SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED DECEMBER 31, 2003
Commission File No. 000-50400
NEW CENTURY BANCORP, INC.
(Exact Name of Registrant as specified in its charter)
NORTH CAROLINA
(State of Incorporation)
20-0218264
(I.R.S. Employer Identification No.)
700 West Cumberland Street
Dunn, North Carolina 28335
(Address of Principal Office)
(910) 892-7080
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B not contained in this form, and no disclosure will be contained, to the best of the Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ¨
The Registrants revenues for the year ended December 31, 2003 were $10,511,000.
The aggregate market value of the voting stock held by non-affiliates of the Registrant at March 26, 2004 was approximately $40,242,000.
The number of shares of the Registrants Common Stock outstanding on March 26, 2004 was 2,541,655.
Documents Incorporated by Reference:
1. | Portions of Annual Report to Shareholders for the Fiscal Year Ended December 31, 2003 (Part II) |
2. | Proxy Statement for the 2004 Annual Meeting of Shareholders (Part III). |
Transitional Small Business Format Yes ¨ No x
FORM 10-KSB CROSS-REFERENCE INDEX
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PART I
ITEM 1 DESCRIPTION OF BUSINESS
(a)-(b)
General
New Century Bancorp, Inc. (the Registrant) was incorporated under the laws of the State of North Carolina on May 14, 2003, at the direction of the Board of Directors of New Century Bank, for the purpose of serving as the bank holding company for New Century Bank and became the holding company for New Century Bank on September 19, 2003. To become New Century Banks holding company, Registrant received approval of the Federal Reserve Board as well as New Century Banks shareholders. Upon receiving such approval, each share of $5.00 par value common stock of New Century Bank was exchanged on a one-for-one basis for one share of $1.00 par value common stock of the Registrant.
The Registrant operates for primary purpose of serving as the holding company for its subsidiary depository institutions, New Century Bank and New Century Bank of Fayetteville (collectively, the Banks). The Registrants headquarters are located at 700 West Cumberland Street, Dunn, North Carolina 28335.
New Century Bank was incorporated on May 19, 2000 as a North Carolina-chartered commercial bank, opened for business on May 24, 2000, and is located at 700 West Cumberland Street, Dunn, North Carolina.
New Century Bank of Fayetteville was incorporated on December 23, 2003 as a North Carolina-chartered commercial bank, opened for business on January 2, 2004, and is located at 2806 Raeford Road Fayetteville NC 28303, Fayetteville, North Carolina.
The Banks operate for the primary purpose of serving the banking needs of individuals, and small to medium-sized businesses in their respective market areas. The Banks offers a range of banking services including checking and savings accounts, commercial, consumer, mortgage and personal loans, and other associated financial services.
Primary Market Area
The Registrants market area consists of Harnett, Cumberland, Johnston, and Sampson Counties, North Carolina. The Registrants market area has a population of over 530,000 with an average household income of over $49,447.
The June 2003 total deposits in the Registrants market area exceeded $3.9 billion. The leading economic components of Harnett and Johnston Counties are services, manufacturing, and retail trade. In contrast, Cumberland Countys leading sector is federal military government, followed by services and retail trade. In Sampson County, leading employers include manufacturing,
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services, and state and local government. The largest employers in the Registrants market area include Goodyear Tire & Rubber Co., Black & Decker, Bayer, and Morganite, Inc.
Competition
Commercial banking in North Carolina is extremely competitive in large part due to statewide branching. Registrant competes in its market areas with some of the largest banking organizations in the state and the country and other financial institutions, such as federally and state-chartered savings and loan institutions and credit unions, as well as consumer finance companies, mortgage companies and other lenders engaged in the business of extending credit. Many of Registrants competitors have broader geographic markets and higher lending limits than Registrant and are also able to provide more services and make greater use of media advertising. As of June 30, 2003, the Registrants market area indicates that there were 142 offices of 20 different commercial and savings institutions (27 in Harnett County, 35 in Johnston County, 63 in Cumberland County, and 17 in Sampson County).
The enactment of legislation authorizing interstate banking has caused great increases in the size and financial resources of some of Registrants competitors. In addition, as a result of interstate banking, out-of-state commercial banks have acquired North Carolina banks and heightened the competition among banks in North Carolina.
Despite the competition in its market areas, Registrant believes that it has certain competitive advantages that distinguish it from its competition. Registrant believes that its primary competitive advantages are its strong local identity and affiliation with the community and its emphasis on providing specialized services to small and medium-sized business enterprises, as well as professional and upper-income individuals. Registrant offers customers modern, high-tech banking without forsaking community values such as prompt, personal service and friendliness. Registrant offers many personalized services and intends to attract customers by being responsive and sensitive to their individualized needs. Registrant also relies on goodwill and referrals from shareholders and satisfied customers, as well as traditional media to attract new customers. To enhance a positive image in the community, Registrant supports and participates in local events and its officers and directors serve on boards of local civic and charitable organizations.
Employees
As of December 31, 2003, the Registrant employed 49 full-time and 8 part-time employees. None of the Registrants employees are covered by a collective bargaining agreement. The Registrant believes its relations with its employees to be good.
REGULATION
Regulation of the Banks
The Banks are extensively regulated under both federal and state law. Generally, these laws and regulations are intended to protect depositors and borrowers, not shareholders. To the extent that
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the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. Any change in applicable law or regulation may have a material effect on the business of the Registrant and the Banks.
