SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
COOPERATIVE BANKSHARES, INC.
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which
transaction applies:
________________________________________________________________
2. Aggregate number of securities to which transaction
applies:
________________________________________________________________
3. Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated and state
how it was determined):
________________________________________________________________
4. Proposed maximum aggregate value of transaction:
________________________________________________________________
5. Total fee paid:
________________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
____________________________________________
2. Form, Schedule or Registration Statement No.:
____________________________________________
3. Filing Party:
____________________________________________
4. Date Filed:
____________________________________________
March 20, 1998
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders
of Cooperative Bankshares, Inc. (the "Company") to be held at
the Howard Johnson Plaza Hotel, 5032 Market Street, Wilmington,
North Carolina, on Friday, April 24, 1998 at 11:00 a.m.
The attached Notice of Annual Meeting and Proxy Statement
describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the
Company. Directors and officers of the Company as well as
representatives of Coopers & Lybrand L.L.P., the Company's
independent auditors, will be present to respond to any
questions the stockholders may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN
IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. This will
not prevent you from voting in person but will assure that your
vote is counted if you are unable to attend the meeting. Your
vote is important, regardless of the number of shares you own.
Sincerely,
/s/ Frederick Willetts, III
Frederick Willetts, III
President and Chief
Executive Officer
________________________________________________________________
COOPERATIVE BANKSHARES, INC.
201 MARKET STREET
WILMINGTON, NORTH CAROLINA 28401
(910) 343-0181
________________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 1998
________________________________________________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Meeting") of Cooperative Bankshares, Inc.
(the "Company") will be held at the Howard Johnson Plaza Hotel,
5032 Market Street, Wilmington, North Carolina, on Friday, April
24, 1998 at 11:00 a.m.
A Proxy Card and a Proxy Statement for the Meeting are
enclosed.
The Meeting is for the purpose of considering and acting
upon:
1. The election of three directors of the Company
for three year terms;
2. The approval of the Cooperative Bankshares,
Inc. 1998 Stock Option and Incentive Plan; and
3. The transaction of such other matters as may
properly come before the Meeting or any
adjournments thereof.
The Board of Directors is not aware of any other business
to come before the Meeting.
Any action may be taken on any of the foregoing proposals
at the Meeting on the date specified above or on any date or
dates to which, by original or later adjournment, the Meeting
may be adjourned. Stockholders of record at the close of busi-
ness on March 3, 1998 are the stockholders entitled to vote at
the Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of
proxy which is solicited by the Board of Directors and to mail
it promptly in the enclosed envelope. The proxy will not be
used if you attend and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Daniel W. Eller
Daniel W. Eller
Secretary
Wilmington, North Carolina
March 20, 1998
________________________________________________________________
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A
QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
________________________________________________________________
________________________________________________________________
PROXY STATEMENT
OF
COOPERATIVE BANKSHARES, INC.
201 MARKET STREET
WILMINGTON, NORTH CAROLINA 28401
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1998
________________________________________________________________
________________________________________________________________
GENERAL
________________________________________________________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Cooperative
Bankshares, Inc. (the "Company"), holding company for
Cooperative Bank for Savings, Inc., SSB ("Cooperative Bank") to
be used at the Annual Meeting of Stockholders of the Company
(the "Meeting") which will be held at the Howard Johnson Plaza
Hotel, 5032 Market Street, Wilmington, North Carolina, on
Friday, April 24, 1998 at 11:00 a.m. The accompanying Notice of
Annual Meeting and this Proxy Statement are being first mailed
to stockholders on or about March 20, 1998.
________________________________________________________________
VOTING AND REVOCABILITY OF PROXIES
________________________________________________________________
Proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given therein.
WHERE NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED FOR
THE NOMINEES FOR DIRECTORS SET FORTH BELOW. The Bylaws of the
Company provide that in the absence of stockholder direction, a
stockholder's proxy shall be voted as determined by a majority
of the Board of Directors. The proxy confers discretionary
authority on the persons named therein to vote with respect to
the election of any person as a director where the nominee is
unable to serve or for good cause will not serve, and matters
incident to the conduct of the Meeting.
Stockholders who execute proxies retain the right to
revoke them at any time. Unless so revoked, the shares
represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies may be revoked by written notice
to Daniel W. Eller, Secretary of the Company, at the address
shown above, by filing of a later dated proxy prior to a vote
being taken on a particular proposal at the Meeting, or by
attending the Meeting and voting in person.
________________________________________________________________
STOCK SPLIT
________________________________________________________________
Except as otherwise indicated, all stock information
presented in this proxy statement has been adjusted to reflect a
two-for-one stock split effected in the form of 100% stock
dividends paid on September 21, 1997.
________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
________________________________________________________________
The securities entitled to vote at the Meeting consist of
the Company's common stock, par value $1.00 per share (the
"Common Stock"). Stockholders of record as of the close of
business on March 3, 1998 (the "Record Date") are entitled to
one vote for each share of Common Stock then held. As of the
Record Date, the Company had 2,984,396 shares of Common Stock
issued and outstanding. The presence, in person or by proxy, of
at least a majority of the total number of shares of Common
Stock outstanding and entitled to vote will be necessary to
constitute a quorum at the Meeting.
Persons and groups owning in excess of 5% of the Common
Stock are required to file certain reports regarding such
ownership pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act"). The following table sets forth, as of
the Record Date, certain information as to the Common Stock
beneficially owned by persons owning in excess of 5% of the
Common Stock, by each of the executive officers named in the
Summary Compensation Table on page 7, and by all executive
officers and directors of the Company as a group. Management
knows of no person, except as listed below, who owned more than
5% of the Company's outstanding shares of the Common Stock as of
the Record Date.
Amount and Percent of
Nature of Shares of
Name and Address Beneficial Common Stock
of Beneficial Owner Ownership (1) Outstanding
- ------------------- ------------- ------------
Frederick Willetts, Jr.
201 Market Street
Wilmington, North Carolina 28401 173,728 (2) 5.3%
Frederick Willetts, III
201 Market Street
Wilmington, North Carolina 28401 135,413 (3) 4.1%
O.C. Burrell, Jr.
201 Market Street
Wilmington, North Carolina 28401 22,150 (4) .6%
Salem Investment Counselors, Inc.
P.O. Box 25427
Winston-Salem, N.C. 27114-5427 199,050 6.67%
All executive officers and directors
as a group (13 persons) 598,071 (5) 18.2%
[FN]
________________
(1) Includes stock held in joint tenancy; stock owned as tenants
in common; stock owned or held by a spouse or other member
of the individual's household; stock allocated through an
employee benefit plan of the Company; stock subject to
options exercisable within 60 days; and stock owned by
businesses in which the officer or director is an officer or
major stockholder, or as a custodian or trustee, or by
spouses as a custodian or trustee, over which shares such
officer or director effectively exercises sole or shared
voting and/or investment power, unless otherwise indicated.
(2) Includes 52,876 shares which Mr. Willetts, Jr. has the right
to purchase pursuant to the exercise of stock options under
the Cooperative Bankshares, Inc. 1990 Stock Option Plan (the
"1990 Option Plan") and 110,310 shares held for the benefit
of Mr. Willetts, Jr. in the Frederick Willetts, Jr. Trust.
(3) Includes 71,414 shares which Mr. Willetts has the right to
purchase pursuant to the exercise of stock options under the
1990 Option Plan and 11,605 shares allocated to Mr.
Willetts' account under the Cooperative Bank for Savings,
Inc., SSB Employee Stock Ownership - 401(k) Savings
Plan (the "KSOP"). Also includes shares of Common Stock
owned by Mr. Willetts' spouse and minor children, and 8,774
shares held by the KSOP, as to which Mr. Willetts, as a
trustee, shares voting and dispositive power.
(4) Includes 14,204 shares which Mr. Burrell has the right to
purchase pursuant to the exercise of stock options under the
1990 Option Plan and 3,976 shares allocated to Mr. Burrell's
account under the KSOP.
(5) Includes 281,006 shares which officers and directors as a
group have the right to purchase pursuant to the exercise of
stock options under the 1990 Option Plan, 8,774 shares held
by the KSOP as to which certain officers and directors, as
trustees, share voting and dispositive power, and 34,731
shares allocated to executive officers under the KSOP.
Shares held by the KSOP have been counted only once in the
computation of ownership by all officers and directors as a
group.
</FN>
2
________________________________________________________________
PROPOSAL I -- ELECTION OF DIRECTORS
________________________________________________________________
The Company's Board of Directors is currently composed of
nine members. Pursuant to the Company's Articles of
Incorporation, the Board of Directors is divided into three
classes which shall be as nearly equal in number as possible.
The terms of only one class of directors expires at each annual
meeting. The Company's Articles of Incorporation generally
provide that directors are to be elected for terms of three
years and until their successors are elected and qualified.
