,251 | — | — | — | $ | 84,313 | (6) | ||||||||||||||||||
| R. Ronald Swanner | 2002 | $ | 146,680 | $ | 45,560 | $ | 57,102 | (7) | ||||||||||||||||||||
| (Current CEO) | 2001 | $ | 140,680 | $ | 45,111 | — | — | — | $ | 52,213 | (8) | |||||||||||||||||
| 2000 | $ | 131,080 | $ | 143,321 | — | — | — | $ | 62,562 | (9) | ||||||||||||||||||
| (1) | Mr. Hill retired from his service on the Board on May 28, 2002. He retired from his service with the Company and Bank on December 31, 2001. | |
| (2) | In addition to salary, this amount also includes $3,000, $9,700, and $9,700 in directors’ fees for Mr. Hill and $9,700, $9,700, and $9,700 in directors’ fees for Mr. Swanner for services on the Company’s and the Bank’s board of directors for 2002, 2001 and 2000. | |
| (3) | Under the “Other Annual Compensation” category, perquisites for the fiscal years ended December 31, 2002, 2001, and 2000, did not exceed the lesser of $50,000 or 10% of salary and bonus as reported for either Mr. Hill or Mr. Swanner. | |
| (4) | Includes $17,776 accrued under supplemental income agreements established for the benefit of Mr. Hill. It also includes $13,340, the amount contributed by the Bank for Mr. Hill’s benefit under the ESOP. In 2002, Mr. Hill was paid $39,400 under the supplemental income agreements. See “Bank Supplemental Income Agreements.” | |
| (5) | Includes $19,385 accrued under supplemental income agreements established for the benefit of Mr. Hill. Such amounts accrued under the supplemental income agreements have not been paid to Mr. Hill. See “Bank Supplemental Income Agreements.” Also includes $51,122, the amount contributed by the Bank for Mr. Hill’s benefit under the ESOP. | |
| (6) | Includes $23,300 accrued under supplemental income agreements established for the benefit of Mr. Hill. Such amounts accrued under the supplemental income agreements have not been paid to Mr. Hill. See “Bank Supplemental Income Agreements.” Also includes $61,013, the amount contributed by the Bank for Mr. Hill’s benefit under the ESOP. | |
| (7) | Includes $12,723.61 accrued under supplemental income agreements established for the benefit of Mr. Swanner. Such amounts accrued under the supplemental income agreements have not been paid to Mr. Swanner. See “Bank Supplemental Income Agreements.” Also includes $44,378, the amount contributed by the Bank for Mr. Swanner’s benefit under the ESOP. | |
| (8) | Includes $11,109 accrued under supplemental income agreements established for the benefit of Mr. Swanner. Such amounts accrued under the supplemental income agreements have not been paid to Mr. Swanner. See “Bank Supplemental Income Agreements.” Also includes $41,104, the amount contributed by the Bank for Mr. Swanner’s benefit under the ESOP. | |
| (9) | Includes $13,600 accrued under supplemental income agreements established for the benefit of Mr. Swanner. Such amounts accrued under the supplemental income agreements have not been paid to Mr. Swanner. See “Bank Supplemental Income Agreements.” Also includes $48,962, the amount contributed by the Bank for Mr. Swanner’s benefit under the ESOP. |
14
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
| Number of Securities Underlying | Value of Unexercised | |||||||||||||||||||||||
| Unexercised Options/SARs at | In-the-Money Options/SARs at | |||||||||||||||||||||||
| Fiscal Year End(2) | Fiscal Year End(3) | |||||||||||||||||||||||
| Shares Acquired on | ||||||||||||||||||||||||
| Name | Exercise | Value Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
| Carl M. Hill (1) | 0 | $ | 0 | 112,413/112,413 | 0/0 | $ | 0 | $ | 0 | |||||||||||||||
| R. Ronald Swanner | 0 | $ | 0 | 89,931/89,931 | 0/0 | $ | 0 | $ | 0 | |||||||||||||||
| (1) | Mr. Hill retired from his service on the Board on May 28, 2002. He retired from his service with the Company and Bank on December 31, 2001. | |
| (2) | All stock options were granted as of January 20, 1998, and were completely vested on January 20, 2001. | |
| (3) | Dollar amounts shown represent the value of stock options held by Mr. Hill and Mr. Swanner as of December 31, 2002. None of Mr. Hill’s or Mr. Swanner’s options were “in-the-money” at such date. An option is considered to be “in-the-money” if the fair market value of the Company’s common stock exceeds the exercise or base price of the shares subject to the options as of the fiscal year end (in this case December 31, 2002). At December 31, 2002, the exercise price of the stock options was $12.00. On December 31, 2002, the closing market price per share for the common stock as reported on Nasdaq was $7.49. |
Bank Supplemental Income Agreements.