State Law . The Banks are subject to extensive supervision and regulation by the North Carolina Commissioner of Banks (the Commissioner). The Commissioner oversees state laws that set specific requirements for bank capital and regulate deposits in, and loans and investments by, banks, including the amounts, types, and in some cases, rates. The Commissioner supervises and performs periodic examinations of North Carolina-chartered banks to assure compliance with state banking statutes and regulations, and the Banks are required to make regular reports to the Commissioner describing in detail the resources, assets, liabilities and financial condition. Among other things, the Commissioner regulates mergers and consolidations of state-chartered banks, the payment of dividends, loans to officers and directors, record keeping, types and amounts of loans and investments, and the establishment of branches.
Deposit Insurance . As member institutions of the FDIC, the Banks deposits are insured up to a maximum of $100,000 per depositor through the Bank Insurance Fund, administered by the FDIC, and each member institution is required to pay semi-annual deposit insurance premium assessments to the FDIC. The Bank Insurance Fund assessment rates have a range of 0 cents to 27 cents for every $100 in assessable deposits. Banks with no premium are subject to an annual statutory minimum assessment.
Capital Requirements . The federal banking regulators have adopted certain risk-based capital guidelines to assist in the assessment of the capital adequacy of a banking organizations operations for both transactions reported on the balance sheet as assets and transactions, such as letters of credit, and recourse arrangements, which are recorded as off balance sheet items. Under these guidelines, nominal dollar amounts of assets and credit equivalent amounts of off balance sheet items are multiplied by one of several risk adjustment percentages which range from 0% for assets with low credit risk, such as certain U.S. Treasury securities, to 100% for assets with relatively high credit risk, such as business loans.
A banking organizations risk-based capital ratios are obtained by dividing its qualifying capital by its total risk adjusted assets. The regulators measure risk-adjusted assets, which include off balance sheet items, against both total qualifying capital (the sum of Tier 1 capital and limited amounts of Tier 2 capital) and Tier 1 capital. Tier 1, or core capital, includes common equity, qualifying noncumulative perpetual preferred stock and minority interests in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions. Tier 2, or supplementary capital, includes among other things, limited-life preferred stock, hybrid capital instruments, mandatory convertible securities, qualifying subordinated debt, and the allowance for loan and lease losses, subject to certain limitations and less required deductions. The inclusion of elements of Tier 2 capital is subject to certain other requirements and limitations of the federal banking agencies. Banks and bank holding companies subject to the risk-based capital guidelines are required to maintain a ratio of Tier 1 capital to risk-weighted assets of at least 4% and a ratio of total capital to risk-weighted assets of at least 8%. The appropriate regulatory authority may set higher capital requirements when particular
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circumstances warrant. As of December 31, 2003, the Registrant was classified as well-capitalized with Tier 1 and Total Risk-Based Capital of 17.36% and 18.61%, respectively.
The federal banking agencies have adopted regulations specifying that they will include, in their evaluations of a banks capital adequacy, an assessment of the banks interest rate risk exposure. The standards for measuring the adequacy and effectiveness of a banking organizations interest rate risk management include a measurement of board of director and senior management oversight, and a determination of whether a banking organizations procedures for comprehensive risk management are appropriate for the circumstances of the specific banking organization.
Failure to meet applicable capital guidelines could subject a banking organization to a variety of enforcement actions, including limitations on its ability to pay dividends, the issuance by the applicable regulatory authority of a capital directive to increase capital and, in the case of depository institutions, the termination of deposit insurance by the FDIC, as well as the measures described under the Federal Deposit Insurance Corporation Improvement Act of 1991 below, as applicable to undercapitalized institutions. In addition, future changes in regulations or practices could further reduce the amount of capital recognized for purposes of capital adequacy. Such a change could affect the ability of the Banks to grow and could restrict the amount of profits, if any, available for the payment of dividends to the shareholders.
Federal Deposit Insurance Corporation Improvement Act of 1991 . In December 1991, Congress enacted the Federal Deposit Insurance Corporation Improvement Act of 1991 (the FDIC Improvement Act), which substantially revised the bank regulatory and funding provisions of the Federal Deposit Insurance Act and made significant revisions to several other federal banking statutes. The FDIC Improvement Act provides for, among other things:
| publicly available annual financial condition and management reports for certain financial institutions, including audits by independent accountants, |
| the establishment of uniform accounting standards by federal banking agencies, |
| the establishment of a prompt corrective action system of regulatory supervision and intervention, based on capitalization levels, with greater scrutiny and restrictions placed on depository institutions with lower levels of capital, |
| additional grounds for the appointment of a conservator or receiver, and |
| restrictions or prohibitions on accepting brokered deposits, except for institutions which significantly exceed minimum capital requirements. |
The FDIC Improvement Act also provides for increased funding of the FDIC insurance funds and the implementation of risk-based premiums.
A central feature of the FDIC Improvement Act is the requirement that the federal banking agencies take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements. Pursuant to the FDIC Improvement Act, the federal bank
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regulatory authorities have adopted regulations setting forth a five-tiered system for measuring the capital adequacy of the depository institutions that they supervise. Under these regulations, a depository institution is classified in one of the following capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. An institution may be deemed by the regulators to be in a capitalization category that is lower than is indicated by its actual capital position if, among other things, it receives an unsatisfactory examination rating with respect to asset quality, management, earnings or liquidity.
