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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
MOUNTAINBANK FINANCIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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[_] 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:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
MountainBank Financial Corporation
201 Wren Drive
Hendersonville, North Carolina 28792
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To Be Held June 17, 2002
The Annual Meeting of Shareholders of MountainBank Financial Corporation
will be held at 10:00 a.m. on Monday, June 17, 2002, at The Kellogg Center
located at 11 Broyles Road, Hendersonville, North Carolina.
The purposes of the meeting are:
1. Election of Directors. To elect six directors for various terms, or
until their respective successors are duly elected and qualified;
2. Approval of 2002 Employee Stock Purchase Plan. To consider a proposal
to approve our proposed Employee Stock Purchase Plan;
3. Ratification of Appointment of Independent Accountants. To consider a
proposal to ratify the appointment of Larrowe and Company, PLLC as our
independent accountants for 2002; and
4. Other Business. To transact any other business that may be properly
presented for action at the Annual Meeting.
You are invited to attend the Annual Meeting in person. However, even if
you plan to attend, we ask that you complete, sign and date the enclosed
appointment of proxy and return it to us as soon as you can in the enclosed
envelope. Doing that will help us ensure that your shares are represented and
that a quorum is present at the Annual Meeting. Even if you sign an appointment
of proxy, you may still revoke it later or attend the Annual Meeting and vote in
person.
By Order of the Board of Directors
/s/ J. W. Davis
J. W. Davis
President and Chief Executive Officer
May 15, 2002
MountainBank Financial Corporation
201 Wren Drive
Hendersonville, North Carolina 28792
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
General
This Proxy Statement is being furnished to our shareholders in connection
with our solicitation of appointments of proxy in the enclosed form for use at
the 2002 annual meeting of our shareholders (the "Annual Meeting") and at any
adjournments of the meeting. The Annual Meeting will be held at The Kellogg
Center located at 11 Broyles Road, Hendersonville, North Carolina, at 10:00 a.m.
on Monday, June 17, 2002. This Proxy Statement is being mailed to our
shareholders on or about May 15, 2002.
In this Proxy Statement, the term "you" or similar terms refer to the
shareholder receiving it. The terms "we," "us," "our" and similar terms refer to
MountainBank Financial Corporation. Our banking subsidiary, MountainBank, is
referred to as the "Bank."
Appointment and Voting of Proxies
A form of "appointment of proxy" is included with this Proxy Statement that
names Gregory L. Gibson, Timothy W. Greene, and Dan T. Marchesoni (the
"Proxies") to act as proxies and vote your shares at the Annual Meeting. We ask
that you sign and date an appointment of proxy and return it to us in the
enclosed envelope so that your shares will be represented at the Annual Meeting.
If you correctly execute an appointment of proxy and return it to us before
the Annual Meeting, then shares of our Common Stock you hold of record will be
voted by the Proxies according to your instructions in the appointment of proxy.
If you sign and return an appointment of proxy but do not give any voting
instructions, then your shares will be voted by the Proxies "FOR" the election
of each of the six nominees for director named in Proposal 1 below and "FOR"
Proposals 2 and 3. If, at or before the time of the Annual Meeting, any nominee
named in Proposal 1 has become unable or unwilling to serve as a director for
any reason, the Proxies will have the discretion to vote for any substitute
nominee named by our Board of Directors. We are not aware of any other business
that will be brought before the Annual Meeting but, if any other matter is
properly presented for action by shareholders, the Proxies will be authorized to
vote your shares according to their best judgment.
We will pay all costs of soliciting appointments of proxy for the Annual
Meeting, including the costs of preparing and mailing this Proxy Statement. In
addition to using the mail, our and the Bank's officers, employees and directors
may solicit appointments of proxy, personally or by telephone, without
additional compensation.
Revocation of Appointment of Proxy
If you sign and return an appointment of proxy, you can revoke it at any
time before the voting takes place at the Annual Meeting by filing with our
Secretary either a written instrument revoking it or an executed appointment of
proxy dated as of a later date, or by attending the Annual Meeting and
announcing your intention to vote in person.
Record Date
Our Board of Directors has set the close of business on May 10, 2002, as
the record date (the "Record Date") for determining which shareholders are
entitled to receive notice of and to vote at the Annual Meeting. You must have
been a record holder of our Common Stock on the Record Date in order to be
eligible to vote at the Annual Meeting.
Voting Securities
Our voting securities are the 3,126,982 shares of our Common Stock which
were outstanding on the Record Date. At the Annual Meeting, you may cast one
vote for each share of Common Stock you held of record on the Record Date on
each director to be elected and on each other matter voted on by shareholders.
Our Series A Preferred Stock is nonvoting stock and those shares may not be
voted at the Annual Meeting.
Voting Procedures; Vote Required for Approval
In the election of directors, the six nominees receiving the highest
numbers of votes will be elected. For Proposals 2 and 3 to be approved, the
numbers of votes cast in person and by proxy at the Annual Meeting in favor of
those proposals must exceed the numbers of votes cast against them. Abstentions
and broker non-votes will have no effect in the voting for directors or on
Proposals 2 and 3. You may not vote cumulatively in the election of directors.
Beneficial Ownership of Equity Securities
The following table describes the beneficial ownership of our equity
securities on the Record Date by our current directors, nominees for election as
directors, and certain of our executive officers, individually, and by all our
current directors and executive officers as a group.
Amount and nature of
beneficial ownership (1)(2)
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Name of Percent of Series A Percent of
beneficial owner Common Stock class (3) Preferred Stock class (3)
- ---------------------------------- --------------- ----------- --------------- ------------
William A. Banks ..................... 13,408 .43% -0- -
William H. Burton III ................ 65,574 2.08% 10,500 2.50%
J. W. Davis .......................... 69,960 2.21% -0- -
Kenneth C. Feagin .................... 40,057 1.27% -0- -
Danny L. Ford ........................ 46,640 1.48% 5,000 1.19%
Gregory L. Gibson .................... 10,878 .35% -0- -
Boyd L. Hyder ........................ 146,402 4.59% 40,000 9.54%
J. Edward Jones ...................... 24,216 .77% 5,000 1.19%
Ronald R. Lamb ....................... 25,741 .82% -0- -
H. Steve McManus ..................... 116,420 3.69% 20,000 4.77%
Van F. Phillips ...................... 57,856 1.84% 4,000 .95%
Vincent K. Rees ...................... 20,160 .64% -0- -
Catherine H. Schroader ............... 83,205 2.64% 5,685 1.36%
Maurice A. Scott ..................... 63,382 2.01% 20,000 4.77%
2
Amount and nature of
beneficial ownership (1)(2)
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Name of Percent of Series A Percent of
beneficial owner Common Stock class (3) Preferred Stock class (3)
- ---------------------------------- --------------- ----------- --------------- ------------
All current directors and executive
officers as a group (14 people) ...... 783,899 22.71% 110,185 26.28%
__________________
(1) Except as otherwise noted, and to the best of our knowledge, the
individuals named and included in the group exercise sole voting and
investment power with respect to all listed shares of our Common Stock. The
listed shares include the following numbers of shares with respect to which
the individuals named and included in the group have shared voting and
investment power: Mr. Banks - 2,774; Mr. Burton - 7,566; Mr. Ford - 18,720;
Mr. Hyder - 374; Mr. Lamb - 5,070; Mr. McManus - 12,150; Mr. Phillips -
39,355; Mr. Rees - 1,080; Ms. Schroader - 26,352; Mr. Scott - 300; and all
persons included in the group - 113,741. The listed shares also include the
following numbers of shares that could be acquired by the individuals named
and included in the group pursuant to currently exercisable stock options
and with respect to which shares they may be deemed to have sole investment
power only: Mr. Banks - 7,860; Mr. Burton - 19,002; Mr. Davis - 37,560; Mr.
Feagin - 19,177; Mr. Ford - 10,040; Mr. Gibson - 7,128; Mr. Hyder - 13,390;
Mr. Jones - 11,154; Mr. Lamb - 10,580; Mr. McManus - 5,180; Mr. Phillips -
7,860; Mr. Rees - 19,080; Ms. Schroader - 22,239; Mr. Scott - 2,578; and
all persons included in the group - 192,828. Additionally, the listed
shares include the following numbers of shares that could be acquired by
the individuals named and included in the group upon the conversion of
shares of our Series A Preferred Stock they currently hold and with respect
to which shares they may be deemed to have sole investment power only: Mr.
Burton - 12,600; Mr. Ford - 6,000; Mr. Hyder - 48,000; Mr. Jones - 6,000;
Mr. McManus - 24,000; Mr. Phillips - 4,800; Ms. Schroader - 6,822; Mr.
Scott - 24,000; and all persons included in the group - 132,222.
(2) Our Series A Preferred Stock is non-voting stock. Except as otherwise
noted, and to the best of our knowledge, the individuals named and included
in the group exercise sole investment power with respect to all listed
shares of our Series A Preferred Stock. The listed shares include the
following numbers of shares with respect to which the individuals named and
included in the group have shared voting and investment power: Mr. Burton -
10,500; Ms. Schroader - 5,685; and all persons included in the group -
16,185.