Three directors will be elected at the Meeting to serve
for a three-year period, and until their respective successors
have been elected and qualified. The Board of Directors has
nominated to serve as directors Frederick Willetts, Jr., James
D. Hundley, M.D. and O. Richard Wright, Jr. for three year
terms. Each of these nominees is currently a member of the
Board. It is intended that the persons named in the proxies
solicited by the Board will vote for the election of the named
nominees. If any nominee is unable to serve, the shares
represented by all valid proxies which have not been revoked
will be voted for the election of such substitute as the Board
of Directors may recommend. At this time, the Board knows of no
reason why any nominee might be unavailable to serve.
Under the Company's Bylaws, directors shall be elected by
a majority of those votes cast by stockholders at the Meeting.
Votes which are not cast at the Meeting, either because of
abstentions or broker non-votes, are not considered in
determining the number of votes which have been cast for or
against the election of a nominee.
The following table sets forth the names of the Board of
Directors' nominees for election as directors and of those
directors who will continue to serve as such after the Meeting.
Also set forth is certain other information with respect to each
person's age, the year he first became a director of Cooperative
Bank, the expiration of his term as a director, and the number
and percentage of shares of the Common Stock beneficially owned.
With the exception of Mr. Rippy, who was appointed in 1997, all
of the individuals were initially appointed as directors of the
Company in connection with the Company's incorporation in April
1994.
Shares of
Year First Common Stock
Age at Elected as Current Beneficially
December 31, Director of Term Owned at Percent
Name 1997 Cooperative Bank to Expire March 3, 1998(1) of Class
- ---- ------------ ---------------- --------- ---------------- ---------
BOARD NOMINEES FOR TERM TO EXPIRE IN 2001
Frederick Willetts, Jr. 72 1952 1998 173,728 (2) 5.3%
James D. Hundley, M.D. 56 1990 1998 29,914 (3) .9%
O. Richard Wright, Jr. 53 1992 1998 53,048 (3) 1.6%
DIRECTORS CONTINUING IN OFFICE
Paul G. Burton 62 1992 1999 11,280 (3) .3%
H. Thompson King, III 55 1990 1999 13,118 (3) .4%
R. Allen Rippy 46 1997 1999 10,524 (3) .3%
Frederick Willetts, III 48 1976 2000 135,413 (4) 4.1%
F. Peter Fensel, Jr. 48 1990 2000 14,248 (3) .4%
William H. Wagoner 70 1968 2000 8,546 (3) .2%
(Footnotes on following page)
3
[FN]
_______________
(1) Includes stock held in joint tenancy; stock owned as tenants
in common; stock owned or held by a spouse or other member
of the individual's household; stock allocated through an
employee benefit plan of the Company; stock subject to
options exercisable within 60 days; and stock owned by
businesses in which the director is an officer or major
stockholder, or as a custodian or trustee, or by spouses as
a custodian or trustee, over which shares the director
effectively exercises sole or shared voting and/or
investment power, unless otherwise indicated.
(2) Includes 52,876 shares which Mr. Willetts, Jr. has the right
to purchase pursuant to the exercise of stock options under
the 1990 Option Plan and 110,310 shares held for the benefit
of Mr. Willetts, Jr. in the Frederick Willetts, Jr. Trust.
(3) Includes 7,424, 7,424, 7,424, 7,424, 7,424, 7,424 and 5,736
shares which Messrs. Hundley, Wright, Burton, King, Rippy,
Fensel and Wagoner have the right to purchase pursuant to
the exercise of stock options under the 1990 Option Plan.
(4) Includes 71,414 shares which Mr. Willetts has the right to
purchase pursuant to the exercise of stock options under the
1990 Option Plan and 11,605 shares allocated to Mr.
Willetts' account under the KSOP. Also includes 8,774
shares held by the KSOP, as to which Mr. Willetts, as a
trustee, shares voting and dispositive power. Also includes
shares of Common Stock owned by Mr. Willetts' spouse and
minor children. Does not include 70,310 shares held by the
Frederick Willetts, Jr. Trust, of which he is trustee.
These shares are included in the shares beneficially
owned by Mr. Frederick Willetts, Jr., discussed in footnote
(2) above.
</FN>
The principal occupation of each director of the Company
for the last five years is set forth below.
FREDERICK WILLETTS, JR. is Chairman of the Board of
Directors of the Company and Cooperative Bank and currently
serves as Assistant to the President/Senior Vice President of
Cooperative Bank. Mr. Willetts has been employed by Cooperative
Bank since 1946 and served as President and Chief Executive
Officer from 1963 until June 1, 1991. Mr. Willetts has served
as Chairman of the North Carolina Savings and Loan League, as a
member of the Board of Directors and Executive Committee for the
United States Savings and Loan League, as past President of the
Southeastern Conference of the U.S. Savings and Loan League, as
past President of the Greater Wilmington Chamber of Commerce and
past President of the North Carolina Azalea Festival at
Wilmington. Mr. Willetts, Jr. is the father of Frederick
Willetts, III.
JAMES D. HUNDLEY is the President of the Wilmington
Orthopaedic Group, P.A.; past President of the North Carolina
Orthopaedic Alumni Association, the New Hanover-Pender Medical
Society, the University of North Carolina Orthopaedic Alumni
Association, the Cape Fear Academy Board of Trustees and the
Wilmington Rotary Club; past Chief of Staff of the New Hanover
Regional Medical Center; and past Chairman of the New Hanover
Public Library Advisory Board. He is the Director of the
Rotary/Orthopaedic Crippled Children's Clinic, Athletic Team
Physician for the University of North Carolina at Wilmington and
a member of the National Board for Certification of Orthopaedic
Physicians' Assistants. He is President of the UNC Medical
Alumni Association; Clinical Assistant Professor in the
Department of Surgery at UNC Hospitals in Chapel Hill and
adjunct professor at UNC-Wilmington. Dr. Hundley is a member of
the Governor's Osteoporosis Task Force and was listed in the
BEST DOCTORS IN AMERICA, THE SOUTHEAST REGION (1996-1997).
O. RICHARD WRIGHT, JR. is the senior partner in the law
firm of McGougan, Wright, Worley & Harper, established in Tabor
City, North Carolina in 1932, and has been associated with the
firm since 1971. Mr. Wright is the owner of Flat Bay Farms and
is co-owner of residential and commercial rental property firms
known as WSIC and FBIC. He and his wife, Jenny McKinnon Wright,
also own the River Inn located at 314 South Front Street in
Wilmington. Mr. Wright served in the North Carolina House of
Representatives for seven terms during the years 1974 to 1988.
He serves on the Board of Directors of a number of civic and
community organizations including the Tabor City Committee of
100, the Southeastern Community College Foundation, the Lewis A.
Sikes Foundation, the Olive Battle Wright Scholarship
Foundation, the Columbus County Committee of 100, the North
Carolina Retail Merchants Association, the University of North
Carolina General Alumni Association and the Cape Fear Council
Boy Scouts of America. Mr. Wright has just served his term as
President of the Law Alumni Association of the University of
North Carolina at Chapel Hill. He has just been elected as
President of the Tabor City Civitan Club, as President of the
Southeastern Genealogical Society and Vice-President of the
Southeastern Community College Foundation.
4
PAUL G. BURTON is President of Burton Steel Company of
Wilmington, North Carolina. He is a native of Wilmington and a
graduate of North Carolina State University. Mr. Burton is
active in the National Society of Professional Engineers and is
a Director of the Wilmington Industrial Development Commission.
He is a past President of the North Carolina Azalea Festival.
He has served on the Governor's Board for Travel and Tourism,
the Mayor's Task Force on Economic Development and the North
Carolina Ports Railway Commission.
H. THOMPSON KING, III was named President of Hanover Iron
Works, Inc. in 1982. He joined the firm in 1973, representing a
fourth generation succession of the founders of the company. He
holds an undergraduate degree in Economics from North Carolina
State University and a Masters Business Administration degree
from the University of North Carolina at Chapel Hill. Hanover
Iron Works, Inc. specializes in metal fabrication, roofing,
heating and air conditioning. Mr. King is a native of
Wilmington, North Carolina. He is a member of the Wilmington
Rotary Club. He has served as President of Carolina Roofing and
Sheet Metal Contractors Association, the New Hanover County
Airport Authority and was Vice President of the Wilmington
Chamber of Commerce.
R. ALLEN RIPPY is Vice President of Rippy Cadillac
Oldsmobile, Inc. He joined the family business in 1973 after
graduating from the University of North Carolina at Chapel Hill.
Mr. Rippy is a native of Wilmington. He has served on the Board
of the North Carolina Automobile Dealers Association for six
years, the Wilmington YMCA and the Cape Fear Academy. He has
been very active with many charitable organizations in the
Wilmington area through his business' "Caring and Sharing"
Program which he founded. He has for many years been extremely
active with the youth programs of his church.