The FDIC Improvement Act provides the federal banking agencies with significantly expanded powers to take enforcement action against institutions which fail to comply with capital or other standards. Such action may include the termination of deposit insurance by the FDIC or the appointment of a receiver or conservator for the institution. The FDIC Improvement Act also limits the circumstances under which the FDIC is permitted to provide financial assistance to an insured institution before appointment of a conservator or receiver.
International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 . On October 26, 2001, the USA Patriot Act of 2001 was enacted. This act contains the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001, which sets forth anti-money laundering measures affecting insured depository institutions, broker-dealers and other financial institutions. The Act requires U.S. financial institutions to adopt new policies and procedures to combat money laundering and grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on the operations of financial institutions.
Miscellaneous . The dividends that may be paid by the Banks are subject to legal limitations. In accordance with North Carolina banking law, dividends may not be paid by one of the Banks unless its capital surplus is at least 50% of its paid-in capital.
The earnings of the Banks will be affected significantly by the policies of the Federal Reserve Board, which is responsible for regulating the United States money supply in order to mitigate recessionary and inflationary pressures. Among the techniques used to implement these objectives are open market transactions in United States government securities, changes in the rate paid by banks on bank borrowings, and changes in reserve requirements against bank deposits. These techniques are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may also affect interest rates charged on loans or paid for deposits.
The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. In view of changing conditions in the national economy and money markets, as well as the effect of actions by monetary and fiscal authorities, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or the business and earnings of the Banks.
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The Registrant cannot predict what legislation might be enacted or what regulations might be adopted, or if enacted or adopted, the effect thereof on the Banks operations.
Regulation of the Registrant
Federal Regulation . The Registrant is subject to examination, regulation and periodic reporting under the Bank Holding Company Act of 1956, as administered by the Federal Reserve Board. The Federal Reserve Board has adopted capital adequacy guidelines for bank holding companies on a consolidated basis.
The Registrant is required to obtain the prior approval of the Federal Reserve Board to acquire all, or substantially all, of the assets of any bank or bank holding company. Prior Federal Reserve Board approval is required for the Registrant to acquire direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after giving effect to such acquisition, it would, directly or indirectly, own or control more than five percent of any class of voting shares of such bank or bank holding company.
The merger or consolidation of the Registrant with another bank, or the acquisition by the Registrant of assets of another bank, or the assumption of liability by the Registrant to pay any deposits in another bank, will require the prior written approval of the primary federal bank regulatory agency of the acquiring or surviving bank under the federal Bank Merger Act. The decision is based upon a consideration of statutory factors similar to those outlined above with respect to the Bank Holding Company Act. In addition, in certain such cases an application to, and the prior approval of, the Federal Reserve Board under the Bank Holding Company Act and/or the North Carolina Banking Commission may be required.
The Registrant is required to give the Federal Reserve Board prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the Registrants consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, Federal Reserve Board order or directive, or any condition imposed by, or written agreement with, the Federal Reserve Board. Such notice and approval is not required for a bank holding company that would be treated as well capitalized under applicable regulations of the Federal Reserve Board, that has received a composite 1 or 2 rating at its most recent bank holding company inspection by the Federal Reserve Board, and that is not the subject of any unresolved supervisory issues.
The status of the Registrant as a registered bank holding company under the Bank Holding Company Act does not exempt it from certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws.
In addition, a bank holding company is prohibited generally from engaging in, or acquiring five percent or more of any class of voting securities of any company engaged in, non-banking activities. One of the principal exceptions to this prohibition is for activities found by the Federal
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Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking as to be a proper incident thereto are:
| making or servicing loans; |
| performing certain data processing services; |
| providing discount brokerage services; |
| acting as fiduciary, investment or financial advisor; |
| leasing personal or real property; |
| making investments in corporations or projects designed primarily to promote community welfare; and |
| acquiring a savings and loan association. |
In evaluating a written notice of such an acquisition, the Federal Reserve Board will consider various factors, including among others the financial and managerial resources of the notifying bank holding company and the relative public benefits and adverse effects which may be expected to result from the performance of the activity by an affiliate of such company. The Federal Reserve Board may apply different standards to activities proposed to be commenced de novo and activities commenced by acquisition, in whole or in part, of a going concern. The required notice period may be extended by the Federal Reserve Board under certain circumstances, including a notice for acquisition of a company engaged in activities not previously approved by regulation of the Federal Reserve Board. If such a proposed acquisition is not disapproved or subjected to conditions by the Federal Reserve Board within the applicable notice period, it is deemed approved by the Federal Reserve Board.
However, with the passage of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999, which became effective on March 11, 2000, the types of activities in which a bank holding company may engage were significantly expanded. Subject to various limitations, the Modernization Act generally permits a bank holding company to elect to become a financial holding company. A financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. Among the activities that are deemed financial in nature are, in addition to traditional lending activities, securities underwriting, dealing in or making a market in securities, sponsoring mutual funds and investment companies, insurance underwriting and agency activities, certain merchant banking activities and activities that the Federal Reserve Board considers to be closely related to banking.
A bank holding company may become a financial holding company under the Modernization Act if each of its subsidiary banks is well capitalized under the Federal Deposit Insurance Corporation Improvement Act prompt corrective action provisions, is well managed and has at least a satisfactory rating under the Community Reinvestment Act. In addition, the bank holding company must file a declaration with the Federal Reserve Board that the bank holding company wishes to become a financial holding company. A bank holding company that falls out of compliance with these requirements may be required to cease engaging in some of its activities. The Registrant has not yet elected to become a financial holding company.