1985 Agreements. The Bank entered into Supplemental Income Agreements with Mr. Hill and Mr. Swanner on October 1, 1985. The agreements provide that the Bank would pay Mr. Hill $1,200 per month for a continuous period of 216 months, and will pay Mr. Swanner $861 per month for a continuous period of 180 months. Mr. Hill’s benefits commenced on the first day of the month following his 65th birthday. Mr. Swanner’s benefits will commence on the first day of the month following his 65th birthday. If Mr. Swanner dies while employed by the Bank but before receiving any or all of the payments due under the agreement, the remaining payments will be made to his designated beneficiary, or, if none, to his estate. If Mr. Swanner becomes disabled prior to his retirement from the Bank, the Bank will pay him the benefits due under the agreement. The plan also provides for an early retirement benefit upon retirement with 25 years of service with the Bank.
As a condition of the agreements, Mr. Hill and Mr. Swanner must be available to provide consulting services to the Bank during the period the retirement payments are payable and must not engage in activities in Stanly County, North Carolina in competition with the Bank.
1995 Agreements. In September 1995, the Bank also entered into Supplemental Income Agreements with Mr. Hill and Mr. Swanner. Under the agreements, the Bank began paying Mr. Hill $25,000 annually upon his attainment of age 65 and will pay Mr. Swanner $15,000 annually for a period of fifteen years upon his attainment of age 65.
If Mr. Swanner dies while employed by the Bank but before receiving all of his benefits under the agreement, payments will be made to his designated beneficiary; or if none, to his estate, unless the death is by suicide, within two years of the execution of the agreement. If Mr. Swanner becomes disabled while employed by the Bank, but prior to attaining age 65, the Bank will pay the same benefits that would be
15
payable in the event of the executive’s death, either in installments over the fifteen-year period or in a lump sum payment. If Mr. Swanner terminates his service to the Bank for reasons other than death or disability, he or his beneficiary shall be entitled to receive at age 65 or his prior death only the vested portion of the benefits due under the agreement. All benefits have vested under the 1995 Supplemental Income Agreement.
As a condition of the agreement, each executive has agreed not to engage in activities in competition with the Bank in Albemarle, North Carolina, and to provide consulting services to the Bank during the period that the retirement benefits are payable.
The Bank has purchased life insurance on the lives of Mr. Hill and Mr. Swanner to fund its obligations under the agreements described above. Total expenses related to those agreements were $69,469 for the fiscal year ended December 31, 2002, and the Bank’s accrued liability for plan obligations amounted to $590,343 on December 31, 2002.
Retirement Plan.The Bank maintains a non-contributory defined benefit pension plan (“Pension Plan”) for the benefit of all of its employees who have completed one year of service and who are at least 21 years of age. Under the Pension Plan, the Bank annually contributes an actuarially determined amount to provide a benefit for each participant at retirement.
Participants are fully vested in amounts contributed to the Pension Plan on their behalf by the Bank after completing five years of service. Benefits under the plan are payable in the event of the participant’s retirement, death, disability or termination of employment.