FREDERICK WILLETTS, III has been employed by the Bank
since 1972 and has served as the Chief Executive Officer and
President since June 1, 1991. Prior to that date he served as
Chief Operating Officer and Executive Vice President of the
Bank. Mr. Willetts, III currently serves as Vice-Chairman of
the North Carolina Bankers Association, is on the Board of
Directors and Executive Committee of America's Community Bankers
and the Thrift Institutions Advisory Council to the Federal
Reserve Board. He has served as President of the Southeastern
Conference of the U.S. Savings and Loan League, the Greater
Wilmington Chamber of Commerce, the Foundation of the Episcopal
Diocese of East Carolina and Vice Chairman of the Foundation of
the University of North Carolina at Wilmington. Mr. Willetts,
III was the recipient of the New Hanover County Distinguished
Service Award in 1987, the "Five Outstanding Young North
Carolinians" award in 1988, the Glen Troop Award for outstanding
public service to the thrift industry in 1990 and the Wilmington
Good Citizenship Award in 1994. Mr. Willetts, III is the son of
Frederick Willetts, Jr.
F. PETER FENSEL, JR. is President of F. P. Fensel Supply
Company in Wilmington, North Carolina. He has served as
President of the North Carolina Azalea Festival, was a member of
the Board of Directors of the Greater Wilmington Chamber of
Commerce, Wilmington Industrial Development Commission, Brigade
Boys Club, Plantation Village, Foundation of the University of
North Carolina at Wilmington and Historic Wilmington Foundation.
He is a past Board member of the Cape Fear Area United Way.
WILLIAM H. WAGONER was the Chancellor of the University of
North Carolina at Wilmington from 1969 to 1990. Dr. Wagoner was
past Chairman of the Board of Directors of the Area Health
Education Center and is Trustee Emeritus of the Board of
Trustees of Cape Fear Memorial Hospital. He was named
Chancellor Emeritus by the University of North Carolina Board of
Governors at his retirement.
________________________________________________________________
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
________________________________________________________________
The Board of Directors of the Company conducts business
through meetings of the Board and of its committees. During the
fiscal year ended December 31, 1997, the Board of Directors held
13 meetings. No director attended fewer than 75% of the total
meetings of the Board of Directors and committee meetings on
which such Board member served during this period.
5
The Company's Audit Committee consists of Directors Rippy,
King and Fensel. This committee meets periodically on call by
the Internal Auditor for the purpose of reviewing the activities
and findings of the Internal Audit Department. The Audit
Committee met five times during the fiscal year ended December
31, 1997.
The Personnel Committee, composed of Directors Wagoner,
Hundley, Wright and Burton, meets periodically for the purpose
of reviewing compensation of all employees and officers and met
three times during the fiscal year ended December 31, 1997 for
this purpose.
The full Board of Directors selects nominees for election
as directors. The Company does not have a standing nominating
committee.
________________________________________________________________
EXECUTIVE COMPENSATION
________________________________________________________________
BOARD PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The function of administering the Company's
executive compensation policies is currently performed by the
Personnel Committee of the Board of Directors of Cooperative
Bank (the "Committee"), which is composed entirely of outside
directors. The Committee is responsible for developing and
making recommendations to the Board concerning compensation paid
to the Chief Executive Officer and each of the other executive
officers, and for administering all aspects of the Company's
executive compensation program, including employee benefit
plans.
The Committee makes its recommendations to the Board
concerning executive compensation on the basis of its annual
review and evaluation of the Company and Cooperative Bank's
corporate performance and the compensation of its executive
officers as compared with other companies similar in size and
market capitalization.
EXECUTIVE COMPENSATION PROGRAM. The Company's executive
compensation program, which was developed with the objective of
attracting and retaining highly qualified and motivated
executives, and recognizing and rewarding outstanding
performance, has the following components: (i) base salaries
(subject to the terms of existing employment agreements), (ii)
stock options, and (iii) miscellaneous other fringe benefits.
Base salary increases are determined on the basis of a
combination of cost of living and individual and corporate
performance. During the year ended December 31, 1997, base
salaries of executive officers were determined by a review of
peer group compensation. The compensation survey results of the
Savings and Community Bankers of America, survey results of the
North Carolina Community Bankers Association and SNL Securities
Executive Compensation Review were compared to salaries of the
Company's executive officers. Peer groups were compared to the
Company by asset range and geographic region. By comparison,
salaries for the Bank's executive officers were on the low to
average end of the range for comparable peer groups.
For a discussion of the Company's 1998 Stock Option and
Incentive Plan, including the reasons for its adoption, see
"Proposal II -- Approval of the Cooperative Bankshares, Inc.
1998 Stock Option and Incentive Plan" herein.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The base
salary of the Chief Executive Officer is established by the
terms of the employment agreement entered into between Mr.
Willetts and Cooperative Bank in 1991 (see "Employment and
Severance Agreements" below). The Chief Executive Officer's
base salary under the agreement was determined on the basis of
the Committee's review and evaluation of the compensation of
chief executives of other thrift companies similar in size and
market capitalization to Cooperative Bank. The chief executive
officer's salary is compared to the same survey results as those
of the other executive officers. The geographic regions used
for the surveys were North Carolina financial institutions and
the South Atlantic states financial institutions. The survey
asset range used by the Savings and Community Bankers of America
was $300 to $500 million and the asset range used by
6
the North Carolina Bankers Association was $200,000,000 - above.
The asset range for the SNL Securities Executive Compensation
Review was $250,000,000 to $500,000,000 with 67 institutions
reporting and nine reporting from the Southeast region. The
number of institutions reporting data for the Savings and
Community Bankers survey in the $300 to $500 million asset group
was 59 and the number reporting for the South Atlantic region
was 71. The number of institutions reporting for the North
Carolina Community Bankers Association by assets in excess of
$200 million was 15.
PERSONNEL COMMITTEE OF THE BOARD OF DIRECTORS
Paul G. Burton
James D. Hundley, M.D.
William H. Wagoner
O. Richard Wright, Jr.
SUMMARY COMPENSATION TABLE. The following table sets
forth the cash and noncash compensation for each of the last
three fiscal years awarded to or earned by the Chief Executive
Officer and the Chief Operating Officer. No other executive
officer received salary and bonuses in excess of $100,000 during
the year ended December 31, 1997.
Long-Term Compensation
Awards
---------------------
Name and Principal Annual Compensation Securities All Other
Position Year Salary Bonus Underlying Options Compensation
- ------------------ ---- ------ ----- --------------------- ------------
Frederick Willetts, III 1997 $180,000 $20,000 -- $13,200 (1)
President and Chief 1996 180,000 -- -- 13,200 (1)
Executive Officer 1995 180,000 -- -- 13,200 (1)
O.C. Burrell, Jr. 1997 97,333 -- 4,204 --
Chief Operating 1996 84,500 -- -- --
Officer(2) 1995 82,000 -- -- --
[FN]
___________
(1) Represents directors' fees.
(2) Mr. Burrell, formerly Senior Vice President of the Company, was
appointed Chief Operating Officer on December 18, 1997.
</FN>
OPTION GRANTS IN LAST FISCAL YEAR. The following table
contains information concerning the grant during 1997 of stock
options under the 1990 Option Plan to each officer named in the
Summary Compensation Table.
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise Expiration
Name Options Granted in 1997 Price Date
- ---- ---------------- ---------- -------- ----------
Frederick Willetts, III -- N/A N/A N/A
O.C. Burrell, Jr. 4,204 100% $19.50 12/18/07
7
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-
END VALUE TABLE. The following table sets forth information
concerning the value of options held by Messrs. Willetts, III
and Burrell, Jr. as of December 31, 1997. Neither individual
exercised stock options during fiscal year 1997.
Number of Securities Value of Unexercised
Underlying Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End
Name (All Immediately Exercisable) (All Immediately Exercisable)(1)
---- ----------------------------- --------------------------------
Frederick Willetts, III 71,414 $ 1,622,883
O.C. Burrell, Jr. 14,204 191,020
[FN]
________________
(1) Difference between fair market value of underlying Common
Stock at fiscal year-end ($24.50 per share) and the
exercise price, as adjusted.
</FN>
PENSION PLAN. The following table shows the estimated
annual benefits payable under the Pension Plan (ten year certain
and life) based on an employee's years of service and
compensation, as calculated under the plan. Under the Internal
Revenue Code of 1986, as amended (the "Code"), benefits under
the plan are currently limited to $120,000 per year.
Alternatively, the Pension Plan provides that payment of
benefits may be made in the form of a lump sum payment equal to
the present value of such benefits.