Under the Modernization Act, the Federal Reserve Board serves as the primary umbrella regulator of financial holding companies, with supervisory authority over each parent company
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and limited authority over its subsidiaries. Expanded financial activities of financial holding companies generally will be regulated according to the type of such financial activity: banking activities by banking regulators, securities activities by securities regulators and insurance activities by insurance regulators. The Modernization Act also imposes additional restrictions and heightened disclosure requirements regarding private information collected by financial institutions. We cannot predict the full sweep of the new legislation.
Capital Requirements . The Federal Reserve Board uses capital adequacy guidelines in its examination and regulation of bank holding companies. If capital falls below minimum guidelines, a bank holding company may, among other things, be denied approval to acquire or establish additional banks or non-bank businesses.
The Federal Reserve Boards capital guidelines establish the following minimum regulatory capital requirements for bank holding companies:
| a leverage capital requirement expressed as a percentage of adjusted total assets; |
| a risk-based requirement expressed as a percentage of total risk-weighted assets; and |
| a Tier 1 leverage requirement expressed as a percentage of adjusted total assets. |
The leverage capital requirement consists of a minimum ratio of total capital to total assets of 4%, with an expressed expectation that banking organizations generally should operate above such minimum level. The risk-based requirement consists of a minimum ratio of total capital to total risk-weighted assets of 8%, of which at least one-half must be Tier 1 capital (which consists principally of shareholders equity). The Tier 1 leverage requirement consists of a minimum ratio of Tier 1 capital to total assets of 3% for the most highly-rated companies, with minimum requirements of 4% to 5% for all others.
The risk-based and leverage standards presently used by the Federal Reserve Board are minimum requirements, and higher capital levels will be required if warranted by the particular circumstances or risk profiles of individual banking organizations. Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 capital less all intangible assets), well above the minimum levels.
Source of Strength for Subsidiaries . Bank holding companies are required to serve as a source of financial strength for their depository institution subsidiaries, and, if their depository institution subsidiaries become undercapitalized, bank holding companies may be required to guarantee the subsidiaries compliance with capital restoration plans filed with their bank regulators, subject to certain limits.
Dividends . As a bank holding company that does not, as an entity, currently engage in separate business activities of a material nature, the Registrants ability to pay cash dividends depends upon the cash dividends the Registrant receives from the Banks. At present, the Registrants
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only source of income is dividends paid by the Banks and interest earned on any investment securities the Registrant holds. The Registrant must pay all of its operating expenses from funds it receives from the Banks. Therefore, shareholders may receive dividends from the Registrant only to the extent that funds are available after payment of our operating expenses and the board decides to declare a dividend. In addition, the Federal Reserve Board generally prohibits bank holding companies from paying dividends except out of operating earnings, and the prospective rate of earnings retention appears consistent with the bank holding companys capital needs, asset quality and overall financial condition. We expect that, for the foreseeable future, any dividends paid by the Banks to us will likely be limited to amounts needed to pay any separate expenses of the Registrant and/or to make required payments on our debt obligations, including the debentures which will fund the interest payments on our trust preferred securities.
The FDIC Improvement Act requires the federal bank regulatory agencies biennially to review risk-based capital standards to ensure that they adequately address interest rate risk, concentration of credit risk and risks from non-traditional activities and, since adoption of the Riegle Community Development and Regulatory Improvement Act of 1994, to do so taking into account the size and activities of depository institutions and the avoidance of undue reporting burdens. In 1995, the agencies adopted regulations requiring as part of the assessment of an institutions capital adequacy the consideration of (a) identified concentrations of credit risks, (b) the exposure of the institution to a decline in the value of its capital due to changes in interest rates and (c) the application of revised conversion factors and netting rules on the institutions potential future exposure from derivative transactions.
In addition, the agencies in September 1996 adopted amendments to their respective risk-based capital standards to require banks and bank holding companies having significant exposure to market risk arising from, among other things, trading of debt instruments, (1) to measure that risk using an internal value-at-risk model conforming to the parameters established in the agencies standards and (2) to maintain a commensurate amount of additional capital to reflect such risk. The new rules were adopted effective January 1, 1997, with compliance mandatory from and after January 1, 1998.
Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), depository institutions are liable to the FDIC for losses suffered or anticipated by the FDIC in connection with the default of a commonly controlled depository institution or any assistance provided by the FDIC to such an institution in danger of default. This law would be applicable to the Registrant because it maintains two separate subsidiary depository institutions.
Subsidiary banks of a bank holding company are subject to certain quantitative and qualitative restrictions imposed by the Federal Reserve Act on any extension of credit to, or purchase of assets from, or letter of credit on behalf of, the bank holding company or its subsidiaries, and on the investment in or acceptance of stocks or securities of such holding company or its subsidiaries as collateral for loans. In addition, provisions of the Federal Reserve Act and Federal Reserve Board regulations limit the amounts of, and establish required procedures and credit standards with respect to, loans and other extensions of credit to officers, directors and principal shareholders of the Banks, the Registrant, any subsidiary of the Registrant and related interests of such persons. Moreover, subsidiaries of bank holding companies are prohibited from engaging in
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certain tie-in arrangements (with the holding company or any of its subsidiaries) in connection with any extension of credit, lease or sale of property or furnishing of services.
Any loans by a bank holding company to a subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of the subsidiary bank. In the event of a bank holding companys bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee and entitled to a priority of payment. This priority would also apply to guarantees of capital plans under the FDIC Improvement Act.