(3) In the case of our Common Stock, percentages are calculated based on
3,126,982 total outstanding shares plus, in the case of each named
individual and the group, the number of additional shares (if any) that
could be purchased by that individual or by persons included in the group
pursuant to currently exercisable stock options and/or upon the conversion
of outstanding shares of our Series A Preferred Stock that they hold. In
the case of our Series A Preferred Stock, percentages are calculated based
on 419,243 total outstanding shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Until we were organized and became the Bank's parent holding company on
March 30, 2001, our directors and executive officers who served in similar
positions with the Bank were required by federal law to file reports with the
Federal Deposit Insurance Corporation regarding the amount of and changes in
their beneficial ownership of the Bank's equity securities. Since that date, our
directors and executive officers are required to file those reports with the
Securities and Exchange Commission. Based on our review of copies of those
reports, we are required to disclose in our proxy statement each year any
failures to report shares beneficially owned or changes in beneficial ownership,
or to timely file required reports, during the previous year. It has come to our
attention that Mr. Feagin, one of our directors, has not reported a transfer of
shares of our Common Stock to him during 2001 by a family member. A report
covering that transfer is in the process of being filed.
PROPOSAL 1: ELECTION OF DIRECTORS
Our Bylaws provide for a Board of Directors consisting of not less than
eight nor more than 20 members and authorize our Board to set and change the
number of directors from time to time within those limits. The Board is divided
into three classes and directors are elected to staggered three-year terms. Each
year, the terms of our directors in one class expire and directors in that class
are elected for new three-year terms.
3
When we completed our acquisition of First Western Bank on December 31,
2001, we had ten directors. Following that transaction, and as provided in our
acquisition agreement, two of First Western Bank's former directors were
appointed to serve as members of our Board of Directors until our next Annual
Meeting. So, the number of our directors currently is set at 12, and our Board
of Directors currently consists of the ten original members of our Board and the
two new directors who were appointed after the acquisition.
Nominees. The terms of the following six current directors expire at the
Annual Meeting, and each of them has been nominated by our Board of Directors
for reelection. Four of the nominees are directors who were serving at the time
we completed our acquisition of First Western Bank. The remaining two nominees
are the former directors of First Western Bank who were appointed to serve as
directors after the acquisition.
Position
with us and First Proposed Principal occupation
Name and age the Bank elected (1) term (2) and business experience
- ----------------- ------------ ----------- --------- ---------------------------------------------------------
William A. Banks Director 2002 3 years President, BanCo Lumber, Inc. (logging/lumber
(79) manufacturing); co-owner, Mountain Air Country Club
Kenneth C. Feagin Director 1997 3 years President, Ken Feagin Truck & Trailer Sales; Partner,
(47) Martin-Feagin Ford Lincoln Mercury; formerly, partner and
owner, Bryan Easler Ford (1980 - 2001) (automobile
dealerships)
J. Edward Jones Director 1998 3 years President, Sutherland Insurance & Realty Company (general
(67) insurance and real estate)
Ronald R. Lamb Director 1997 2 years Owner, Lamb Fruit Co., Inc. and Ottanola Farms (apple
(66) production and sales)
H. Steve McManus Director 2000 2 years President, Beacon Food Services, Inc. (restaurant),
(60) McManus Development LLC, and Moon McManus Developers LLC
(residential real estate developers); formerly, Chief
Executive Officer, Hardee's Food Systems, Inc. (1995 - 1997)
Van F. Phillips Director 2002 3 years Vice President, Great Meadows, Inc. (real estate
(50) development); general partner, Spruce Pine Shopping
Center, Ltd.
_________________
(1) "Year first elected" refers to the year in which each individual first took
office as our director or, if before our incorporation during 2001, as a
director of the Bank. Mr. Banks and Mr. Phillips previously served as
directors of First Western Bank and were appointed to serve as our
directors during January 2002 following, and as provided in the agreement
pertaining to, our acquisition of that bank. Each other nominee first
became our director during January 2001 at the time we were incorporated,
and each of them previously served, and continues to serve, as a director
of the Bank.
(2) Under our Bylaws, the numbers of directors in each class are to be as
nearly equal as may be. The proposed terms of the six nominees have been
set in manner that will divide our 12 directors evenly among the three
classes.
Our Board of Directors recommends that you vote "FOR" each of the six
nominees named above. The six nominees receiving the highest numbers of votes
will be elected.
Incumbent Directors. The following table contains information about our six
current directors whose terms extend beyond the date of the Annual Meeting.
Positions First elected/
with us and current term Principal occupation
Name and age the Bank expires (1) and business experience
- ---------------------- ------------ -------------- ----------------------------------------------------
William H. Burton III Director 1997 / 2003 President and Chief Executive Officer,
(47) Cafe Enterprises, Inc. (regional restaurant company)
J. W. Davis (2) President, Chief 1997 / 2004 Our and the Bank's executive officer
(55) Executive Officer,
and Director
4
Positions First elected/
with us and current term Principal occupation
Name and age the Bank expires (1) and business experience
- ---------------------- ------------ -------------- ----------------------------------------------------
Danny L. Ford Director 1999 / 2004 Self-employed cattle rancher; formerly, head football
(54) coach, University of Arkansas (1993 - 1997) and
Clemson University (1978 - 1989)
Boyd L. Hyder Chairman 1997 / 2003 President and owner, B&A Hyder Trucking, Inc.
(60) (trucking company)
Catherine H. Schroader Director 1997 / 2003 Co-owner and manager, Schroader's Honda, Inc.
(65) (motorcycle dealership)
Maurice A. Scott Director 1997 / 2003 Retired; previously, Plant Manager, Monsanto Company
(57) (chemical manufacturer) (1981 - 1997)
_________________
(1) "Year first elected" refers to the year in which each individual first took
office as our director or, if before our incorporation during 2001, as a
director of the Bank. Each person first became our director during January
2001 at the time we were incorporated, and each of them previously served,
and continues to serve, as a director of the Bank.
(2) Mr. Davis' employment agreement with the Bank provides that he be nominated
each year for election as a director.
Director Compensation
Director Fees. Our directors also serve as directors of the Bank. Each
director currently receives a monthly retainer of $100 plus a fee of $900 for
attendance at each meeting of our or the Bank's Board of Directors and $150 for
attendance at each meeting of a Board committee. Members of the Executive
Committee receive a monthly retainer of $500 and are not compensated for
attendance at Committee meetings. Other than meeting fees, directors do not
receive any additional or separate compensation for their services as our
directors.
Director Stock Options. Since the Bank was organized during 1997, options
have been granted to the Bank's current non-employee directors under the Bank's
1997 Director Stock Option Plan which was approved by the Bank's shareholders
during 1998. When our reorganization became effective and we became the Bank's
parent company during 2001, we assumed those options and the Plan and the
options were converted into options to purchase our Common Stock. Additionally,
the former directors of First Western Bank who have become our directors held
options previously granted by that bank under its separate plans which we
assumed and converted into options to purchase our Common Stock in connection
with the acquisition. The numbers of shares of our Common Stock covered by
options currently held by our non-employee directors are as follows: Mr. Banks -
7,860; Mr. Burton - 24,344; Mr. Feagin - 24,698; Mr. Ford - 17,522; Mr. Hyder -
21,110; Mr. Jones - 15,463; Mr. Lamb - 15,260; Mr. McManus - 15,541; Mr.
Phillips - 7,860; Ms. Schroader - 26,704; and Mr. Scott - 7,735.
Meetings and Committees of the Board of Directors
Each of our directors also serves as a director of the Bank, and the Bank's
and our Boards ordinarily meet jointly. During 2001, the Boards of Directors
held five regular meetings and one special meeting. Each current director who
held office during 2001 attended 75% or more of the aggregate number of meetings
of the Boards and any committees on which he or she served.
The Boards of Directors have several standing committees, including a joint
Executive Committee which serves as our Board's nominating committee, and a
joint Audit Committee which is further described below. The Boards do not have a
separate compensation committee.
The Executive Committee functions as a joint committee of our and the
Bank's Boards of Directors. It may act with all the authority of the full
Boards, and it acts as a nominating committee for us by making
5
recommendations to our Board regarding nominees for election as directors. Our
Board of Directors makes all final determinations regarding the selection of
nominees. The current members of the Executive Committee are: Boyd L. Hyder --
Chairman, J. W. Davis, J. Edward Jones, H. Steve McManus, Van F. Phillips, and
Maurice A. Scott. The Committee met once during 2001 in its capacity as a
nominating committee. In making its recommendations to our Board of Directors,
the Committee will consider candidates recommended by shareholders. Any
shareholder recommendation should be made in writing and include a statement of
the candidate's qualifications to serve as a director.
Audit Committee
Function. The Audit Committee functions as a joint committee and acts under
a written charter approved by both our and the Bank's Boards of Directors. The
Committee reviews the work of our internal auditor and the scope of our internal
audit program. The Committee and our Board of Directors engage independent
accountants each year to conduct an annual audit of our consolidated financial
statements, and the Committee reviews reports from the accounting firm and
reports of examinations by our regulators. During 2001, the Committee met three
times.
Members. The current members of the Audit Committee are William H. Burton
III-- Chairman, Danny L. Ford, Van F. Phillips, and Maurice A. Scott. Each
member of the Committee is "independent" as that term is defined by the listing
standards of The Nasdaq Stock Market.