Years of Service
----------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
- ------------ ----------------------------------------------------------------
$ 10,000 $ 3,800 $ 4,200 $ 4,500 $ 4,900 $ 5,300 $ 5,700 $ 6,100
30,000 11,600 13,000 14,300 15,700 17,100 18,500 19,900
60,000 23,300 26,200 29,000 31,900 34,800 37,700 40,600
90,000 35,000 39,400 43,700 48,100 52,500 56,900 61,300
120,000 46,700 52,600 58,400 64,300 70,200 76,100 82,000
150,000 58,400 65,800 73,100 80,500 87,900 95,300 102,700
160,000 62,300 70,200 78,000 85,900 93,800 101,700 109,600
170,000 66,200 74,600 82,900 91,300 99,700 108,100 116,500
200,000 77,900 87,800 97,600 107,500 117,400 127,300 137,200
230,000 89,600 101,000 112,300 123,700 135,100 146,500 157,900
As of December 31, 1997, Messrs. Willetts, III and
Burrell, Jr., had twenty-five and five years, respectively, of
service under the Pension Plan.
EMPLOYMENT AND SEVERANCE AGREEMENTS. Cooperative Bank
maintains an employment agreement with Frederick Willetts, III,
President and Chief Executive Officer. The agreement has a term
of five years, and provides for a current annual base salary of
$180,000. The employment agreement provides for a salary
review by the Board of Directors not less often than annually
with increases to be made in the Board's sole discretion, and
also provides for inclusion in any customary fringe benefits and
vacation and sick leave. The agreement is terminable upon
death, and is terminable by Cooperative Bank for "just cause" as
defined in the agreement. If Cooperative Bank terminates Mr.
Willetts' employment without just cause, he will be entitled to
a continuation of his salary and other benefits from the date of
termination through the remaining term of the agreement. Mr.
Willetts is able to terminate his agreement by providing written
notice to the Board of Directors.
8
Mr. Willetts' employment agreement contains a provision
stating that in the event of the voluntary or involuntary
termination of employment in connection with, or within one year
after, any change in control of the Company or Cooperative Bank,
Mr. Willetts will be paid a sum equal to 2.99 times the average
annual compensation he received during the five taxable years
immediately prior to the date of change in control. "Control"
generally refers to the ownership, holding or power to vote more
than 25% of the Company's or Cooperative Bank's voting stock,
the control of the election of a majority of directors or the
exercise of a controlling influence over the management or
policies of the Company or Cooperative Bank by any person or
group.
On December 18, 1997, the Bank entered into a severance
agreement with O.C. Burrell, Jr., Chief Operating Officer of the
Bank. The agreement provides that in the event of the
involuntary termination of Mr. Burrell's employment with the
Bank in connection with, or within one year after, any change in
control of the Bank, Mr. Burrell shall be paid an amount equal
to 2.99 times the total cash compensation paid to him during the
12 month period preceding such termination, but in no event more
than the product of 2.99 and the average annual compensation he
received during the five taxable years immediately prior to the
change in control. "Control" is defined in the same way as
under Mr. Willetts' employment agreement. Mr. Burrell may also
be entitled to receive the foregoing termination payment in the
event of his voluntary termination of employment in connection
with a change of control under the following circumstances: (1)
if he would be required to relocate outside the metropolitan
area of Wilmington, North Carolina, (2) if in the organizational
structure of the Bank he would be required to report to persons
other than the President, (3) if the Bank fails to maintain
employee benefit plans at pre-change in control levels, (4) if
Mr. Burrell would be assigned duties and responsibilities other
than those normally associated with his position as Executive
Vice President and Chief Operating Officer, and (5) if Mr.
Burrell's responsibilities or authority have in any way been
diminished.
The aggregate payment to Messrs. Willetts and Burrell,
assuming the termination of employment or other triggering
events under the foregoing circumstances at December 31, 1997,
would be approximately $593,733 and $291,025, respectively.
The provisions of these agreements may have the effect of
discouraging a future takeover attempt in which stockholders of
the Company otherwise might receive a premium for their shares
over then-current market prices.
________________________________________________________________
DIRECTORS' COMPENSATION
________________________________________________________________
Members of the Board of Directors and committees of the
Board of Directors receive $1,100 per month. No additional fees
are paid for committee membership or meetings. The Chairman of
the Board receives an additional fee of $1,000 per month and is
eligible to participate in the Company's medical insurance
reimbursement plan. The Chairman also has use of an automobile
and is reimbursed for associated expenses. Directors are also
eligible to receive stock options under the 1990 Option Plan and
will be entitled to receive options under the 1998 Stock Option
and Incentive Plan (See "Proposal II -- Approval of the 1998
Stock Option and Incentive Plan" herein). Each non-employee
director who joins the Board of Directors receives options to
purchase 2.50% of the shares of Common Stock reserved for
issuance under the 1990 Option Plan at an exercise price equal
to the fair market value of the Common Stock on the date of
grant.
9
________________________________________________________________
PROPOSAL II -- APPROVAL OF THE COOPERATIVE BANKSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
________________________________________________________________
GENERAL
The Board of Directors of the Company has adopted the
Cooperative Bankshares, Inc. 1998 Stock Option and Incentive
Plan (the "1998 Option Plan"), subject to its approval by the
Company's stockholders. All statements made herein regarding
the 1998 Option Plan, which are only intended to summarize the
1998 Option Plan, are qualified in their entirety by reference
to the 1998 Option Plan itself, which is attached hereto as
Exhibit A.
PURPOSE OF THE 1998 OPTION PLAN
The purpose of the 1998 Option Plan is to advance the
interests of the Company by providing directors and selected
employees of the Company and its affiliates, including the Bank,
with the opportunity to acquire shares of Common Stock. By
encouraging such stock ownership, the Company seeks to attract,
retain, and motivate the best available personnel for positions
of substantial responsibility and to provide additional
incentive to directors and employees of the Company and its
affiliates to promote the success of the business of the
Company.
DESCRIPTION OF THE 1998 OPTION PLAN
Effective Date. The 1998 Option Plan became effective
February 19, 1998 (the "Effective Date"), subject to its
approval by the Company's stockholders. Awards made prior to
such approval are contingent on such approval and may not be
exercised beforehand.
Administration. The 1998 Option Plan is administered by a
committee (the "Committee"), appointed by the Board of
Directors, consisting of at least two directors of the
Company who are "Non-employee Directors" within the meaning of
the federal securities laws. It is expected that the Committee
will initially consist of the Non-employee Directors
serving on the Company's 1990 Stock Option Plan Committee. The
Committee has discretionary authority to select participants and
grant awards, to determine the form and content of any awards
made under the 1998 Option Plan, to interpret the 1998 Option
Plan, to prescribe, amend and rescind rules and regulations
relating to the 1998 Option Plan, and to make other decisions
necessary or advisable in connection with administering the 1998
Option Plan. All decisions, determinations, and interpretations
of the Committee are final and conclusive on all persons
affected thereby. Members of the Committee will be indemnified
to the full extent provided for under the Company's governing
instruments in connection with any claims, actions, suits or
proceedings relating to any action taken under the 1998 Option
Plan. The Company's full board may act in lieu of the Committee
on any matter as to which the Committee may act.
Eligible Persons; Types of Awards. Under the 1998 Option
Plan, the Committee may grant stock options ("Options") and
stock appreciation rights ("SARs") (collectively, "Awards") to
such employees and directors as the Committee shall designate.
As of the Record Date, the Committee had not made any Awards,
although approximately thirty-one employees and seven non-
employee directors are eligible to receive Awards.
Shares Available for Grants. The 1998 Option Plan
reserves 290,000 shares of Common Stock for issuance upon the
exercise of Options or SARs. Such shares may be (i) authorized
but unissued shares, (ii) shares held in treasury, or (iii)
shares held in a grantor trust created by the Company. The
number and kind of shares reserved for issuance under the 1998
Option Plan, and the number and kind of shares subject to
outstanding Awards, and the exercise price of such Awards, will
be proportionately adjusted for any increase, decrease, change
or exchange of Common Stock for a different number or kind of
shares or other securities of the Company which results from a
merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares
is changed without the receipt or payment of consideration by
the Company.
10
Generally, the number of shares as to which SARs are granted
are charged against the aggregate number of shares available for
grant under the 1998 Option Plan, provided that, in the case of
an SAR granted in conjunction with an Option, under
circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of
shares of Common Stock subject to the Option shall be charged
against the aggregate number of shares of Common Stock remaining
available under the 1998 Option Plan. If Awards should expire,
become unexercisable or be forfeited for any reason without
having been exercised, the shares of Common Stock subject to
such Awards shall, unless the 1998 Option Plan shall have been
terminated, be available for the grant of additional Awards
under the 1998 Option Plan.