Normal retirement age under the Pension Plan is the later of (a) age 65 or (b) the fifth anniversary of the date an employee first became a participant in the Pension Plan (“Normal Retirement Age”). Subject to certain restrictions on maximum benefits required by federal law, upon reaching Normal Retirement Age, each participant will receive a retirement benefit in the form of a straight life annuity, determined pursuant to a formula which takes into consideration a participant’s “final average compensation,” years of service with the Bank and the participant’s expected benefits from Social Security. In general, for purposes of the Pension Plan, a participant’s “Final Average Compensation” is defined as his average annual compensation for those five consecutive years in the last ten calendar years immediately preceding Normal Retirement Age that produce the highest average. The plan also offers early retirement to participants who have completed 15 years of service and who are at least 55 years of age.
The following table shows the retirement benefit payable for a range of compensation and years of service for a person who retires at Normal Retirement Age. These are hypothetical benefits based upon the plan’s normal benefit formula.
16
| Earnings Credited | ||||||||||||||||||||
| for Retirement | ||||||||||||||||||||
| Benefits | Years of Service at Normal Retirement | |||||||||||||||||||
| 15 | 20 | 25 | 30 | 35 | ||||||||||||||||
| $25,000 | $ | 4,688 | $ | 6,250 | $ | 7,813 | $ | 9,375 | $ | 10,938 | ||||||||||
| $50,000 | $ | 10,404 | $ | 13,872 | $ | 17,340 | $ | 20,808 | $ | 24,276 | ||||||||||
| $75,000 | $ | 17,529 | $ | 23,372 | $ | 29,215 | $ | 35,058 | $ | 40,901 | ||||||||||
| $100,000 | $ | 24,654 | $ | 32,872 | $ | 41,090 | $ | 49,308 | $ | 57,526 | ||||||||||
| $125,000 | $ | 31,779 | $ | 42,372 | $ | 52,965 | $ | 63,558 | $ | 74,151 | ||||||||||
| $150,000 | $ | 38,904 | $ | 51,872 | $ | 64,840 | $ | 77,808 | $ | 90,776 | ||||||||||
The benefits listed above are annual amounts and are based on the assumption that the participant is age 65.
2003 Supplemental Executive Retirement Plan.In February 2003, the Bank adopted a non-tax qualified retirement plan for certain executives called the Supplemental Executive Retirement Plan (“SERP”) to supplement the benefits those executives would receive under the Bank’s pre-existing retirement plan. Through the purchase of life insurance policies, the Bank is able to recover or offset the cost of providing benefits under the SERP. The SERP is designed to provide a retirement and death benefit to the executives and their beneficiaries at the normal retirement date, as determined by the Bank’s Board of Directors, subject to vesting requirements during the executives’ time of employment. Following the participant’s retirement, the retirement benefit will continue to accrue and be paid throughout the participant’s life.
Employee Stock Ownership Plan.The Bank has established the ESOP for eligible employees of the Bank. Employees with 1,000 hours of employment in a plan year and who have attained age 21 are eligible to participate. The ESOP borrowed funds from the Company and used the funds to purchase 359,720 of the shares of common stock issued in connection with the Bank’s conversion from a North Carolina-chartered mutual savings bank to a North Carolina-chartered stock savings bank (the “Conversion”).
Collateral for the Company’s loan to the ESOP is the common stock purchased by the ESOP. The loan will be repaid principally from the Bank’s discretionary contributions to the ESOP over a period of 15 years or less. Dividends-other than special dividends-if any, paid on shares held by the ESOP may also be used to reduce the loan. The Bank has not guaranteed the loan. On January 8, 1998, the Company paid a $6.00 per share return of capital in the form of a special dividend to its stockholders. As of September 30, 1999, the ESOP had purchased 168,448 shares of common stock in the open market using funds received as a special dividend in addition to the 359,720 shares purchased in the Conversion and now holds, net of shares allocated or committed to be allocated to participants’ accounts, in the aggregate, 209,671 shares.