Audit Committee Report. Our Audit Committee (i) reviewed our audited
consolidated financial statements for 2001 and discussed them with management,
(ii) discussed with our independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended, (iii) received
written disclosures and a letter from our independent accountants required by
Independence Standards Board Standard No. 1, and (iv) discussed the independence
of our accountants with the accountants. Based on that review and discussion,
the Committee recommended to our Board of Directors that it approve inclusion of
our consolidated financial statements in our 2001 Annual Report on Form 10-KSB
as filed with the Securities and Exchange Commission.
Our management is responsible for our financial reporting process,
including our system of internal controls, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Our independent accountants are responsible for auditing
those financial statements. The Audit Committee's responsibility is to monitor
and review those processes. It is not the Committee's duty or its responsibility
to conduct auditing or accounting reviews or procedures. Committee members are
not our employees and do not represent themselves to be or to serve as
accountants or auditors by profession or experts in the fields of accounting or
auditing, and they do not perform audits of our financial statements. Therefore,
the Committee has relied, without independent verification, on management's
representations that our financial statements have been prepared with integrity
and objectivity and in conformity with accounting principles generally accepted
in the United States, and on the representations of our independent accountants
included in their report on our financial statements. The Committee's oversight
does not provide it with an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
policies, or appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the Committee's considerations and discussions with management and
the independent accountants do not guarantee that our financial statements are
presented in accordance with generally accepted accounting principles, that the
audit of our financial statements has been carried out in accordance with
generally accepted auditing standards, or that our independent accountants are
in fact "independent."
The Audit Committee:
William H. Burton III Danny L. Ford Van F. Phillips Maurice A. Scott
6
Executive Officers
Our and the Bank's executive officers are listed below:
J. W. Davis, age 55, serves as our and the Bank's President and Chief
Executive Officer. He was first employed by the Bank's organizers during 1996 to
coordinate and direct the Bank's initial organization, and he was elected
President of the Bank when it began operations during 1997. Previously, Mr.
Davis was employed for 15 years with NationsBank where he held various
positions, the most recent of which was Senior Vice President and Regional
Executive for that bank's western South Carolina branches. He has a total of 33
years of banking experience.
Vincent K. Rees, age 34, has served as the Bank's Chief Lending Officer
since it began operations during 1997, and he was elected Executive Vice
President of the Bank during 1999. He previously was employed for seven years by
NationsBank where he served as Vice President and in various positions in branch
management, credit analysis, and consumer and commercial lending. Mr. Rees has a
total of 13 years of banking experience.
Gregory L. Gibson, age 45, serves as our and the Bank's Executive Vice
President and Chief Financial Officer. He became a full-time employee of the
Bank during 2000, having previously served as its Chief Financial Officer on a
part-time basis since 1999. From 1997 until he was employed by the Bank, Mr.
Gibson operated his own public accounting and financial institutions consulting
firm (which the Bank retained to provide it with financial consulting services)
and, from 1994 to 1997, he was employed as Senior Vice President of Bank of
Mecklenburg, Charlotte, North Carolina. Mr. Gibson is a certified public
accountant and has 22 years of experience in the banking industry, having served
as an executive officer of six community banks and bank holding companies.
Executive Compensation
Cash Compensation. The following table shows the cash and certain other
compensation received or deferred by our and the Bank's named executive officers
for the years indicated. Our executive officers are compensated by the Bank for
their services as its officers and employees, and they receive no additional
compensation from us.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Annual Compensation Long term compensation
--------------------------------------- ----------------------
Name and Other annual Securities All other
principal position(s) Year Salary (1) Bonus compensation (2) underlying options (3) compensation (4)
--------------------- ---- ---------- ----- ---------------- ---------------------- ----------------
J. W. Davis (5) 2001 163,750 135,000 -0- -0- $ 13,450
President and Chief
Executive Officer 2000 144,000 75,000 -0- 15,000 5,500
1999 128,000 25,000 -0- -0- 4,100
Vincent K. Rees 2001 94,479 70,000 -0- -0- 2,716
Executive Vice
President and Chief 2000 78,333 35,000 -0- 9,000 1,961
Lending Officer
1999 65,625 11,500 -0- -0- 1,640
Gregory L. Gibson (6) 2001 90,000 67,500 -0- -0- -0-
Executive Vice
President and Chief 2000 81,667 -0- -0- 9,000 -0-
Financial Officer
1999 59,583 -0- -0- 9,000 -0-
- ----------------
(1) Includes amounts of salary deferred at each officer's election under the
Bank's Section 401(k) plan.
(2) In addition to compensation paid in cash, our and the Bank's executive
officers receive certain personal benefits. The value of non-cash benefits
received by each named officer during 2001 did not exceed 10% of his cash
compensation.
7
(3) As adjusted for stock dividends and splits since the dates the options were
granted.
(4) For 2001, consists of, for Mr. Davis, the Bank's $5,250 contribution to the
Section 401(k) plan for his account and $8,200 in director fees, and for
Mr. Rees, the Bank's contribution to the Section 401(k) plan for his
account.
(5) Mr. Davis serves as President and Chief Executive Officer of the Bank
pursuant to an employment agreement which provides for a term of three
years (which, absent notice of non-renewal from either party, is extended
by one additional year on each anniversary date of the agreement), annual
base salary, an annual bonus, and certain other benefits. In the event
there is a "change in control" (as defined in the agreement) of the Bank
which is not approved by at least two-thirds of its directors who are not
affiliated with the acquiring person, or if, following any approved change
in control, and without his consent, Mr. Davis is required to move his
residence or principal job location more than 50 miles from Hendersonville,
his salary or benefits are reduced, or his responsibilities or authority
are reduced below the level associated with his current position, then he
may terminate his employment and be entitled to continue to receive salary,
bonuses and employee benefits for a period of three years. The agreement
may be terminated by the Bank for "just cause" (as defined in the
agreement).
(6) Mr. Gibson was employed on a part-time basis during 1999.
Employee Stock Options. Since the Bank was organized during 1997, options
have been granted to the Bank's executive officers pursuant to its 1997 Employee
Stock Option Plan which was approved by shareholders during 1998. When we were
organized as the Bank's parent holding company during 2001, we assumed all the
Bank's outstanding options and converted them into options to purchase our
Common Stock. The following table contains information regarding all options
held on December 31, 2001, under the Plan by the executive officers named in the
Summary Compensation Table above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- --------------------------------------------------------------------------------
Number of securities Value of unexercised
underlying unexercised in-the-money options
options on December 31, 2001 (2) on December 31, 2001 (2)(3)
-------------------------------- ------------------------------
Shares acquired Value
Name on exercise realized Exercisable Unexercisable Exercisable Unexercisable
- ------------- ------------------- -------- ------------- --------------- ----------- -------------
J. W. Davis (1) - 37,560 20,640 $ 504,125 $ 191,731
V. K. Rees (1) - 19,080 11,520 253,815 102,873
G. L. Gibson (1) - 7,128 13,032 69,834 100,618
- ------------------
(1) No options were exercised during 2001.
(2) All share and dollar amounts have been adjusted, or calculated based on a
market value or exercise price that has been adjusted, for the six-for-five
stock split which was effected in the form of a 20% stock dividend on March
11, 2002.
(3) Represents the aggregate fair market value on December 31, 2001, of shares
underlying options held on that date, minus the aggregate exercise or
purchase price of those shares. On April 15, 2002, the values of the
exercisable and unexercisable options, respectively, based on the then
current last known sales price per share of our Common Stock, were: Mr.
Davis - $531,544 and $206,798; Mr. Rees - $267,743 and $111,283; and Mr.
Gibson - $75,037 and $110,132.
Transactions with Management
The Bank has had, and expects to have in the future, banking transactions
in the ordinary course of its business with certain of our and the Bank's
current directors, nominees for director, executive officers, and their
associates. All loans included in those transactions were made on substantially
the same terms, including interest rates, repayment terms and collateral, as
those prevailing at the time the loans were made for comparable transactions
with other persons, and those loans do not involve more than the normal risk of
collectibility or present other unfavorable features.
During 1997, and in connection with the Bank's initial organization, the
Bank's Chairman, Boyd L. Hyder, constructed and leased to the Bank its main
banking and executive offices in Hendersonville, North Carolina. The Bank's
lease agreement calls for an initial term of 20 years (with two five-year
renewal options) and current rental payments of $6,700 per month (with rent
adjustments each five years based on the consumer price index). Before entering
into the lease arrangement, the Bank's Board of Directors obtained an
independent estimate of the rental value of the building and compared the terms
of the lease to lease terms
8
on comparable properties. Additionally, during 1998, the Bank entered into a
lease agreement with Mr. Hyder for approximately 2,400 square feet of space that
is used as the Bank's administration/operations facility. The lease agreement
provides for an initial term of five years (with one five-year renewal option)
and rental payments of $1,050 per month. During 2000, the space leased from Mr.
Hyder was increased to approximately 4,800 square feet and, during 2001, the
leased space again was increased to approximately 6,800 square feet. The lease
agreements for that additional space call for initial terms of ten years (with
one five-year renewal option) and aggregate additional rental payments of $4,600
per month. Also during 2001, Mr. Hyder leased a building to the Bank for use as
a new branch office. The terms of that lease call for an initial term of ten
years (with three five-year renewal options) and current lease payments of
$2,400 per month (with a 15% adjustment after the first five years and a
renegotiated rental for each renewal period).