Options. Options may be either incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or options that are not ISOs
("Non-ISOs"). The exercise price as to any Option may not be
less than the fair market value (determined under the 1998
Option Plan) of the optioned shares on the date of grant. In
the case of an optionee who owns more than 10% of the
outstanding Common Stock on the date of grant, such option price
may not be less than 110% of fair market value of the shares.
As required by federal tax laws, to the extent that the
aggregate fair market value (determined when an ISO is granted)
of the Common Stock with respect to which ISOs are exercisable
by an optionee for the first time during any calendar year
(under all plans of the Company and of any subsidiary) exceeds
$100,000, the Options granted in excess of $100,000 will be
treated as Non-ISOs, and not as ISOs.
SARs. An SAR may be granted in tandem with all or part of
any Option granted under the 1998 Option Plan, or without any
relationship to any Option. An SAR granted in tandem with an
ISO must expire no later than the ISO, must have the same
exercise price as the ISO and may be exercised only when the ISO
is exercisable and when the fair market value of the shares
subject to the ISO exceeds the exercise price of the ISO. For
SARs granted in tandem with Options, the optionee's exercise of
the SAR cancels his or her right to exercise the Option, and
vice versa. Regardless of whether an SAR is granted in tandem
with an Option, exercise of the SAR will entitle the optionee to
receive, without payment to the Company, an amount equal to the
excess of (or, in the discretion of the Committee if provided in
the grant, a portion of) the excess of the fair market value of
the shares of Common Stock subject to the SAR at the time of its
exercise over the exercise price. The exercise price as to any
particular SAR may not be less than the fair market value of the
optioned shares on the date of grant.
Exercise of Options and SARs. The exercise of Options and
SARs will be subject to terms and conditions established by the
Committee in a written agreement with the optionee. Any vesting
requirement will, however, automatically accelerate to 100% upon
an optionee's termination of service as an employee or a
director due to death, disability (as defined in the 1998 Option
Plan), or retirement at or after age 65. In the absence of
Committee action to the contrary, an otherwise unexpired Option
shall cease to be exercisable upon (i) an optionee's termination
of employment for "just cause" (as defined in the 1998 Option
Plan), (ii) the date two years after an optionee terminates
service due to death, or (iii) the date one year after an
optionee terminates service for any other reason.
An optionee may exercise Options or SARs, subject to
provisions relative to their termination and limitations on
their exercise, only by (i) written notice of intent to exercise
the Option or SAR with respect to a specified number of shares
of Common Stock, and (ii) in the case of Options, payment to the
Company (contemporaneously with delivery of such notice) in
cash, in Common Stock, or a combination of cash and Common
Stock, of the amount of the exercise price for the number of
shares with respect to which the Option is then being exercised.
Common Stock utilized in full or partial payment of the exercise
price for Options shall be valued at its market value at the
date of exercise, and may consist of shares subject to the
Option being exercised.
Change in Control. The terms of any Award which provide for
its exercise or vesting in installments will immediately and
permanently lapse (meaning that all Awards will become
immediately exercisable and fully vested) on the date of a
"change in control" or execution of an agreement to effect a
change in control. In addition, at the time of a change in
control, with respect to Options, each optionee shall, at the
discretion of the Committee, be entitled to receive cash in an
amount equal to the excess of the fair market value of any
shares of Common Stock subject to an
11
Option over the exercise price of such shares, in exchange for
the cancellation of such Options by the optionee. For purposes
of the 1998 Option Plan, a "change in control" is generally
defined as (i) an acquisition of voting control over more than
25% of the voting stock of the Bank or the Company, (ii) an
acquisition of the ability to control the election of a majority
of the Bank's or the Company's directors, (iii) an acquisition
of a controlling influence over the management or policies of
the Bank or of the Company by any person or by persons acting as
a group, or (iv) during any period of two consecutive years,
individuals (the "Continuing Directors") who at the beginning of
such period constitute the Board of Directors of the Bank or of
the Company (the "Existing Board") cease for any reason to
constitute at least two-thirds thereof, provided that any
individual whose election or nomination for election as a member
of the Existing Board was approved by a vote of at least
two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director.
Although these provisions are included in the 1998 Option
Plan primarily for the protection of an optionee in the event of
a Change in Control of the Company, they may also be regarded as
having a takeover defensive effect, which may reduce the
Company's vulnerability to hostile takeover attempts and certain
other transactions which have not been negotiated with and
approved by the Board of Directors.
Conditions on Issuance of Shares. The Committee will have
the discretionary authority to impose, in agreements, such
restrictions on shares of Common Stock issued pursuant to the
1998 Option Plan as it may deem appropriate or desirable,
including but not limited to the authority to impose a right of
first refusal or to establish repurchase rights or both of these
restrictions. In addition, the Committee may not issue shares
unless the issuance complies with applicable securities laws,
and to that end may require that an optionee make certain
representations or warranties. In any event, Common Stock
purchased upon exercise of an Option or SAR may not be sold
within the six-month period following the grant date of that
Option or SAR, except in the event of the optionee's death or
disability, or such other event as the Board may deem
appropriate.
Nontransferability. Optionees may transfer their Awards
(but not ISOs) to family members or trusts under specified
circumstances. Awards may otherwise not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution.
Effect of Dissolution and Related Transactions. In the
event of (i) the liquidation or dissolution of the Company, (ii)
a merger or consolidation in which the Company is not the
surviving entity, or (iii) the sale or disposition of all or
substantially all of the Company's assets (any of the foregoing
to be referred to herein as a "Transaction"), all outstanding
Awards, together with the exercise prices thereof, will be
equitably adjusted for any change or exchange of shares for a
different number or kind of shares which results from the
Transaction. However, any such adjustment will be made in such
a manner as to not constitute a modification, within the meaning
of Section 424(h) of the Code, of outstanding ISOs.
Duration of the 1998 Option Plan and Grants. The 1998
Option Plan has a term of ten years from the Effective Date,
after which date no Awards may be granted. The maximum term for
an Award is ten years from the date of grant, except that the
maximum term of an ISO (and an SAR granted in tandem with an
ISO) may not exceed five years if the optionee owns more than
10% of the Common Stock on the date of grant. The expiration of
the 1998 Option Plan, or its termination by the Committee, will
not affect any Award then outstanding.
Amendment and Termination of the 1998 Option Plan. The
Board of Directors of the Company may from time to time amend
the terms of the 1998 Option Plan and, with respect to any
shares at the time not subject to Awards, suspend or terminate
the 1998 Option Plan. No amendment, suspension, or termination
of the 1998 Option Plan will, without the consent of any
affected optionee, alter or impair any rights or obligations
under any Award previously granted.
12
Financial Effects of Awards. The Company will receive no
monetary consideration for the granting of Awards under the 1998
Option Plan. It will receive no monetary consideration other
than the exercise price for shares of Common Stock issued to
optionees upon the exercise of their Options, and will receive
no monetary consideration upon the exercise of SARs. Under
current accounting standards, recognition of compensation
expense is not required when Options are granted at an exercise
price equal to or exceeding the fair market value of the Common
Stock on the date the Option is granted.
The granting of SARs will require charges to the income of
the Company based on the amount of the appreciation, if any, in
the average market price of the Common Stock to which the SARs
relate over the exercise price of those shares. If the average
market price of the Common Stock declines subsequent to a charge
against earnings due to estimated appreciation in the Common
Stock subject to SARs, the amount of the decline will reverse
such prior charges against earnings (but not by more than the
aggregate of such prior charges).
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the
grant of ISOs. If the optionee holds the shares purchased upon
exercise of an ISO for at least two years from the date the ISO
is granted, and for at least one year from the date the ISO is
exercised, any gain realized on the sale of the shares received
upon exercise of the ISO is taxed as long-term capital gain.
However, the difference between the fair market value of the
Common Stock on the date of exercise and the exercise price of
the ISO will be treated by the optionee as an item of tax
preference in the year of exercise for purposes of the
alternative minimum tax. If an optionee disposes of the shares
before the expiration of either of the two special holding
periods noted above, the optionee will be required, at the time
of the disposition of the Common Stock, to treat the lesser of
the gain realized or the difference between the exercise price
and the fair market value of the Common Stock at the date of
exercise as ordinary income and the excess, if any, as capital
gain.
The Company will not be entitled to any deduction for
federal income tax purposes as the result of the grant or
exercise of an ISO, regardless of whether or not the exercise of
the ISO results in liability to the optionee for alternative
minimum tax. However, if an optionee has ordinary income
taxable as compensation as a result of a disqualifying
disposition (i.e., transfer of the underlying shares prior to
the expiration of the required holding period), the Company will
be entitled to deduct an equivalent amount.
Non-ISOs. In the case of a Non-ISO, an optionee will
recognize ordinary income upon the exercise of the Non-ISO in an
amount equal to the difference between the fair market value of
the shares on the date of exercise and the option price (or, if
the optionee is subject to certain restrictions imposed by the
federal securities laws, upon the lapse of those restrictions
unless the optionee makes a special tax election within 30 days
after the date of exercise to have the general rule apply).