Interstate Branching
Under the Riegle Community Development and Regulatory Improvement Act (the Riegle Act), the Federal Reserve Board may approve bank holding company acquisitions of banks in other states, subject to certain aging and deposit concentration limits. As of June 1, 1997, banks in one state may merge with banks in another state, unless the other state has chosen not to implement this section of the Riegle Act. These mergers are also subject to similar aging and deposit concentration limits.
North Carolina opted-in to the provisions of the Riegle Act. Since July 1, 1995, an out-of-state bank that did not already maintain a branch in North Carolina was permitted to establish and maintain a de novo branch in North Carolina, or acquire a branch in North Carolina, if the laws of the home state of the out-of-state bank permit North Carolina banks to engage in the same activities in that state under substantially the same terms as permitted by North Carolina. Also, North Carolina banks may merge with out-of-state banks, and an out-of-state bank resulting from such an interstate merger transaction may maintain and operate the branches in North Carolina of a merged North Carolina bank, if the laws of the home state of the out-of-state bank involved in the interstate merger transaction permit interstate merger.
Registrant cannot predict what legislation might be enacted or what regulations might be adopted, or if enacted or adopted, the effect thereof on Registrants operations.
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ITEM 2 - PROPERTIES
The following table sets forth the location of the main and branch offices of the Registrants subsidiary depository institutions, New Century Bank and New Century Bank of Fayetteville, as well as certain information relating to these offices to date.
Office Location |
Year
Opened |
Approximate
Square Footage |
Owned
or Leased |
|||
Main Office 700 West Cumberland Street Dunn, NC 28110 |
2001 | 12,600 | Owned | |||
Clinton Office 506 South East Boulevard Clinton, NC 28328 |
2002 | 2,200 | Leased | |||
Goldsboro Office 435 Spence Avenue Goldsboro, NC 27534 |
2004 | 2,448 | Owned | |||
New Century Bank of Fayetteville 2806 Raeford Road Fayetteville, NC 28303 |
2004 | 2,160 | Leased |
ITEM 3 - LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Registrant is a party, or of which any of its property is the subject.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated by reference from page 40 of the Registrants 2003 Annual Report to Shareholders, filed herewith as Exhibit 13.
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ITEM 6 - MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Incorporated by reference from pages 4 through 13 of the Registrants 2003 Annual Report to Shareholders, filed herewith as Exhibit 13.
ITEM 7 - FINANCIAL STATEMENTS
Incorporated by reference from pages 14 through 37 of the Registrants 2003 Annual Report to Shareholders, filed herewith as Exhibit 13.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 8a - CONTROLS AND PROCEDURES
The Registrants Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the Registrants disclosure controls and procedures as of December 31, 2003. Based on their evaluation, the Registrants Chief Executive Officer and Chief Financial Officer have concluded that the Registrants disclosure controls and procedures are effective to ensure that information required to be disclosed by the Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the applicable Securities and Exchange Commission rules and forms. There have been no changes in the Registrants internal control over financial reporting identified in connection with the evaluation described above that occurred during the Registrants last fiscal quarter, that have materially affected, or are reasonably likely to materially affect, the Registrants internal control over financial reporting.
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Incorporated by reference from pages 5 through 9 of the Registrants Proxy Statement for the 2004 Annual Meeting of Shareholders.
The Registrant has adopted a code of ethics that applies, among others to its principal executive offices and principal financial officer. The Registrants code of ethics will be provided to any person upon written request made to Brenda Bonner, 700 W. Cumberland Street, Dunn, NC 28335.
ITEM 10 - EXECUTIVE COMPENSATION
Incorporated by reference from pages 9 through 11 of the Registrants Proxy Statement for the 2004 Annual Meeting of Shareholders.
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ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from pages 3 through 4 of the Registrants Proxy Statement for the 2004 Annual Meeting of Shareholders.
In 2000, the shareholders of New Century Bank approved the New Century Bank 2000 Nonqualified Stock Option Plan for Directors (the Nonqualified Plan) and the New Century Bank 2000 Incentive Stock Option Plan (the Incentive Plan). Both plans were adopted by the Registrant upon its organization as the holding company for New Century Bank on September 19, 2003. Options to purchase up to 117,496 shares of the Registrants common stock have been granted pursuant to the Nonqualified Plan. The maximum number of shares reserved for issuance upon the exercise of options granted under the Nonqualified Plan is 117,496 (adjusted). Options to purchase up to 110,682 shares of the Registrants common stock have been granted pursuant to the Incentive Plan. The maximum number of shares reserved for issuance upon the exercise of options granted under the Incentive Plan is 117,496 (adjusted). Option prices for both plans are established at market value at the time of grant. The following chart contains details of the grants:
Plan Category |
Number of securities to be issued
(a) |
Weighted-average exercise price of
(b) |
Number of securities remaining
(c) |
|||
Equity compensation plans approved by security holders |
Nonqualified 117,496 Incentive 110,682 |
$9.09 $9.11 |
-0- 6,814 |
|||
Equity compensation plans not approved by security holders |
None | N/A | None | |||
Total |
228,178 | $9.10 | 6,814 |
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from pages 4 and 12 of the Registrants Proxy Statement for the 2004 Annual Meeting of Shareholders.