Van F. Phillips, our director who formerly served as Chairman of First
Western Bank, is a general partner in a partnership that leased property to
First Western Bank during 1997 for use as a branch office. The Bank assumed the
lease during 2001 in connection with our acquisition of First Western Bank. The
lease agreement calls for a current remaining term of approximately 18 months
(with one three-year renewal option) and rental payments of $3,000 per month.
PROPOSAL 2: APPROVAL OF 2002 EMPLOYEE STOCK PURCHASE PLAN
Our Board of Directors proposes to adopt, subject to shareholder approval,
an employee stock purchase plan (the "Stock Purchase Plan") under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). The Stock Purchase
Plan will authorize us to periodically grant rights to purchase shares of our
Common Stock ("Rights") to our and our subsidiaries' eligible employees. A
proposal to approve the Plan will be presented at the Annual Meeting for action
by shareholders. If approved by our shareholders, the Plan will become effective
on July 1, 2002, and will expire on June 30, 2012.
The purposes of the Stock Purchase Plan are to encourage the continued
service of our and our subsidiaries' employees by giving them an opportunity to
become shareholders, or to increase their shareholdings, and to share in the
benefit of potential increases in the value of our Common Stock. The following
is a summary of the terms of the Stock Purchase Plan and is qualified by
reference to the Plan itself. A copy of the Stock Purchase Plan will be
furnished to any shareholder upon written request made to our Secretary.
The Stock Purchase Plan will be administered by our Board of Directors. At
its discretion, the Board may delegate certain administrative functions
pertaining to the Plan to a committee consisting of directors who are not our or
any of our subsidiaries' employees and who meet certain other requirements. The
Board or its committee will be authorized to interpret and establish rules
relating to the Stock Purchase Plan, and to make all determinations and take all
other actions required, necessary or advisable in its administration. However,
only the Board may approve grants of Rights under the Plan or determine the
amounts and other material terms of Rights being granted.
Under the Plan, Rights may be granted to our and our subsidiaries'
employees, other than any employee who beneficially owns (or who, after receipt
of a Right, would be considered to beneficially own) shares of our voting
securities that would entitle him or her to 5% or more of the aggregate combined
voting power of all our voting securities, and other than any employee otherwise
excluded from participating in a particular grant of Rights (our "Eligible
Employees"). Rights ordinarily will be granted to substantially all our and our
subsidiaries' employees. However, in connection with any grant of Rights, we may
exclude employees who have not been employed for up to two years or whose
customary employment is less than up to 20 hours per week or up to five months
in any calendar year. Also, our Board of Directors may approve a limited grant
of Rights under the Plan only to Eligible Employees who are or were employees of
an entity that has been acquired by us or one of our subsidiaries, but, before
it can do that, the Board must determine to its satisfaction that the limited
grant will not cause the Rights being granted, or any other outstanding Rights,
to be treated for tax purposes differently than as further described below.
Also, in connection with such a limited grant, Rights must be granted to all
employees of that entity who are Eligible Employees on the date
9
the Rights are granted. For purposes of determining an employee's eligibility to
receive a Right, the Board may give credit for that employee's past service with
any other entity that we have acquired, and employees may be treated as
remaining employed during certain leaves of absence. No director who is not also
an employee will be eligible to participate in the Stock Purchase Plan. On April
30, 2002, we had a total of 143 employees.
The Stock Purchase Plan provides for the periodic grant of Rights. At the
time it approves a grant of Rights, the Board will specify a dollar amount of
annual compensation (the "Annual Factor"). The number of shares covered by the
Right granted to each Eligible Employee will be equal to that employee's annual
rate of compensation divided by the Annual Factor for that grant. The Annual
Factor may be different for each separate grant of Rights under the Plan but, in
connection with each grant, the Annual Factor will be the same for all Eligible
Employees. However, in connection with any grant, the Board may specify a
maximum amount of compensation that will be included for purposes of determining
the numbers of shares covered by Rights, or it may specify a maximum number of
shares which may be covered by each Right granted. The Stock Purchase Plan
provides that, over its life, we will be authorized to issue and sell an
aggregate of up to 350,000 shares of our Common Stock upon the exercise of
Rights granted under the Plan. The aggregate number, as well as the class or
kind, of securities that may be issued under the Plan may be adjusted under
certain circumstances as further described below. Shares covered by Rights that
expire or terminate without being exercised will again become available for the
grant of Rights under the Plan during its ten-year life.
Each Right will give the Eligible Employee to whom it is granted the right
to purchase the Common Stock covered by that Right at a price per share set by
our Board at the time of grant (the "Exercise Price"). In connection with each
grant of Rights, the Exercise Price will be a percentage (the "Applicable
Percentage") of the "fair market value" of a share of our Common Stock on the
date of that grant. The Applicable Percentage for each grant will be set by the
Board at the time it approves that grant, but in no case may the Applicable
Percentage be less than 85%. For purposes of the Stock Purchase Plan, the "fair
market value" of a share of our Common Stock will be considered to be the
average of the last reported prices of our Common Stock on the OTC Bulletin
Board (or, in the future, if our Common Stock is listed on The Nasdaq Stock
Market, as reported on Nasdaq) for the ten trading days on which our Common
Stock was traded immediately preceding the date Rights are granted. On April 30,
2002, the "fair market value" of our Common Stock, calculated for purposes of
the Plan as described above, would have been $20.73.
We will not receive any payments from Eligible Employees at the time Rights
are granted. If an Eligible Employee chooses to exercise a Right, he or she will
be required to pay us the full Exercise Price of the shares being purchased
before we issue those shares. Employees who receive Rights will have no rights
as shareholders as to any shares covered by their Rights until the Rights are
exercised and they have purchased and paid for those shares. Stock sold to an
exercising employee may be newly issued shares or, at our option, shares
purchased by us on the open market or in privately negotiated transactions.
In connection with each grant of Rights, the Board will specify the period
or term during which those Rights by be exercised, but the term may not be for
more than 27 months following the date of grant. During the term, an Eligible
Employee may elect each calendar quarter, and again during the last month of the
term, to exercise his or her Right and purchase part or all of the Common Stock
covered by the Right. However, during any calendar year, an employee may not
purchase shares having a fair market value (as of the date the Rights were
granted) in excess of $25,000. At its discretion, at the time of each grant of
Rights, our Board may impose other terms or restrictions on the Rights granted
to, or the exercise of those Rights by, Eligible Employees.
Each Right will expire at the end of its term as to any shares that have
previously not been purchased by the Eligible Employee. Each Right also will
terminate, to the extent it previously has not been exercised, at the time of
any termination of the Eligible Employee's employment (other than a termination
resulting from death, retirement or permanent disability). A Right held by an
Eligible Employee whose employment terminates as a result of retirement or
permanent disability will continue in effect and may be exercised for 90 days
following the date of termination. In the case of the death of an Eligible
Employee, his or her Right
10
will continue in effect for its remaining term. If in the future we are
dissolved or liquidated, or we consummate any merger or other reorganization in
which we are not the surviving entity or resulting corporation, outstanding
Rights that have not been exercised may be terminated by us or they may be
assumed by our successor or converted into rights or options to purchase its
stock.
The number, class or kind of securities covered by each outstanding Right
and that may be issued under the Plan, and the Exercise Price of each
outstanding Right, may be adjusted in a manner that the Board considers to be
appropriate in the event that (i) we pay a dividend in the form of shares of our
Common Stock, (ii) we effect a recapitalization, reclassification, split-up,
consolidation or combination of, or other change in, or the offering of rights
to the holders of, our outstanding Common Stock, or (iii) we complete an
exchange of the outstanding shares of our Common Stock for a different number or
class of shares of stock or other securities that we issue or that are issued by
any other corporation in connection with a merger, consolidation or other
reorganization in which we are the surviving corporation.
The Board of Directors may, at its discretion from time to time, amend or
modify the Stock Purchase Plan without the approval of shareholders. However,
without shareholder approval, the Board may not increase the aggregate number of
shares that may be issued under the Plan (other than in connection with
adjustments provided for in the Plan itself), change the formula used to
determine the Exercise Price, or change the provisions of the Plan with respect
to the determination of persons who may receive Rights.
We intend that Rights granted under the Stock Purchase Plan be treated as
options issued pursuant to an "employee stock purchase plan" within the meaning
of Section 423 of the Internal Revenue Code of 1986, as amended. Our
understanding is that, under the Code, no taxable income will be realized by an
Eligible Employee, and no tax deduction may be taken by us, at the time a Right
is granted or exercised under the Plan. If the employee exercises the Right and
holds the stock he or she purchases until the later of the end of one year
following the purchase or two years following the date the Right was granted,
then, when the employee sells the stock, he or she will realize ordinary income
equal to the excess of the fair market value of the stock on the date the Right
was granted over the Exercise Price. Any additional gain recognized on the
employee's sale of the stock will be treated as long-term capital gain. If the
employee sells the stock before the above holding periods have been met, then he
or she will realize ordinary income equal to the excess of the fair market value
of the stock on the date the Right was exercised over the Exercise Price, and
any additional gain will be capital gain. We may take an income tax deduction
for the amount of ordinary income realized by an employee on the sale of shares
prior to the end of the holding periods.
Our Board of Directors has not yet approved any grant of Rights under the
Stock Purchase Plan and it has no specific plans regarding the amounts or terms
of any proposed grant.