Upon a subsequent disposition of such shares, any amount
received by the optionee in excess of the fair market value of
the shares as of the exercise will be taxed as capital gain.
The Company will be entitled to a deduction for federal income
tax purposes at the same time and in the same amount as the
ordinary income recognized by the optionee in connection with
the exercise of a Non-ISO.
SARs. The grant of an SAR has no tax effect on the
optionee or the Company. Upon exercise of the SARs, however,
any cash or Common Stock received by the optionee in connection
with the surrender of his or her SAR will be treated as
compensation income to the optionee, and the Company will be
entitled to a business expense deduction for the amounts treated
as compensation income.
PROPOSED STOCK OPTIONS GRANTS
For information relating to grants to be made under the
1998 Option Plan at the Effective Date, see "New Plan Benefits"
below.
13
NEW PLAN BENEFITS
The following table sets forth the estimated benefits that
will be received under the 1998 Option Plan.
<CAPTI0N>
NAME AND DOLLAR NUMBER
POSITION VALUE ($)(1) OF UNITS
- -------- ------------ --------
Frederick Willetts, III $527,630 27,770
President and Chief Executive Officer
O.C. Burrell, Jr. 322,335 16,965
Chief Operating Officer
All Executive Officers as a Group 1,826,375 96,125
All Non-Executive Officer Directors
as a Group 557,000 29,000
All Non-Executive Officer Employees
as a Group 3,132,625 164,875
[FN]
________
(1) Based on the closing sale price of the Common Stock on the
NASDAQ National Market $19 per share on March 4, 1998.
</FN>
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the 1998 Option
Plan is desirable, cost effective, and produces incentives which
will benefit the Company and its stockholders. The Board of
Directors is seeking stockholder approval of the 1998 Option
Plan in order to satisfy the requirements of the Code for
favorable tax treatment of ISOs, and to satisfy the requirements
for continued listing of the Common Stock on the Nasdaq National
Market.
Stockholder approval of the 1998 Option Plan requires the
affirmative vote of the holders of a majority of the votes cast
in person or by proxy at the Meeting. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1998 OPTION PLAN.
14
________________________________________________________________
COMPARATIVE STOCK PERFORMANCE GRAPH
________________________________________________________________
The graph and table which follow show the cumulative total
return on the Common Stock of the Company (and its predecessor,
Cooperative Bank) for the five years ended December 31, 1997,
compared with the cumulative total return of the NASDAQ Stock
Market Index for U.S. Companies and the NASDAQ Bank Stocks Index
over the same period. Cumulative total return on the stock or
the index equals the total increase in value since January 1,
1993 assuming reinvestment of all dividends paid into the stock
or the index, respectively.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER
RETURN FOR THE COMPANY AND SELECTED INDICES
[Line graph appears here depicting the cumulative total
shareholder return of $100 invested in the Common Stock as
compared to $100 invested in all companies whose equity
securities are traded on the NASDAQ Stock Market and banking
companies traded on the NASDAQ market. Line graph plots the
cumulative total return from March 1993 to December 1997. Plot
points are provided below.]
3/93 3/94 12/94 12/95 12/96 12/97
--------------------------------------------
The Company 100 110 106 150 148 359
NASDAQ Stock Market Index 100 108 110 156 192 235
NASDAQ Bank Stock Index 100 102 103 153 202 341
Source: Research Data Group, Inc.
15
________________________________________________________________
TRANSACTIONS WITH MANAGEMENT
________________________________________________________________
All of the Company's loans to directors and executive
officers are currently made in the ordinary course of business
on substantially the same terms as those of comparable
transactions prevailing at the time and do not involve more than
the normal risk of collectibility or contain other unfavorable
features.
________________________________________________________________
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
________________________________________________________________
Pursuant to regulations promulgated under the 1934 Act,
the Company's officers, directors and persons who own more than
ten percent of the outstanding Common Stock are required to file
reports detailing their ownership and changes of ownership in
such Common Stock, and to furnish the Company with copies of all
such reports. Based solely on its review of the copies of such
reports received during or with respect to the fiscal year ended
December 31, 1997, the Company believes that during the year
ended December 31, 1997, all of its officers, directors and
stockholders owning in excess of ten percent of the Company's
outstanding Common Stock have complied with the reporting
requirements, except that Officer O.C. Burrell, Jr. and Director
H. Thompson King, III each inadvertently failed to timely file
two reports disclosing two transactions.
________________________________________________________________
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
________________________________________________________________
Coopers & Lybrand L.L.P. served as the Company's
independent certified public accountants for the fiscal year
ended December 31, 1997. A representative of Coopers & Lybrand
L.L.P. is expected to be present at the Meeting to respond to
appropriate questions and to make a statement, if so desired.
________________________________________________________________
OTHER MATTERS
________________________________________________________________
The Board of Directors is not aware of any business to
come before the Meeting other than those matters described above
in this Proxy Statement. However, if any other matters should
properly come before the Meeting, it is intended that proxies in
the accompanying form will be voted in respect thereof in
accordance with the judgment of the person or persons voting the
proxies.
________________________________________________________________
MISCELLANEOUS
________________________________________________________________
The cost of soliciting proxies will be borne by the
Company. In addition to the solicitation of proxies by mail,
Morrow & Co., a proxy soliciting firm, will assist the Company
in soliciting proxies for the meeting and will be paid a fee of
approximately $5,000, plus reimbursement for out-of-pocket
expenses. Proxies may also be solicited personally or by
telephone or telegraph by directors, officers and regular
employees of the Company and the Bank, without additional
compensation therefor. The Company will also request persons,
firms and corporations holding shares in their names, or in the
name of their nominees, which are beneficially owned by others,
to send proxy materials to and obtain proxies from such
beneficial owners, and will reimburse such holders for their
reasonable expenses in doing so.
The Company's Annual Report to Stockholders for the year
ended December 31, 1997, including financial statements, is
being mailed to all stockholders of record as of the close of
business on March 3, 1998. Any stockholder who has not received
a copy of such Annual Report may obtain a copy by writing to the
Secretary of the Company. Such Annual Report is not to be
treated as a part of the proxy solicitation material nor as
having been incorporated herein by reference.
16
________________________________________________________________
STOCKHOLDER PROPOSALS
________________________________________________________________
In order to be eligible for inclusion in the Company's
proxy materials for next year's Annual Meeting of Stockholders,
any stockholder proposal to take action at such meeting must be
received at the Company's main office at 201 Market Street,
Wilmington, North Carolina 28401, no later than November 20,
1998. Any such proposal shall be subject to the requirements of
the proxy rules adopted under the 1934 Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Daniel W. Eller
Daniel W. Eller
Secretary
Wilmington, North Carolina
March 20, 1998
________________________________________________________________
ANNUAL REPORT ON FORM 10-K
________________________________________________________________
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1997 AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT
CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO THE SECRETARY, COOPERATIVE BANKSHARES, INC., 201
MARKET STREET, WILMINGTON, NORTH CAROLINA 28401.
________________________________________________________________
17
Exhibit A
COOPERATIVE BANKSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of
the Company through providing select key Employees and Directors
of the Bank, the Company, and their Affiliates with the
opportunity to acquire Shares. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate the
best available personnel for positions of substantial respon-
sibility and to provide additional incentives to Directors and
key Employees of the Company or any Affiliate to promote the
success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered
into in accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options and SARs,
unless the context clearly indicates a different meaning.
(d) "Bank" shall mean Cooperative Bank for Savings,
Inc., SSB.
(e) "Board" shall mean the Board of Directors of the
Company.
(f) "Change in Control" shall mean any one of the
following events: (i) the acquisition of ownership, holding or
power to vote more than 25% of the voting stock of the Bank or
the Company, (ii) the acquisition of the ability to control the
election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the
management or policies of the Bank or of the Company by any
person or by persons acting as a "group" (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934), or (iv)
during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period
constitute the Board of Directors of the Bank or of the Company
(the "Existing Board") cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing
Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a
Continuing Director. For purposes of this paragraph only, the
term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
(g) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(h) "Committee" shall mean the Stock Option Committee
under the Company's 1990 Stock Option Plan, provided that the
Board may at any time act as the Committee with respect to any
action the Committee may take pursuant to the Plan.
(i) "Common Stock" shall mean the common stock, $1.00
par value, of the Company.
(j) "Company" shall mean Cooperative Bankshares, Inc.
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(k) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of
the Company or between the Company, an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
(l) "Director" shall mean any member of the Board, and
any member of the board of directors of any Affiliate that the
Board has by resolution designated as being eligible for
participation in this Plan.
(m) "Disability" shall have the meaning set forth in
Code Section 22(e)(3), as amended from time to time.