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ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
(a) | Exhibits |
3(i) | Articles of Incorporation of Registrant (Filed herewith) | |
3(ii) | Bylaws of Registrant (Filed herewith) | |
4 | Form of Stock Certificate (Filed herewith) | |
10(i) | 2000 Incentive Stock Option Plan (Filed herewith) | |
10(ii) | 2000 Nonqualified Stock Option Plan for Directors (Filed herewith) | |
10(iii) | Employment Agreement between the Registrant and John Q. Shaw, Jr. (Filed herewith) | |
10(iv) | Employment Agreement between the Registrant and Lisa F. Campbell (Filed herewith) | |
10(v) | Employment Agreement between the Registrant and B. Darrell Fowler (Filed herewith) | |
10(vi) | Salary Continuation Agreement with John Q. Shaw, Jr. (Filed herewith) | |
13 | Registrants 2003 Annual Report to Shareholders (Filed herewith) | |
21 | Subsidiaries (Filed herewith) | |
31(i) | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act (Filed herewith) | |
31(ii) | Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes Oxley Act (Filed herewith) | |
32(i) | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act (Filed herewith) | |
32(ii) | Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes Oxley Act (Filed herewith) | |
99(i) | Registrants Proxy Statement for the 2004 Annual Meeting of Shareholders (Filed with the Securities and Exchange Commission pursuant to Rule 14a-6) |
16
(b) | Reports Filed on Form 8-K |
During the quarter ended December 31, 2003, the Registrant filed four Current Reports on Form 8-K on the following dates: October 2, 2003 (reporting under Item 5), October 23, 2003 (reporting under Items 5, 7 and 12), November 20, 2003 (reporting under Item 5), and November 25, 2003 (reporting under Item 5). The Registrant also filed one amended current report on Form 8-K/A on October 28, 2003 (reporting under Items 5, 7 and 12).
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference from page 19 of the Registrants Proxy Statement for the 2004 Annual Meeting of Shareholders.
17
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
NEW CENTURY BANCORP, INC. | ||
Registrant | ||
By: |
/s/ John Q. Shaw, Jr. |
|
|
||
John Q. Shaw, Jr. |
||
President and Chief Executive Officer |
Date: March 30, 2004
18
Pursuant to the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ John Q. Shaw, Jr. |
March 30, 2004 | |||
|
||||
John Q. Shaw, Jr., President, Chief Executive Officer and Director |
||||
/s/ Lisa F. Campbell |
March 30, 2004 | |||
|
||||
Lisa F. Campbell, Vice President and Chief Financial Officer |
||||
/s/ J. Gary Ciccone |
March 30, 2004 | |||
|
||||
J. Gary Ciccone, Director |
||||
/s/ John W. McCauley |
March 30, 2004 | |||
|
||||
John W. McCauley, Director |
||||
/s/ Oscar N. Harris |
March 30, 2004 | |||
|
||||
Oscar N. Harris, Director |
||||
/s/ Clarence L. Tart, Jr. |
March 30, 2004 | |||
|
||||
Clarence L. Tart, Jr., Director |
||||
/s/ Gerald W. Hayes, Jr. |
March 30, 2004 | |||
|
||||
Gerald W. Hayes, Jr., Director |
||||
/s/ Thurman C. Godwin, Jr. |
March 30, 2004 | |||
|
||||
Thurman C. Godwin, Jr., Director |
||||
/s/ Carlie C. McLamb |
March 30, 2004 | |||
|
||||
Carlie C. McLamb, Director |
||||
March 30, 2004 | ||||
|
||||
Anthony Rand, Director |
19
EXHIBIT INDEX
Exhibit Number
|
Exhibit |
|||
3(i) | Articles of Incorporation. | Filed herewith | ||
3(ii) | Bylaws | Filed herewith | ||
4 | Form of Stock Certificate | Filed herewith | ||
10(i) | 2000 Incentive Stock Option Plan | Filed herewith | ||
10(ii) | 2000 Nonstatutory Stock Option Plan | Filed herewith | ||
10(iii) | Employment Agreement of John Q. Shaw, Jr. | Filed herewith | ||
10(iv) | Employment Agreement of Lisa F. Campbell | Filed herewith | ||
10(v) | Employment Agreement of B. Darrell Fowler | Filed herewith | ||
10(vi) | Executive Supplemental Retirement Plan Agreement with John Q. Shaw, Jr. | Filed herewith | ||
13 | Registrants 2003 Annual Report to Shareholders | Filed herewith | ||
21 | Subsidiaries | Filed herewith | ||
31(i) | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act | Filed herewith | ||
31(ii) | Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes Oxley Act | Filed herewith | ||
32(i) | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act | Filed herewith | ||
32(ii) | Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes Oxley Act | Filed herewith | ||
99(i) | Registrants Proxy Statement for the 2004 Annual Meeting of Shareholders | * |
* | Filed with the Securities and Exchange Commission pursuant to Rule 14a-6. |
20
Exhibit 3(i)
ARTICLES OF INCORPORATION
OF
NEW CENTURY BANCORP, INC.
The undersigned hereby makes and acknowledges these Articles of Incorporation for the purpose of forming a business corporation under and by virtue of the laws of the State of North Carolina as contained in Chapter 55 of the General Statutes of North Carolina, entitled North Carolina Business Corporation Act, and the several amendments thereto, and to that end hereby sets forth the following:
ARTICLE I
The name of the corporation is New Century Bancorp, Inc. (herein referred to as the Corporation).
ARTICLE II
The Corporation shall have authority to issue a total of 10,000,000 shares of capital stock, all of which shall consist of Common Stock, $1.00 par value per share, each with one vote per share.