Our Board of Directors recommends that you vote "FOR" Proposal 2. To be
approved, the number of votes cast in person and by proxy at the Annual Meeting
in favor of the proposal must exceed the number of votes cast against it.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Our current independent accounting firm, Larrowe and Company, PLLC, has
been reappointed by our Board of Directors to serve as our independent public
accountants for 2002, and a proposal to ratify that appointment will be
presented for voting by shareholders at the Annual Meeting. Representatives of
Larrowe and Company, PLLC are expected to attend the Annual Meeting and be
available to respond to appropriate questions, and they will have the
opportunity to make a statement if they desire to do so.
Our Board of Directors recommends that you vote "FOR" Proposal 3. To be
approved, the number of votes cast in person and by proxy at the Annual Meeting
in favor of the proposal must exceed the number of votes cast against it.
11
Services and Fees During 2001
As our independent accountants for 2001, Larrowe and Company, PLLC provided
various audit and non-audit services for which we were billed for fees as
further described below. Our Audit Committee has considered whether Larrowe and
Company, PLLC's provision of non-audit services is compatible with maintaining
its independence. The Committee believes that those services do not affect
Larrowe and Company, PLLC's independence.
Audit Fees. Larrowe and Company, PLLC audited our consolidated financial
statements for the year ended December 31, 2001, that are included in our 2001
Annual Report on Form 10-KSB and, during 2001, it reviewed the consolidated
financial statements included in our Quarterly Reports on Form 10-QSB. The
aggregate amount of fees billed to us for those services was $77,100.
Financial Information Systems Design and Implementation Fees. During 2001,
Larrowe and Company, PLLC did not provide any services related to financial
information systems design and implementation.
All Other Fees. In addition to the services listed above, during 2001
Larrowe and Company, PLLC provided certain other services for which the
aggregate amount of fees billed to us was $50,300. Those other services included
tax preparation and compliance services, accounting and other services related
to our acquisition of First Western Bank, registrations and issuances of
securities and filings of regulatory applications, and other consulting
services.
PROPOSALS FOR 2003 ANNUAL MEETING
Any proposal (other than nominations for director) of a shareholder which
is intended to be presented for action at our 2003 Annual Meeting must be
received by us in writing at our main office in Hendersonville, North Carolina,
no later than January 15, 2003, to be considered timely received for inclusion
in the proxy statement and form of appointment of proxy that we will distribute
in connection with that meeting. In order for a proposal to be included in our
proxy materials for a particular meeting, the person submitting the proposal
must own, beneficially or of record, at least 1% or $2,000 in market value of
shares of our Common Stock entitled to be voted on that proposal at the meeting
and must have held those shares for a period of at least one year and continue
to hold them through the date of the meeting. Also, the proposal and the
shareholder submitting it must comply with certain other eligibility and
procedural requirements contained in rules of the Securities and Exchange
Commission.
Written notice of a shareholder proposal intended to be presented at the
2003 Annual Meeting, but which is not intended to be included in our proxy
statement and form of appointment of proxy, must be received by us at our main
office in Hendersonville, North Carolina, no later than March 31, 2003, in order
for that proposal to be considered timely received for purposes of the Proxies'
discretionary authority to vote on other matters presented for action by
shareholders at that meeting.
ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act
of 1934 and we file reports and other information, including proxy statements,
annual reports and quarterly reports, with the Securities and Exchange
Commission.
A copy of our 2001 Annual Report on Form 10-KSB as filed with the
Securities and Exchange Commission will be provided without charge upon the
written request of any shareholder entitled to vote at the Annual Meeting.
Requests for copies should be directed to Gregory L. Gibson, Chief Financial
Officer, MountainBank Financial Corporation, 201 Wren Drive, Hendersonville,
North Carolina 28792.
12
MountainBank Financial Corporation
201 Wren Drive
Hendersonville, North Carolina 28792
APPOINTMENT OF PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Gregory L. Gibson, Timothy W. Greene and Dan
T. Marchesoni (the "Proxies"), or any substitute appointed by them, as the
undersigned's attorneys and proxies, and authorizes each of them, jointly and
severally, to represent and vote as directed below all shares of the common
stock of MountainBank Financial Corporation ("MFC") held of record by the
undersigned on May 10, 2002, at the Annual Meeting of MFC's shareholders (the
"Annual Meeting") to be held at The Kellogg Center, 11 Broyles Road,
Hendersonville, North Carolina, at 10:00 a.m. on Monday, June 17, 2002, and at
any adjournment of the Annual Meeting. The undersigned directs that the shares
represented by this appointment of proxy be voted as follows:
1. ELECTION OF DIRECTORS: Proposal to elect six directors of MFC for specified
terms or until their successors are duly elected and qualified.
[_]FOR all nominees [_]WITHHOLD AUTHORITY to
listed below (except vote for all nominees
as marked to the listed below
contrary below)
Nominees and Proposed Terms: Three year terms: William A. Banks; Kenneth C. Feagin; J. Edward Jones; and Van F. Phillips
Two year terms: Ronald R. Lamb; and H. Steve McManus.
Instruction: To withhold authority to vote for any individual nominee,
write the nominee's name on the line below.
----------------------------------------------------------------------------
2. APPROVAL OF 2002 EMPLOYEE STOCK PURCHASE PLAN. Proposal to approve MFC's
2002 Employee Stock Purchase Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTS. Proposal to ratify the
appointment of Larrowe and Company, PLLC as MFC's independent accounts for
2002.
[_] FOR [_] AGAINST [_] ABSTAIN
4. OTHER BUSINESS: On any other matter properly presented for action by
shareholders at the Annual Meeting, the Proxies are authorized to vote the
shares represented by this appointment of proxy according to their best
judgment.
Please date and sign this appointment of proxy on the reverse side and return
it in the enclosed prepaid envelope.
I (we) direct that the shares represented by this appointment of proxy be
voted as directed above. In the absence of any direction, those shares may be
voted by the Proxies "FOR" the election of each of the six nominees for
director listed in Proposal 1 and "FOR" Proposals 2 and 3. If, at or before the
time of the Annual Meeting, any nominee listed in Proposal 1 has become unable
or unwilling to serve as a director for any reason, the Proxies are authorized
to vote for a substitute nominee named by MFC's Board of Directors. On any
other matters that may properly be presented for action at the Annual Meeting,
the Proxies are authorized to vote the shares represented by this appointment
of proxy according to their best judgment. This appointment of proxy may be
revoked by the undersigned at any time before the voting takes place at the
Annual Meeting by filing with MFC's Secretary a written instrument revoking it
or a duly executed appointment of proxy bearing a later date, or by attending
the Annual Meeting and announcing an intention to vote in person.
Dated: _________________ , 2002
_________________________________________
Signature
_________________________________________
Joint Signature (if shares held jointly)
Instruction: Please sign above exactly as
your name appears on this appointment of
proxy. Joint owners of shares should both
sign. Fiduciaries or other persons
signing in a representative capacity
should indicate the capacity in which
they are signing.
IMPORTANT: To ensure that a quorum is present at the Annual Meeting, please
sign and return your appointment of proxy whether or not you plan to attend the
meeting.
MOUNTAINBANK FINANCIAL CORPORATION
2002 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I. TITLE, PURPOSE, SCOPE AND ADMINISTRATION OF PLAN
1.1 Title.
The title of the plan is the MOUNTAINBANK FINANCIAL CORPORATION 2002
EMPLOYEE STOCK PURCHASE PLAN (the "Plan").
1.2 Purpose.
The purpose of the Plan is to encourage employees of MountainBank
Financial Corporation (the "Corporation") and companies which are, or
during the term of the Plan become, subsidiaries of the Corporation or
subsidiaries of its subsidiaries (the "Subsidiaries") to acquire equity
interests in the Corporation and to encourage their continued
employment by giving them the opportunity to share the benefit of
increases in the value of the Corporation's capital stock. Pursuant to
the Plan, the Corporation from time to time may issue rights to
purchase shares of its capital stock ("Rights"). The Rights are
intended to constitute options issued pursuant to an "employee stock
purchase plan" within the meaning of Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code").
1.3 Stock to be Issued under Plan; Aggregate Limitation.
(a) The capital stock as to which Rights may be granted under the
Plan will be shares of the Corporation's Common Stock, $4.00
par value per share ("Common Stock"). Rights granted under the
Plan may not apply to shares of any other class or series of
the Corporation's capital stock or equity securities.
(b) The aggregate number of shares of Common Stock which may be
sold upon the exercise of Rights granted under the Plan is
350,000 shares, which maximum number is subject to adjustment
as provided in Paragraph 5.1(a) below. Shares of Common Stock
sold by the Corporation upon the exercise of Rights, at the
sole discretion of the Corporation, may be shares issued from
the Corporation's authorized but unissued shares, or they may
be shares repurchased by the Corporation, on the open market
or in privately negotiated transactions, for the purpose of
resale under the Plan. Upon the expiration or termination of a
Right granted pursuant to the Plan, any shares of Common Stock
which have not been issued and purchased pursuant to the
exercise of that Right will again become available for the
grant of new Rights under the Plan.