(n) "Effective Date" shall mean the date specified in
Paragraph 14 hereof.
(o) "Employee" shall mean any person employed by the
Company, the Bank, or an Affiliate.
(p) "Exercise Price" shall mean the price per Optioned
Share at which an Option or SAR may be exercised.
(q) "ISO" shall mean an option to purchase Common Stock
which meets the requirements set forth in the Plan, and which is
intended to be and is identified as an "incentive stock option"
within the meaning of Section 422 of the Code.
(r) "Market Value" shall mean the fair market value of
the Common Stock, as determined under Paragraph 7(b) hereof.
(s) "Non-Employee Director" shall have the meaning
provided in Rule 16b-3.
(t) "Non-ISO" means an option to purchase Common Stock
which meets the requirements set forth in the Plan but which is
not intended to be and is not identified as an ISO.
(u) "Option" means an ISO and/or a Non-ISO.
(v) "Optioned Shares" shall mean Shares subject to an
Award granted pursuant to this Plan.
(w) "Participant" shall mean any person who receives an
Award pursuant to the Plan.
(x) "Plan" shall mean this Cooperative Bankshares, Inc.
1998 Stock Option and Incentive Plan.
(y) "Rule 16b-3" shall mean Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "SAR" (or "Stock Appreciation Right") means a right
to receive the appreciation in value, or a portion of the
appreciation in value, of a specified number of shares of Common
Stock.
(bb) "Year of Service" shall mean a full twelve-month
period, measured from the date of an Award and each annual
anniversary of that date, during which a Participant has not
terminated Continuous Service for any reason.
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3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect
for a term of ten years from the Effective Date, unless sooner
terminated pursuant to Paragraph 16 hereof. No Award shall be
granted under the Plan after ten years from the Effective Date.
(b) Term of Awards. The term of each Award granted
under the Plan shall be established by the Committee, but shall
not exceed 10 years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time an ISO is granted, the term
of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required under
Paragraph 11, the aggregate number of Shares deliverable
pursuant to Awards shall not exceed 290,000 Shares. Such Shares
may either be authorized but unissued Shares, Shares held in
treasury, or Shares held in a grantor trust created by the
Company. If any Awards should expire, become unexercisable, or
be forfeited for any reason without having been exercised, the
Optioned Shares shall, unless the Plan shall have been
terminated, be available for the grant of additional Awards
under the Plan.
(b) Special Rule for SARs. The number of Shares with
respect to which an SAR is granted, but not the number of Shares
which the Company delivers or could deliver to an Employee or
individual upon exercise of an SAR, shall be charged against the
aggregate number of Shares remaining available under the Plan;
provided, however, that in the case of an SAR granted in
conjunction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and
vice versa, only the number of Shares subject to the Option
shall be charged against the aggregate number of Shares
remaining available under the Plan. The Shares involved in an
Option as to which option rights have terminated by reason of
the exercise of a related SAR, as provided in Paragraph 9
hereof, shall not be available for the grant of further Options
under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Appointment of the Committee. The Plan shall be
administered by the Committee. Members of the Committee shall
serve at the pleasure of the Board. In the absence at any time
of a duly appointed Committee, the Plan shall be administered by
the Board.
(b) Powers of the Committee. Except as limited by the
express provisions of the Plan or by resolutions adopted by the
Board, the Committee shall have sole and complete authority and
discretion (i) to select Participants and grant Awards, (ii) to
determine the form and content of Awards to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan,
(iv) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (v) to make other determinations
necessary or advisable for the administration of the Plan. The
Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to
time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at
any meeting at which a quorum is present, or acts approved in
writing by a majority of the Committee without a meeting, shall
be deemed the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a
written agreement containing such provisions as may be approved
by the Committee. Each such Agreement shall constitute a
binding contract between the Company and the Participant, and
every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such
Agreement. The terms of each such Agreement shall be in
accordance with the Plan, but each Agreement may include such
additional provisions and restrictions determined by the
Committee, in its discretion, provided that such additional
provisions and restrictions are not inconsistent with the terms
of the Plan. In particular, the Committee shall set forth in
each Agreement (i) the Exercise Price of an Option or SAR, (ii)
the
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number of Shares subject to the Award, and its expiration
date, (iii) the manner, time, and rate (cumulative or otherwise)
of exercise or vesting of such Award, and (iv) the restrictions,
if any, to be placed upon such Award, or upon Shares which may
be issued upon exercise of such Award. The Chairman of the
Committee and such other Directors and officers as shall be
designated by the Committee are hereby authorized to execute
Agreements on behalf of the Company and to cause them to be
delivered to the recipients of Awards.
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be
final and conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights
of indemnification as they may have, the members of the
Committee shall be indemnified by the Company in connection with
any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or
any Award, granted hereunder to the full extent provided for
under the Company's governing instruments with respect to the
indemnification of Directors.
6. ELIGIBILITY FOR AWARDS.
(a) General Rule. The Committee shall have the
discretion to grant Awards to Employees and Directors (including
members of the Committee). In selecting those Employees and
Directors to whom Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the
position, duties and responsibilities of the eligible Employees
and Directors, the value of their services to the Company and
its Affiliates, and any other factors the Committee may deem
relevant.
(b) Special Rules for ISOs. The aggregate Market Value,
as of the date the Option is granted, of the Shares with respect
to which ISOs are exercisable for the first time by an Employee
during any calendar year (under all incentive stock option
plans, as defined in Section 422 of the Code, of the Company or
any present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may
grant Options in excess of the foregoing limitations, in which
case Options granted in excess of such limitation shall be Non-
ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price
as to any particular Option shall not be less than 100% of the
Market Value of the Optioned Shares on the date of grant. In
the case of an Employee who owns Shares representing more than
10% of the Company's outstanding Shares of Common Stock at the
time an ISO is granted, the Exercise Price shall not be less
than 110% of the Market Value of the Optioned Shares at the time
the ISO is granted.
(b) Standards for Determining Exercise Price. If the
Common Stock is listed on a national securities exchange
(including the NASDAQ National Market System) on the date in
question, then the Market Value per Share shall be the average
of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise
Price shall be the mean between the bid and asked price on such
date. If the Common Stock is traded otherwise than on a
national securities exchange on the date in question, then the
Market Value per Share shall be the mean between the bid and
asked price on such date, or, if there is no bid and asked price
on such date, then on the next prior business day on which there
was a bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and
absolute discretion.
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8. EXERCISE OF OPTIONS.
(a) Generally. The Committee shall specify in each
Agreement the period of years over which the underlying Option
shall become exercisable. Notwithstanding the foregoing, an
Option shall become fully (100%) exercisable immediately upon
termination of the Participant's Continuous Service due to
Disability, death, retirement at or after age 65, or upon a
Change in Control or execution of an agreement to effect a
Change in Control.
(b) Procedure for Exercise. A Participant may exercise
Options, subject to provisions relative to its termination and
limitations on its exercise, only by (1) written notice of
intent to exercise the Option with respect to a specified number
of Shares, and (2) payment to the Company (contemporaneously
with delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the
Exercise Price for the number of Shares with respect to which
the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the
Company at its executive offices. Common Stock utilized in full
or partial payment of the Exercise Price for Options shall be
valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised.
(c) Period of Exercisability. Except to the extent
otherwise provided in the terms of an Agreement, an Option may
be exercised by a Participant only while he is an Employee or a
Director and has maintained Continuous Service from the date of
the grant of the Option, or within one year after termination of
such Continuous Service (but not later than the date on which
the Option would otherwise expire), except if the Participant's
Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall
have the meaning set forth in any unexpired employment or
severance agreement between the Participant and the Bank
and/or the Company (and, in the absence of any such
agreement, shall mean termination because of the
Participant's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final
cease-and-desist order), then the Participant's rights to
exercise such Option shall expire on the date of such
termination; or
(2) death, then to the extent that the Participant
would have been entitled to exercise the Option
immediately prior to his death, such Option of the
deceased Participant may be exercised within two years
from the date of his death (but not later than the date on
which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom
his rights under such Option shall have passed by will or
by laws of descent and distribution.
(d) Effect of the Committee's Decisions. The
Committee's determination whether a Participant's Continuous
Service has ceased, and the effective date thereof, shall be
final and conclusive on all persons affected thereby.
(e) Mandatory Six-Month Holding Period. Notwithstanding
any other provision of this Plan to the contrary, Common Stock
that is purchased upon exercise of an Option or SAR may not be
sold within the six-month period following the grant of that
Option or SAR.
9. SARS (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the
Committee may from time to time grant SARs either in conjunction
with, or independently of, any Options granted under the Plan.