ARTICLE III
The street address of the initial registered office of the Corporation is 700 West Cumberland Street, Harnett County, Dunn, North Carolina 28335; the mailing address of the initial registered office of the Corporation is Post Office Box 1988, Harnett County, Dunn, North Carolina 28335-1988; and, the name of the initial registered agent at such address is John Q. Shaw, Jr.
ARTICLE IV
The name of the incorporator is Anthony Gaeta Jr., and the address of the incorporator is 808 Salem Woods Drive, Suite 201, Wake County, Raleigh, North Carolina 27615.
ARTICLE V
To the fullest extent permitted by the North Carolina Business Corporation Act as it exists or may hereafter be amended, no person who is serving or who has served as a director of the Corporation shall be personally liable to the Corporation or any of its shareholders or otherwise for monetary damages for breach of any duty as a director. No amendment or repeal of this article, nor the adoption of any provision to these Articles of Incorporation inconsistent with this article, shall eliminate or reduce the protection granted herein with respect to any matter that occurred prior to such amendment, repeal, or adoption.
ARTICLE VI
In connection with the exercise of its or their judgment in determining what is in the best interests of the Corporation and its shareholders, the Board of Directors of the Corporation, any committee of the Board of Directors, or any individual directors may, but shall not be required to, in addition to considering the long-term and short-term interests of the shareholders, consider any of the following factors and any other factors which it or they deem relevant: (a) the social and economic effects of the matter to be considered on the Corporation and its subsidiaries, its and their employees, depositors, customers, and creditors, and the communities in which the Corporation and its subsidiaries operate or are located; and (b) when evaluating a business combination or a proposal by another Person or Persons to make a business combination or a tender or exchange offer or any other proposal relating to a potential change of control of the Corporation (i) the business and financial condition and earnings prospects of the acquiring Person or Persons, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the acquisition, and other likely financial obligations of the acquiring Person or Persons, and the possible effect of such conditions upon the Corporation and its subsidiaries and the communities in which the Corporation and its subsidiaries operate or are located, (ii) the competence, experience, and integrity of the acquiring Person or Persons and its or their management, and (iii) the prospects for successful conclusion of the business combination, offer or proposal. The provisions of this Article VI shall be deemed solely to grant discretionary authority to the directors and shall not be deemed to provide to any constituency the right that any factors, including but not limited to those detailed herein, be considered. As used in this Article VI, the term Person means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity; and, when two or more Persons act as a partnership, limited partnership, syndicate, or other group acting in concert for the purpose of acquiring, holding, voting or disposing of securities of the Corporation, such partnership, limited partnership, syndicate or group shall also be deemed Person for purposes of this Article VI.
ARTICLE VII
Any agreement, plan or arrangement providing for the merger, consolidation or exchange of shares of the Corporation with any other corporation, foreign or domestic, or the sale, lease or exchange of all or substantially all of the assets of the Corporation which require prior shareholder approval under North Carolina law shall only be effected after the prior approval of the holders of at least two-thirds (2/3) of the outstanding shares of all classes of capital stock of the Corporation, voting together as a single class, unless class voting rights are specifically permitted for any class of capital stock of the Corporation. Notwithstanding the foregoing, the requirement of approval of at least two-thirds (2/3) of the outstanding shares as set forth above shall not be applicable and only such affirmative vote as is required by North Carolina law shall be required, if any such transaction shall have been approved by a majority of the members of the Board of Directors unaffiliated with any other party to the proposed transaction.
2
ARTICLE VIII
Any person as a director of this Corporation may only be removed for cause by the shareholders represented by a majority of all shares entitled to vote at an annual or special meeting of this Corporation. The term cause for the purposes of this paragraph shall mean (i) the criminal prosecution and conviction during the course of the directors service as a director of this Corporation of an act of fraud, embezzlement, theft or personal dishonesty (excepting minor traffic and similar violations in the nature of a misdemeanor under North Carolina law), (ii) the prosecution and conviction of any criminal offense involving dishonesty or breach of trust, or (iii) the occurrence of any event resulting in a director being excluded from coverage, or having coverage limited as to the director when compared to other covered directors, under any of the Corporations fidelity bonds or insurance policies covering its directors, officers or employees.
This 6th day of May, 2003.
/s/ Anthony Gaeta, Jr. |
Anthony Gaeta, Jr., Incorporator |
3
Exhibit 3(ii)
BYLAWS
OF
NEW CENTURY BANCORP, INC.
BYLAWS
OF
NEW CENTURY BANCORP, INC.