Shares purchased by the ESOP are held in a suspense account for allocation among participants as the loan is repaid. Contributions to the ESOP and shares released from the suspense account in an amount proportional to the repayment of the ESOP loan are allocated among ESOP participants on the basis of relative compensation in the year of allocation. Benefits vest in annual increments with full vesting upon attaining five years of service (with credit given for years of service prior to the
17
Conversion). 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 are reallocated among remaining participating employees in the same proportion as contributions. Benefits immediately vest and are payable upon death or disability. The Bank’s contributions to the ESOP are not fixed, so benefits payable under the ESOP cannot be estimated.
The Bank has established a committee of the board of directors to administer the ESOP. Trustees for the ESOP were appointed prior to the Conversion. The ESOP committee may instruct the trustees regarding investment of funds contributed to the ESOP. Participating employees may instruct the trustees as to the voting of all shares allocated to their respective ESOP accounts. 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.
Stock Option Plan and Management Recognition Plan. See “Director Compensation – Stock Option Plan” and “Management Recognition Plan” for a discussion of the executive officers’ benefits under those plans.
Employment Agreements.In 1996 the Bank entered into an employment agreements with R. Ronald Swanner in order to establish his duties and compensation and to provide for his continued employment with the Bank. The agreement provides for an initial term of employment of three years. Commencing on the first anniversary date and continuing on each anniversary date thereafter, following a performance evaluation of Mr. Swanner, the agreement may be extended for an additional year. Each agreement provides that base salary shall be reviewed by the board of directors of the Bank not less often than annually. Under the terms of the agreements, Mr. Swanner’s annual base salary was $136,980 for the 2002 fiscal year. In addition, the employment agreements provide for discretionary bonuses and participation in all other pension, profit-sharing or retirement plans maintained by the Bank or by the Company for the employee of the Bank, as well as fringe benefits normally associated with such employee’s office, including the use of a company car. The employment agreement provides that Mr. Swanner may be terminated by the Bank for cause, as defined in the agreement, and that he may otherwise be terminated by the Bank (subject to vested rights) or the employee may choose to terminate his employment. In the event of a change in control (as defined below), the terms of each agreement shall be automatically extended for three years from the date of the change of control, and the employee’s base salary shall be increased at least 6% annually.
The employment agreement provides that the nature of the employee’s compensation, duties or benefits may not be diminished following a change in control of the Bank or the Company. 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.
18
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, collateral and repayment terms, 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 complies with such regulations. Currently, no executive officer or director is indebted by any such loan to the Bank.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
The Audit Committee of the Board of Directors of the Bank has selected Dixon Odom PLLC as the independent certified public accountants to audit the financial statements of the Company and the Bank for the fiscal year ending December 31, 2003, subject to ratification by the Company’s stockholders. Representatives of Dixon Odom are expected to attend the Annual Meeting and will be afforded an opportunity to make a statement, if they so desire, and to respond to appropriate questions from stockholders.
Audit Fees
The aggregate fees and related expenses billed or expected to be billed by Dixon Odom for professional services rendered for the audit of the Company’s financial statements and for the reviews of the financial statements included in the Company’s quarterly reports on Form 10-QSB for the fiscal year ended December 31, 2002 amount to $63,000.
Financial Information Systems Design and Implementation Fees
Dixon Odom rendered no professional services for information technology services relating to financial information system design and implementation during the year ended December 31, 2002.
Tax Fees
The aggregate fees billed or expected to be billed for professional services rendered by Dixon Odom to the Company for tax compliance for the fiscal year ended December 31, 2002 are $5,000.
All Other Fees
In addition to the fees outlined above, Dixon Odom billed aggregate fees in the amount of $6,500 for additional products and services rendered during the fiscal year ended December 31, 2002.
The Board of Directors recommends that the stockholders vote FOR ratification of the selection of Dixon Odom PLLC as independent auditor for the Company and the Bank for the fiscal year ending December 31, 2003.
PROPOSALS FOR 2004 ANNUAL STOCKHOLDERS’ MEETING
It is presently anticipated that the 2004 Annual Meeting of Stockholders will be held in May of
19
2004. In order for shareholder 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 executive office not later than December 7, 2003 and meet all other applicable requirements for inclusion in the proxy statement.