An SAR granted in conjunction with an Option may be an
alternative right wherein the exercise of the Option terminates
the SAR to the extent of the
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number of shares purchased upon exercise of the Option and,
correspondingly, the exercise of the SAR terminates the Option
to the extent of the number of Shares with respect to which the
SAR is exercised. Alternatively, an SAR granted in conjunction
with an Option may be an additional right wherein both the SAR
and the Option may be exercised. An SAR may not be granted in
conjunction with an ISO under circumstances in which the
exercise of the SAR affects the right to exercise the ISO or
vice versa, unless the SAR, by its terms, meets all of the
following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference
between the Exercise Price of the ISO and the
Market Value of the Shares subject to the ISO
at the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is
transferable, and under the same conditions;
(4) The SAR may be exercised only when the ISO may
be exercised; and
(5) The SAR may be exercised only when the Market
Value of the Shares subject to the ISO exceeds
the Exercise Price of the ISO.
(b) Terms of SAR Awards. The provisions of Paragraphs 7
and 8 are incorporated by reference herein, and shall (to the
extent not inconsistent with this Paragraph) determine the terms
of SARs.
(c) Exercise of SARs. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement
granted to a Participant, provided that an SAR may not be
exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the
Company except for applicable withholding taxes, an amount equal
to the excess of (or, in the discretion of the Committee if
provided in the Agreement, a portion of) the excess of the then
aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the
aggregate Exercise Price of such number of Optioned Shares.
This amount shall be payable by the Company, in the discretion
of the Committee, in cash or in Shares valued at the then Market
Value thereof, or any combination thereof.
10. CHANGE IN CONTROL.
The provisions of any Award which provides for its exercise
or vesting in installments shall immediately and permanently
lapse on the date of a Change in Control or execution
of an agreement to effect a Change in Control. Consequently,
all Options and SARs shall become immediately exercisable and
fully vested on the date of the Change in Control. With respect
to Options, at the time of a Change in Control, the Participant
shall, at the discretion of the Committee, be entitled to
receive cash in an amount equal to the excess of the Market
Value of the Common Stock subject to such Option over the
Exercise Price of such Shares, in exchange for the cancellation
of such Options by the Participant.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number
and kind of shares reserved for issuance under the Plan, and the
number and kind of shares subject to outstanding Awards, and the
Exercise Price thereof, shall be proportionately adjusted for
any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapita-
lization, reorganization, reclassification, stock dividend,
split-up, combination of shares, or similar event in which the
number or kind of shares is changed without the receipt or
payment of consideration by the Company.
A-6
(b) Transactions in which the Company is Not the
Surviving Entity. In the event of (i) the liquidation or
dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale
or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to herein as a
"Transaction"), all outstanding Awards, together with the
Exercise Prices thereof, shall be equitably adjusted for any
change or exchange of Shares for a different number or kind of
shares or other securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant
to subparagraphs (a) or (b) hereof shall be made in such a
manner as not to constitute a modification, within the meaning
of Section 424(h) of the Code, of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or
Different Shares or Securities. If, by reason of any adjustment
made pursuant to this Paragraph, a Participant becomes entitled
to new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the
Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in
this Paragraph, the issuance by the Company or an Affiliate of
shares of stock of any class, or of securities convertible into
Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect,
and no adjustment shall be made with respect to, the number,
class, or Exercise Price of Shares then subject to Awards or
reserved for issuance under the Plan.
12. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or
by the laws of descent and distribution. Notwithstanding the
foregoing, or any other provision of this Plan, a Participant
who holds Awards may transfer such Awards (but not ISOs) to his
or her spouse, lineal ascendants, lineal descendants, or to a
duly established trust for the benefit of one or more of these
individuals. Awards so transferred may thereafter be
transferred only to the Participant who originally received the
grant or to an individual or trust to whom the Participant could
have initially transferred the Awards pursuant to this Paragraph
12. Awards which are transferred pursuant to this Paragraph 12
shall be exercisable by the transferee according to the same
terms and conditions as applied to the Participant.
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be
the later of the date on which the Committee makes the deter-
mination of granting such Award, and the Effective Date. Notice
of the determination shall be given to each Participant to whom
an Award is so granted within a reasonable time after the date
of such grant.
14. EFFECTIVE DATE.
The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders owning at least a
majority of the total votes cast at a duly called meeting of the
Company's stockholders held in accordance with applicable laws.
Any Awards made prior to approval of the Plan by the
stockholders of the Company shall be contingent on such
approval, and may not be exercised until and unless such
approval is received.
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may
authorize the Committee to direct execution of an instrument
providing for the modification of any outstanding Award,
provided no such modification shall confer on
A-7
the holder of said Award any right or benefit which could not be
conferred on him by the grant of a new Award at such time, or
impair the Award without the consent of the holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the
Plan and, with respect to any Shares at the time not subject to
Awards, suspend or terminate the Plan. No amendment, suspension
or termination of the Plan shall, without the consent of any
affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common
Stock shall not be issued with respect to any Award unless the
issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed.
(b) Special Circumstances. The inability of the Company
to obtain approval from any regulatory body or authority deemed
by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of
any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option or SAR, the
Company may require the person exercising the Option or SAR to
make such representations and warranties as may be necessary to
assure the availability of an exemption from the registration
requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the
discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or desirable,
including but not limited to the authority to impose a right of
first refusal or to establish repurchase rights or both of these
restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise
of Options and/or SARs shall be subject to the Participant's
satisfaction of all applicable federal, state and local income
and employment tax withholding obligations. The Committee, in
its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have
the Company withhold Shares, or to deliver to the Company Shares
that he already owns, having a value equal to the amount
required to be withheld. The value of the Shares to be
withheld, or delivered to the Company, shall be based on the
Market Value of the Shares on the date the amount of tax to be
withheld is to be determined. As an alternative, the Company
may retain, or sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility
to participate or participation in the Plan create or be deemed
to create any legal or equitable right of the Employee,
Director, or any other party to continue service with the
Company, the Bank, or any Affiliate of such corporations. No
Employee or Director shall have a right to be granted an Award
or, having received an Award, the right to again be granted an
Award. However, an Employee or Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award
or Awards.
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21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance
with the laws of the State of North Carolina, except to the
extent that federal law shall be deemed to apply.
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REVOCABLE PROXY
COOPERATIVE BANKSHARES, INC.
WILMINGTON, NORTH CAROLINA
________________________________________________________________
ANNUAL MEETING OF STOCKHOLDERS
April 24, 1998
________________________________________________________________
The undersigned hereby appoints Paul G. Burton, H.
Thompson King, III and F. Peter Fensel, Jr. of Cooperative
Bankshares, Inc. (the "Company") with full powers of
substitution, to act as proxies for the undersigned to vote all
shares of the Company's common stock, $1.00 par value, which the
undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held at the Howard Johnson Plaza Hotel, 5032
Market Street, Wilmington, North Carolina, on Friday, April 24,
1998 at 11:00 a.m., and at any and all adjournments thereof, as
follows:
VOTE
FOR WITHHELD
--- --------
1. The election as directors of all
nominees listed below (except as
marked to the contrary below). [ ] [ ]
Frederick Willetts, Jr.
James D. Hundley, M.D.
O. Richard Wright, Jr.
INSTRUCTION:
TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL
NOMINEE, INSERT THAT NOMINEE'S NAME ON THE
LINE PROVIDED BELOW.
_________________________________________
The Board of Directors recommends a vote "FOR" nominees
listed above.
FOR AGAINST ABSTAIN
--- ------- -------
2. Approval of the Cooperative Bankshares,
Inc. 1998 Stock Option and Incentive
Plan [ ] [ ] [ ]
The Board of Directors recommends a vote "FOR" this
proposal.
________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY SHALL BE VOTED FOR EACH OF THE NOMINEES
LISTED ABOVE AND "FOR" APPROVAL OF THE 1998 STOCK OPTION AND
INCENTIVE PLAN. IF ANY OTHER BUSINESS IS PRESENTED AT THE
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
AS DETERMINED BY A MAJORITY OF THE BOARD OF DIRECTORS. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS
TO BE PRESENTED AT THE MEETING. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH
RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND
MATTERS INCIDENT TO THE CONDUCT OF THE 1998 ANNUAL MEETING.
________________________________________________________________
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at
the Meeting or at any adjournment thereof and after notification
to the Secretary of the Company at the Meeting of the
stockholder's decision to terminate this proxy, then the power
of said attorneys and proxies shall be deemed terminated and of
no further force and effect.
The undersigned acknowledges receipt from the Company
prior to the execution of this proxy of the Notice of Annual
Meeting, the Proxy Statement, and the Company's Annual Report to
Stockholders for the Fiscal Year Ended December 31, 1997. The
undersigned hereby revokes any and all proxies heretofore given
with respect to the undersigned's shares of the Company's Common
Stock.
Dated:_____________________, 1998
__________________________ __________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
__________________________ __________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in
which this card was mailed. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title.
If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.