1.4 Administration of the Plan.
(a) The Plan will be administered by the Corporation's Board of
Directors and, in its administration of the Plan, the Board
may request and consider the recommendations of any committee
of the Board with respect to any action to be taken under the
Plan. However, so long as the Board retains the authority to
administer the Plan unto itself, all final decisions regarding
any matter under the Plan, including the grant of Options,
shall be made by the full Board. Alternatively, at the
discretion of the Board, the Plan may be administered, to the
extent described below, by a committee created by the Board
and to which shall be delegated the authority described below
(the "Committee"). The administrator of the Plan, whether it
be the Board or a Committee appointed by the Board, is
referred to in this Plan as the "Administrator."
(b) The Administrator shall have the authority to:
(i) make any and all determinations regarding
persons who are eligible to receive Rights
under the Plan;
(ii) subject to the provisions of Articles III
and IV below, make any and all
determinations regarding the timing of each
grant of Rights pursuant to the Plan, the
number of shares covered by each Right
granted, and the purchase price of shares
covered by each such Right; provided,
however, that only the Corporation's full
Board of Directors may approve a grant of
Rights under the Plan or specify the
"Applicable Percentage," "Exercise Price,"
"Term" and "Expiration Date" (as those terms
are defined below) related to the Rights
included in any such grant of Rights;
(iii) to interpret and construe the provisions of
the Plan and to establish rules and
regulations relating to it;
(iv) to prescribe the form or forms of the
instruments evidencing any Rights granted
under the Plan and of any other instruments
required under the Plan and to change such
forms from time to time; and,
(v) to make all other determinations and to take
all other actions provided for herein or
deemed by it, in its discretion, to be
necessary or advisable to administer the
Plan in a proper and effective manner.
(c) If created by the Board of Directors, the Committee shall be
composed solely of two or more "Non-Employee Directors" who
shall be appointed by and serve at the pleasure of the Board.
The Board, from time to time and at its discretion, may remove
members from (with or without cause), or add members to, the
Committee or fill any vacancies on the Committee, however
created. Any standing committee of the Board may be designated
as the Committee, but, in connection with its duties in
connection with the Plan, it will be deemed to operate as a
separate committee.
For purposes of the Plan, "Non-Employee Director" refers to a
member of the Board who satisfies the definition of that term
contained in Rule 16b-3(b)(3) under the Securities Exchange
Act of 1934, as such rule may be amended from time to time.
The Committee shall select one of its members as Chairman and
shall hold meetings at such times and places as it shall deem
necessary or desirable. Acts of a majority of the members of
the Committee present at meetings at which a quorum is
present, or acts reduced to and approved in writing by all of
the members of the Committee, shall be valid acts of the
Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business at its
meetings.
(d) All actions, decisions and determinations of the Administrator
in the administration of the Plan, and in the interpretation
and construction of, or questions or other matters concerning
the Plan or any Right granted, shall (i) be made consistent
and in accordance with the terms of the Plan and shall be
designed to cause the Plan to continue to satisfy the
requirements of, and for Rights granted under the Plan to
qualify as options granted under, an "employee stock purchase
plan" under, Section 423 of the Code, and (ii) shall be final,
conclusive and
2
binding on all persons, including Eligible Employees, subject
to the right of the Board of Directors to review and/or modify
any such action by the Committee.
1.5 Shareholder Approval; Effective Date; Termination Date.
Subject to its approval by the holders of a majority of the
Corporation's voting shares represented and voted at a meeting of the
Corporation's shareholders held under applicable law, the Plan shall
become effective on July 1, 2002 (the "Effective Date") and shall
terminate on June 30, 2012 (the "Termination Date").
ARTICLE II. ELIGIBILITY
2.1 Eligible Employees.
Rights may be granted under the Plan only to employees of the
Corporation or a Subsidiary who are "Eligible Employees," as defined
below. For purposes of the Plan, the term "Eligible Employee" means a
person who is actively employed by the Corporation or a Subsidiary, or
is on paid or authorized but unpaid leave of absence, on the date of
that grant (the "Date of Grant"), other than an employee excluded from
participation in the Plan as provided in Paragraph 2.2 below.
2.2 Exclusion of Certain Employees.
Notwithstanding the provisions of Paragraph 2.1 above, in no event may
an employee be granted a Right if such employee, immediately after the
Right is granted, would own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the
Corporation or its parent or subsidiary corporation (as the terms
"parent corporation" and "subsidiary corporation" are defined in
Sections 424(e) and (f) of the Code). For purposes of determining stock
ownership under this paragraph, the rules of Section 424(d) of the Code
shall apply, and shares of the Corporation's stock which an Eligible
Employee may purchase under outstanding options of any type shall be
treated as shares owned by such employee.
Additionally, in connection with any grant of Rights, the Corporation
also may, at its sole discretion, exclude from participation in that
grant any employees of the Corporation or a Subsidiary (i) who have not
been so employed for a period of up to two years preceding the Date of
Grant of those Rights, and/or (ii) whose customary employment is less
than up to 20 hours per week or up to five months in any calendar year.
For purposes of determining eligibility to participate in a grant of
Rights, the Administrator may, at its sole discretion, give credit to
employees of an entity that shall have been acquired by the Corporation
or any Subsidiary for their past service with that entity; provided
however, that, if the Administrator chooses to do that, then all
employees of the acquired entity shall be given credit for their past
service with that entity.
ARTICLE III. GRANT OF RIGHTS
3.1 Authorization to Grant Rights.
From time to time prior to the Termination Date, the Corporation may
grant Rights pursuant to the Plan to Eligible Employees to purchase
shares of Common Stock. Each grant of Rights must be specifically
approved by the Corporation's Board of Directors and, in connection
with each grant, Rights will be granted in accordance with the terms of
the Plan to all persons who are Eligible Employees as of the Date of
Grant of the Rights. However, notwithstanding anything contained herein
to the contrary, and provided that such action is determined by the
Board of Directors to not affect the intended treatment of the Rights
being granted, or any other outstanding Rights, for tax
3
purposes as options issued pursuant to an "employee stock purchase
plan" within the meaning of Section 423 of the Code, the Board of
Directors may approve a grant of Rights under the Plan that is limited
to Eligible Employees who are or were employees of an entity that has
been acquired by the Corporation or a Subsidiary (whether by merger or
as a separate Subsidiary) even though they constitute less than all
Eligible Employees; provided however that, in connection with any such
a limited grant, Rights shall be granted to all employees of that
entity who otherwise are Eligible Employees on the date those Rights
are granted.
3.2 Determination of Amount of Rights.
At the time each grant of Rights is approved, the Board of Directors
shall specify a dollar amount of annual compensation (the "Annual
Factor") on the basis of which the number of shares of Common Stock to
be covered by the Right granted to each Eligible Employee will be
determined. Each such Right will entitle the Eligible Employee to whom
it is granted to purchase a number of whole shares of Common Stock
equal to that employee's annual rate of compensation as of the tenth
business day immediately preceding the Date of Grant of that Right (as
determined by the payroll records of the corporation that employs that
employee) divided by the Annual Factor set by the Board of Directors
for that grant of Rights. The Annual Factor may be different for each
grant of Rights under the Plan; however, in connection with each
separate grant of Rights the Annual Factor shall be the same for all
Eligible Employees to whom Rights are granted.
For purposes of the Plan, the term "compensation" is defined as an
Eligible Employee's regular, fixed basic compensation. Compensation
does not include any bonus, overtime payment, contribution by an
employer corporation to an employee benefit plan or other similar
payment or contribution.
In connection with any grant of Rights under the Plan, the Board of
Directors may, at its option, specify a maximum amount of compensation
that will be considered for purposes of determining the numbers of
shares of Common Stock for which Rights will be granted to Eligible
Employees or a maximum number of shares of Common Stock for which a
Right will be granted to each Eligible Employee.
3.3 Rights Notices.
Each Right granted under the Plan will be evidenced by a written notice
(a "Rights Notice") delivered to the Eligible Employee to whom that
Right is granted and which will (i) be in such form as the
Administrator determines; (ii) incorporate by reference the terms and
provisions of the Plan; (iii) specify the number of shares covered by
the Right and its Date of Grant; and (iv) contain the other information
about the Right provided for in the Plan to be included in Rights
Notices. No Eligible Employee shall have any rights hereunder to
purchase any shares of Common Stock until a Right has been granted to
him and that Right is evidenced by a Rights Notice delivered to him,
all as provided herein.
ARTICLE IV. TERMS AND CONDITION OF RIGHTS; PURCHASE OF SHARES
4.1 Exercise Price.
The exercise or purchase price of each share of Common Stock covered by
Rights included in each grant of Rights under the Plan (the "Exercise
Price") shall be a percentage of the fair market value of the Common
Stock on the Date of Grant of those Rights (as determined by the Board
of Directors) and will be specified in the Rights Notices evidencing
those Rights. The percentage applicable to each grant of Rights (the
"Applicable Percentage") will be specified by the Board of Directors at
the time of its approval of that grant but in no event may be less than
85%. On any particular Date of
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Grant, the "fair market value" shall be the average of the closing
transaction prices of the Common Stock as reported on the OTC Bulletin
Board or, if the Common Stock is then listed on The Nasdaq Stock
Market, then on Nasdaq, for the ten trading days on which the Common
Stock traded immediately preceding that Date of Grant. The Applicable
Percentage may be different for each grant of Rights; however, in
connection with each separate grant of Rights, the Applicable
Percentage shall be the same for all Eligible Employees to whom Rights
are granted.