In the alternative, a shareholder may commence his own proxy solicitation subject to the SEC’s rules on proxy solicitation and may present a proposal from the floor at the 2004 Annual Meeting of Stockholders of the Company. In order to do so, the shareholder must notify the Secretary of the Company in writing, at the Company’s principal executive office no later than February 20, 2004, of his proposal. If the shareholder wants to stop the Company from voting proxies (under the discretionary authority granted by the form of proxy to be solicited by the Company for use at the 2004 Annual Meeting) on his proposal, the notice must also state the shareholder’s intent to solicit the required number of votes for passage of his proposal and the shareholder must provide evidence to the Company that the solicitation has occurred.
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.
OTHER MATTERS
Management knows of no other matters to be presented for consideration at the Annual Meeting or any adjournments thereof. If any other matters shall properly come before the Annual Meeting, it is intended that the proxy holders 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.
MISCELLANEOUS
The Annual Report of the Company for the year ended December 31, 2002, 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-KSB FILED BY THE COMPANY WITH THE SEC, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, WILL BE PROVIDED FREE OF CHARGE TO THE COMPANY’S STOCKHOLDERS UPON WRITTEN REQUEST DIRECTED TO: SOUTH STREET FINANCIAL CORP., POST OFFICE BOX 489, 155 WEST SOUTH STREET, ALBEMARLE, NORTH CAROLINA 28001, ATTENTION: R. RONALD SWANNER.
| By Order of the Board of Directors, | ||
| /s/ David L. Smith | ||
| David L. Smith Secretary | ||
| Albemarle, North Carolina April 7, 2003 |
20
| x | PLEASE MARK VOTES AS IN THIS EXAMPLE |
REVOCABLE PROXY
SOUTH STREET FINANCIAL CORP.
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 2003
4:00 PM
The undersigned hereby appoints the official proxy committee of South Street Financial Corp. (the “Company”) comprised of Douglas D. Stokes, Joel A. Huneycutt and Greg E. Underwood, each with full power of substitution, to act as attorneys and proxies for the undersigned and to vote all shares of Common Stock of the Company which the undersigned is entitled to vote only at the Annual Meeting of Stockholders, to be held at the office of the Company, 155 West South Street, Albemarle, North Carolina, on May 19, 2003 at 4:00 p.m. and at any and all adjournments thereof, as follows:
| With- | For All | |||||||
| For | hold | Except | ||||||
| 1. | The approval of the election of the following named directors: | o | o | o | ||||
| | ||||||||
| J. Banks Garrison, Jr., Caldwell A. Holbrook, Jr., Joel A. Huneycutt, Douglas Dwight Stokes, R. Ronald Swanner and Greg E. Underwood will serve as directors of the Company until the 2004 Annual Meeting of Stockholders or until their successors are duly elected and qualify. | ||||||||
INSTRUCTION: To withhold authority to vote for any individual nominee, mark “For All Except” and write that nominee’s name in the space provided below.
| For | Against | Abstain | ||||||
| 2. | The ratification of Dixon Odom PLLC as the independent auditor of the Company for the year ending December 31, 2003. | o | o | o |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE LISTED PROPOSALS.
If no instructions are given, the proxy will be votedFORthe nominees for election to the Board of Directors named in this Revocable Proxy and for the ratification of the selection of Dixon Odom PLLC as the independent auditor for the Company for the 2003 fiscal year. If instructions are given with respect to one but not both proposals, such instructions as are given will be followed and the proxy will be votedFORthe proposal on which no instructions are given.
Please be sure to sign and date this Proxy in the box below.
| Date | ||
| | ||
| | ||
| Stockholder sign above | Co-holder (if any) sign above | |
Detach above card, sign, date and mail in postage paid envelope provided.
SOUTH STREET FINANCIAL CORP.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
______________________________________________________
______________________________________________________
______________________________________________________