4.2 Term of Rights.
Except as otherwise provided in the Plan, the term of all Rights
included in each separate grant (the "Term") shall extend for a period
commencing on the Date of Grant of those Rights and ending on the last
business day of a month and year specified by the Board of Directors
when that grant is made (the "Expiration Date"). The Expiration Date of
Rights included in each grant of Rights will be specified in the Rights
Notices evidencing those Rights. The Term of all Rights included in
each separate grant of Rights shall be the same, and in no event may
the Term of Rights included in any grant be more than 27 calendar
months following the Date of Grant of those Rights. Unless terminated
sooner as provided below, each Right granted pursuant to the Plan shall
expire at 5:00 p.m. on its Expiration Date (to the extent that such
Right shall not previously have been exercised) and thereafter shall be
of no further force or effect or give the Eligible Employee to whom it
was granted, or any other person, any right to purchase shares of
Common Stock.
4.3 Purchases of Shares.
Each Right will entitle the Eligible Employee to whom it is granted to
purchase up to the total number of whole shares of Common Stock
specified in the Rights Notice relating to that Right, and to purchase
all or any portion of those shares at the times and in the manner
specified in Paragraph 4.5 below.
4.4 Limitation on Exercise and Purchases.
Notwithstanding any other terms and provisions of the Plan or of any
Right granted hereunder to the contrary, no Eligible Employee to whom a
Right is granted will be permitted to purchase, and no Right granted to
that employee under the Plan will become exercisable with respect to,
shares of the Corporation's stock under all employee stock purchase
plans (including the Plan) of his employer corporation and its related
corporations at a rate which exceeds $25,000 in fair market value of
such stock (determined at the time the Right is granted) for each
calendar year in which any right or option granted to that individual
pursuant to any such plan is outstanding at any time. This limitation
applies only to options granted under "employee stock purchase plans"
as defined by Section 423 of the Code and does not limit the amount of
the Corporation's stock which an Eligible Employee may purchase under
any other stock or bonus plan then in effect. In the event that a Right
granted to an Eligible Employee under the Plan otherwise would permit
that employee to purchase Common Stock in excess of the above limit,
then, notwithstanding anything contained herein or in the Rights Notice
with respect to that Right, and notwithstanding the number of shares
for which the Right is granted, the Right will be deemed, by its terms,
to not be exercisable during each calendar year during its Term for
Common Stock in excess of that limit.
4.5 Election by Eligible Employee.
During the first 15 days of each March, June, September and December,
and, additionally, of the last calendar month, during the Term of each
Right granted under the Plan (the "Election Periods"), an Eligible
Employee may elect to purchase shares pursuant to his Right. To
purchase shares during an Election Period, the Eligible Employee must
give to the Corporation, and the Corporation must
5
actually receive, prior to the end of that Election Period, written
notice (an "Election Notice") of the number of shares he or she wishes
to purchase (the "Elected Shares"). An Election Notice must be given on
a form supplied by the Corporation for that purpose and must be
accompanied by full payment of the Exercise Price of all Elected Shares
or, if the Eligible Employee intends that payment for any of the
Elected Shares be made from funds held for him or her under a payroll
deduction plan described in Paragraph 4.10 below, the Election Notice
must so indicate and specify the amount of funds then held for and
available to the Eligible Employee under that plan. Purchases of
Elected Shares for which Election Notices are delivered to the
Corporation during an Election Period will be considered to be
effective on the Corporation's last business day of that month (the
"Purchase Date"). An Eligible Employee's Election Notice as to any
number of Elected Shares, once delivered to the Corporation, will be
irrevocable as to that number of shares and may not be altered or
changed by the Eligible Employee except with the consent of the
Corporation.
The failure of an Eligible Employee to deliver an Election Notice to
the Corporation in a timely manner to purchase all shares covered by a
Right before the Expiration Date of that Right will be conclusively
deemed to be an election by the Eligible Employee not to purchase, and
a forfeiture of his rights to purchase, any and all remaining shares
covered by that Right; and, on the Expiration Date, that Right will
immediately terminate and be of no further force or effect.
4.6 Payment of Exercise Price.
Payment of the aggregate Exercise Price of Elected Shares must be
delivered to the Corporation (in the form of certified or other
collected U.S. funds) with the Election Notice pertaining to those
Elected Shares or, in the case of any Eligible Employee participating
in a payroll deduction plan as described in Paragraph 4.10 below, the
aggregate Exercise Price of those shares must be held for and available
to the Eligible Employee under that plan at the time the Election
Notice is given.
If payment of the Exercise Price of any Elected Shares is not made as
required herein, then the Eligible Employee's Election Notice will not
be effective as to those shares and he or she will not be allowed to
purchase those shares on the Purchase Date for that Election Period,
but those shares may be reelected during a later Election Period
(subject to final forfeiture as described in Paragraph 4.5 above).
4.7 Terminations of Rights Upon Terminations of Employment.
In addition to the termination of Rights upon their Expiration Dates as
provided in Paragraph 4.2 above or as a result of certain corporate
events as described in Paragraph 5.1(b) below, Rights granted pursuant
to the Plan shall terminate or may be terminated as described below.
(a) Voluntary and Involuntary Terminations of Employment: If,
prior to the Expiration Date of his or her Right, an Eligible
Employee's employment by the Corporation or a Subsidiary
terminates or is terminated, voluntarily or involuntarily
(including an involuntary termination without cause) for any
reason other than the Eligible Employee's death, "Retirement"
(as defined below) or "Disability" (as defined below), then
the Eligible Employee's Right shall terminate immediately upon
termination of his or her employment as to any unpurchased
shares, including any Elected Shares to be purchased on a
Purchase Date occurring after the date of termination of
employment. Within 30 days after receipt by the Corporation of
a written request therefor from the Eligible Employee, the
Eligible Employee shall be paid any funds paid by the Eligible
Employee to the Corporation prior to the date of such
termination for the purchase of Elected Shares on a Purchase
Date occurring after the date of termination of employment.
Authorized leaves of absence and transfers of employment by an
Eligible Employee between the Corporation and a Subsidiary,
6
or between two Subsidiaries, without a break in service, will
not constitute terminations of employment for purposes of the
Plan. The Administrator will determine whether any other
absence for military or government service or for any other
reasons will constitute a termination of employment for
purposes of the Plan, and the Administrator's determination
will be final.
(b) Death of Eligible Employee: If, prior to the Expiration Date
of his or her Right, an Eligible Employee dies while employed
by the Corporation or a Subsidiary, then, following the date
of the Eligible Employee's death, the Eligible Employee's
Right will remain in effect and, to the extent not previously
exercised, the Eligible Employee's designated beneficiary
(determined either by will or other writing delivered to the
Administrator in advance), or if no designated beneficiary,
the personal representative of his estate, will have the right
to exercise the Right at any time on or before, but not later
than, 5:00 P.M. on the Expiration Date of the Right in
accordance with the terms of the Plan and, to the extent not
so exercised, at that time the Right will terminate and be of
no further force or effect. Any references herein to an
Eligible Employee will be deemed to include any person
entitled under the terms of the Plan to exercise a Right after
the death of an Eligible Employee.
(c) Retirement or Disability of Eligible Employee: If, prior to
the Expiration Date of his or her Right, an Eligible
Employee's employment with the Corporation or a Subsidiary
terminates as a result of his or her "Retirement" (as defined
below) or "Disability" (as defined below), the Eligible
Employee's Right will remain in effect and, to the extent not
previously exercised, the Eligible Employee will have the
right to exercise the Right at any time on or before, but not
later than, 5:00 P.M. on the earlier of the 90th day following
the effective date of termination of his or her employment, or
the Expiration Date of the Right, in accordance with the terms
of the Plan and, to the extent not so exercised, at that time
the Right will terminate and be of no further force or effect.
The termination of an Eligible Employee's employment which is
treated as a "retirement" under the terms of any qualified
retirement plan maintained by the Corporation or its
Subsidiary and in which the Eligible Employee is a participant
from time to time, or the termination of an Eligible
Employee's employment at such other time or under such other
circumstances as the Administrator agrees in writing to treat
as "retirement," will be deemed to be a "Retirement" for
purposes of the Plan.
For purposes of the Plan, an Eligible Employee will be
considered to be "Disabled" at such time as he or she is
determined to be permanently disabled such as would qualify
the Eligible Employee for benefits under the Corporation's or
its Subsidiary's long term disability insurance plan which is
applicable to the Eligible Employee.
4.8 Effect of Termination of Right.
Upon the expiration or termination of all or any portion of a Right
(whether at its Expiration Date or during its term as described
herein), that Right or portion thereof will, without any further act by
the Corporation, expire and no longer be exercisable or confer any
rights to any person to purchase shares of Common Stock under the Plan.
4.9 Assignment.
Rights granted to Eligible Employees under the Plan may not be assigned
or transferred except by will or by the laws of descent and
distribution, and, except as provided in Paragraph 4.7(b) above, Rights
may be exercised only by the Eligible Employees to whom they are
granted.
7
4.10 Payroll Deduction Plan.
At its option from time to time, the Corporation or a Subsidiary may
offer a payroll deduction plan under which, at an Eligible Employee's
written instruction, a specified amount will be deducted periodically
from his or her salary or wages and applied toward the purchase of
Elected Shares pursuant to his or her Right. Any such payroll deduction
plan offered to Eligible Employees will be solely for the convenience
of Eligible Employees and will operate in such a manner, and be offered
under such terms and conditions, as the Corporation or Subsidiary
specifies from time to time, and any such plan that is offered may be
discontinued at any time.
ARTICLE V. GENERAL PROVISIONS
5.1 Adjustment or Termination of Rights in Certain Corporate Events.
(a) In the event of (i) any dividend payable by the Corporation in
shares of Common Stock, or (ii) any recapitalization,
reclassification, split_up, consolidation or combination of,
or other change in or offering of rights to the holders of,
Common Stock, or (iii) an exchange of the outstanding shares
of Common Stock for a different number or class of shares of
stock or other securities of the Corporation in connection
with a merger, consolidation or other reorganization of or
involving the Corporation (provided the Corporation shall be
the surviving or resulting corporation in any such merger or
consolidation), then the Administrator may, in such a manner
as it shall determine in its sole discretion, appropriately
adjust the number and class or kind of shares or other
securities which shall be subject to outstanding Rights and/or
the Exercise Price per share which must be paid thereafter
upon exercise of any outstanding Right, and the aggregate
number and class or kind of shares or other securities which
may be issued under the Plan upon the exercise of Rights
granted hereunder. Subject to review by the Corporation's
Board of Directors, any such adjustments made by the
Administrator shall be final, conclusive and binding upon all
persons, including, without limitation, the Corporation, its
shareholders and any persons having any interest in any Rights
granted under the Plan. Any fractional shares resulting from
any such adjustment shall be eliminated. However,
notwithstanding anything contained herein to the contrary,
Rights granted pursuant to the Plan may not be adjusted in a
manner that causes the Rights to fail to continue to qualify
as options issued pursuant to an "employee stock purchase
plan" within the meaning of Section 423 of the Code.
(b) In the event of a dissolution or liquidation of the
Corporation, the sale of substantially all the assets of the
Corporation, or a merger or consolidation of the Corporation
with or into any other corporation or entity (or any other
such reorganization or similar transaction) in which the
Corporation is not the surviving or resulting corporation,
then, at the option and discretion of the Corporation, on the
effective date of that transaction, (i) all outstanding Rights
under the Plan, and all rights of Eligible Employees with
respect thereto, will terminate and be of no further effect,
to the extent those Rights previously have not been exercised
(or at such other time and pursuant to such rules and
regulations as the Administrator determines and promulgates to
the Eligible Employees), or (ii) the outstanding Rights will
be treated in accordance with any express agreement made in
that transaction for the continuance of this Plan, for the
assumption of outstanding Rights by any successor entity to
the Corporation in the transaction or a parent or subsidiary
of that successor entity, or for the conversion of outstanding
Rights into, or the substitution for outstanding Rights of,
new rights or options covering shares of any successor to the
Corporation or a parent or subsidiary of that successor
entity. In the case of any such transaction in which
outstanding Rights will terminate, then, notwithstanding
Paragraph 4.5 above, the Administrator will make reasonable
arrangements to permit Eligible Employees
8
to exercise their Rights and purchase the Common Stock covered
by those Rights during the 30 days preceding the effective
date of the transaction.
(c) The grant of a Right pursuant to the Plan will not affect in
any way the right or power of the Corporation to make
adjustments, recapitalizations, reclassifications,
reorganizations or any other changes in its capital or
business structure, or to merge or consolidate, or to
dissolve, liquidate, sell or transfer all or any part of its
business or assets, or enter into any other transaction.
5.2 Rights as a Shareholder.
No Eligible Employee shall have any rights as a shareholder of the
Corporation with respect to any shares of Common Stock subject to a
Right until that Right has been properly exercised as provided herein,
full payment of the Exercise Price has been made for those shares
hereunder, and a stock certificate evidencing those shares has actually
been issued to and registered in the Eligible Employee's name on the
Corporation's stock records. Except for adjustments as provided in
Paragraph 5.1(a) above, no adjustment will be made for dividends or
other rights as to which the record date for determining shareholders
entitled to receive the same is prior to the date of the issuance of
such certificate.
5.3 No Right to Employment.
Nothing in the Plan or in any Rights Notice is intended or shall be
deemed or interpreted to constitute an employment agreement or to
confer upon an Eligible Employee any right of employment with the
Corporation or a Subsidiary, including without limitation any right to
continue in the employ of the Corporation or a Subsidiary, or to
interfere with or otherwise restrict in any way the right of the
Corporation or a Subsidiary to discharge or terminate the employment of
an Eligible Employee at any time for any reason whatsoever, with or
without cause.
5.4 Legal Restrictions.
If, in the opinion of the Corporation's legal counsel, the issuance or
sale of any shares of Common Stock pursuant to the exercise of a Right
would not be lawful without registration under the Securities Act of
1933 ("Act") or for any other reason or would require the Corporation
to obtain approval from any governmental authority or regulatory body,
the Corporation will not be obligated to issue or sell any Common Stock
pursuant to the exercise of any Right unless a registration statement
that complies with the provisions of the Act in respect of such shares
is then in effect or other appropriate action has been taken under and
pursuant to the provisions of the Act, or unless the Corporation
receives evidence satisfactory to its legal counsel that the issuance
and sale of the shares, in the absence of an effective registration
statement or other appropriate action, would not constitute a violation
of the Act or any applicable state securities law, or unless any such
required approval shall have been obtained. The Corporation in no event
will be obligated to register any such shares, to comply with any
exemption from registration requirements, or to take any other action
that may be required, in order to permit, or to remedy or remove any
prohibition or limitation on, the issuance or sale of shares to any
Eligible Employee or other authorized person.
5.5 No Obligation to Purchase Shares.
The receipt of a Right under the Plan will not impose any obligation on
an Eligible Employee to purchase any shares covered by that Right.
9
5.6 Payment of Taxes.
Each Eligible Employee will be responsible for all federal, state,
local or other taxes of any nature that are imposed pursuant to any law
or governmental regulation or ruling on any Right or the exercise
thereof, and the Corporation or a Subsidiary may withhold from each
Eligible Employee's salary or any other amount due to such Eligible
Employee, or require the Eligible Employee to pay or reimburse it for,
the amount of any such taxes which it, in good faith, deems itself
required to withhold.
5.7 Choice of Law.
The validity, interpretation and administration of the Plan and of any
rules, regulations, determinations or decisions made thereunder, and
the rights of any and all persons having or claiming to have any
interest therein or thereunder, will be determined exclusively in
accordance with the laws of North Carolina. Without limiting the
generality of the foregoing, the period within which any action in
connection with the Plan must be commenced shall be governed by the
laws of North Carolina, without regard to the place where the act or
omission complained of took place, the residence of any party to such
action, or the place where the action may be brought or maintained.
5.8 Amendment of Plan.
The Corporation's Board of Directors may, from time to time, amend,
modify, suspend or discontinue the Plan at any time without notice,
provided that no Eligible Employee's existing rights under any Right
previously granted are adversely affected thereby; and, provided
further that, except with the approval of the Corporation's
shareholders or otherwise as provided in Paragraph 5.1(a) hereof or to
comport with changes in the Code, no such amendment of the Plan shall:
(i) increase the aggregate number of shares which may be sold upon the
exercise of Rights granted under the Plan; (ii) change the formula by
which the Exercise Price is determined; or (iii) change the provisions
of the Plan with respect to the determination of Eligible Employees.
5.9 Application of Funds.
The proceeds received by the Corporation from the sale of Common Stock
pursuant to Rights granted under the Plan will be used for general
corporate purposes.
5.10 Notices.
Any notice which the Corporation or an Eligible Employee may be
required or permitted to give to the other shall be in writing and may
be delivered personally or by mail, postage prepaid, addressed as
follows: If to the Corporation, to it, Attn: Gregory L. Gibson, 201
Wren Drive, Hendersonville, North Carolina 28792, or at such other
address as the Corporation, by notice to Eligible Employees, may
designate in writing from time to time; and, if to an Eligible
Employee, by mail at his or her home address, or, at the option of the
Corporation, by courier at his or her job location, in each case as
shown on the payroll records of his or her employer corporation.
5.11 Conformity With Applicable Laws and Regulations.
With respect to persons who are subject to Section 16 of the Securities
Exchange Act of 1934 (the "Act"), the Plan and transactions under it
are intended to satisfy applicable conditions of Rule 16b-3 of the
Securities and Exchange Commission (as such Rule may be modified,
amended or superseded from time to time) in order for transactions
under the Plan to be exempt from the application of Section 16(b) of
the Act. To the extent any provision of the Plan or any action by the
Administrator
10
fails to so comply, then, to the extent permitted by law and deemed
advisable by the Administrator, that provision or action will be deemed
to be null and void.
5.12 Use of Numbers and Pronouns.
Whenever the singular or plural number, or masculine, feminine or
neuter gender is used herein, it shall equally include the others.
As approved by the Corporation's Board of Directors on May , 2002,
and by the holders of a majority of the shares of the Corporation's Common
Stock present and voting at the Corporation's Annual Meeting of Shareholders
duly held on June 17, 2002.
------------------------------------------
J. W. Davis
President and Chief Executive Officer
11