Index
ARTICLE I |
Offices |
Section 1. Principal Office |
Section 2. Registered Office |
Section 3. Other Offices |
ARTICLE II |
Meetings of Shareholders |
Section 1. Place of Meetings |
Section 2. Annual Meetings |
Section 3. Substitute Annual Meeting |
Section 4. Special Meetings |
Section 5. Notice of Meetings |
Section 6. Voting Lists |
Section 7. Voting Group |
Section 8. Quorum |
Section 9. Proxies |
Section 10. Voting of Shares |
Section 11. Fixing Record Date |
ARTICLE III |
Directors |
Section 1. General Powers |
Section 2. Number, Term and Qualifications |
Section 3. Nominations |
Section 4. Election of Directors |
Section 5. Removal |
Section 6. Vacancies |
Section 7. Chairman of the Board |
Section 8. Vice Chairman of the Board |
Section 9. Compensation |
Section 10. Appointment of Committees |
2
ARTICLE IV |
Meetings of Directors |
Section 1. Regular Meetings |
Section 2. Special Meetings |
Section 3. Notice of Meetings |
Section 4. Waiver of Notice |
Section 5. Quorum |
Section 6. Manner of Acting |
Section 7. Presumption of Assent |
Section 8. Informal Action by Directors |
ARTICLE V |
Officers |
Section 1. Number |
Section 2. Election and Term |
Section 3. Removal and Resignation |
Section 4. Compensation |
Section 5. President |
Section 6. Vice Presidents |
Section 7. Assistant Vice Presidents |
Section 8. Secretary |
Section 9. Assistant Secretaries |
Section 10. Treasurer |
Section 11. Assistant Treasurers |
ARTICLE VI |
Contracts, Loans, Checks and Deposits |
Section 1. Contracts |
Section 2. Loans |
Section 3. Checks and Drafts |
Section 4. Deposits |
ARTICLE VII |
Certificates for Shares and Their Transfer |
Section 1. Certificates for Shares |
Section 2. Transfer of Shares |
Section 3. Lost Certificates |
Section 4. Holder of Record |
Section 5. Reacquired Shares |
3
ARTICLE VIII |
General Provisions |
Section 1. Distributions |
Section 2. Seal |
Section 3. Amendments |
Section 4. Fiscal Year |
Section 5. Indemnification |
4
BYLAWS
OF
NEW CENTURY BANCORP, INC.
ARTICLE I
Offices
Section 1. Principal Office : The principal office of the Corporation shall be located in Dunn, North Carolina.
Section 2. Registered Office : The registered office of the Corporation required by law to be maintained in the State of North Carolina may be, but need not be, identical with the principal office.
Section 3. Other Offices : The Corporation may have offices at such other places, either within or without the State of North Carolina, as the Board of Directors from time to time may determine, or as the affairs of the Corporation from time to time may require.
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meetings : All meetings of shareholders shall be held at the principal office of the Corporation or at such other place, either within or without the State of North Carolina, as shall be designated in the notice of the meeting.
Section 2. Annual Meetings : The annual meeting of shareholders of the Corporation, for the purpose of electing directors of the Corporation and for the transaction of such other business as properly may be brought before the meeting, shall be held within 180 days of the end of the fiscal year on any day, except Saturday, Sunday or a legal or banking holiday, as may be determined by the Board of Directors.
Section 3. Substitute Annual Meeting : If the annual meeting shall not be held as provided in Section 2 of this Article, a substitute annual meeting may be called in accordance with the provisions of Section 4 of this Article. A meeting so called shall be designated and treated for all purposes as the annual meeting.
Section 4. Special Meetings : Special meetings of the shareholders may be called at any time by (a) the Chairman of the Board, (b) the President of the Corporation, or (c) the Secretary of the Corporation at the request of the Board of Directors of the Corporation.
Section 5. Notice of Meetings : Written or printed notice stating the time, place and date of the meeting shall be delivered not less than ten (10) nor more than sixty (60) days before the date thereof, either in person or by mail, by or at the direction of the President or other qualified person calling the meeting to each shareholder of record
1
entitled to vote at such meeting unless applicable law or the Corporations articles of incorporation require that such notice shall be given to all shareholders with respect to such meeting. If mailed, such notice shall be deemed to be effective when deposited in the United States mail, correctly addressed to the shareholder at the shareholders address as it appears on the current record of shareholders of the Corporation, with postage thereon prepaid.
In the case of an annual or substitute annual meeting, the notice of meeting need not specifically state the business to be transacted thereat unless such a statement expressly is required by the provisions of the North Carolina Business Corporation Act. In the case of a special meeting, the notice of meeting specifically shall state the purpose or purposes for which the meeting is called.
If any meeting of shareholders is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment and if a new record date is not fixed for the adjourned meeting. If a new record date for the adjourned meeting is or must be fixed pursuant to North Carolina law, notice of the adjourned meeting must be given as provided in this Section to persons who are shareholders as of the new record date.
Section 6. Voting Lists : Before each meeting of shareholders, an alphabetical list of the shareholders entitled to notice of such meeting shall be prepared by the Secretary of the Corporation. The list shall be arranged by voting group and within each voting group by class or series of shares and show the address of and the number of shares held by each shareholder. The list shall be kept on file at the principal office of the Corporation for the period beginning two (2) business days after notice of the meeting is given and continuing through the meeting, and shall be available for inspection by any shareholder or the agent or attorney of any shareholder at any time prior to the meeting during regular business hours and at any time during the meeting or any adjournment thereof. The list shall be prima facie evidence as to who are the shareholders entitled to examine the list and the shareholders of record entitled to vote at any meeting of the shareholders.
Section 7. Voting Group : All shares of one or more classes or series that under the Corporations articles of incorporation or the North Carolina Business Corporation Act are entitled to vote and be counted together collectively on a matter at a meeting of shareholders constitute a voting group. All shares entitled by the Corporations articles of incorporation or the North Carolina Business Corporation Act to vote generally on a matter are for that purpose a single voting group. Classes or series of shares shall not be entitled to vote separately by voting group unless expressly authorized by the Corporations articles of incorporation or specifically required by law.
Section 8. Quorum : Shares entitled to vote as a separate voting group may take action on a matter at a meeting of shareholders only if a quorum of those shares is present at the meeting. A majority of the votes entitled to be cast on the matter by the voting group shall constitute a quorum of that voting group for action on that matter.
2
Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.
In the absence of a quorum at the opening of any meeting of shareholders, such meeting may be adjourned from time to time by a vote of the majority of the votes cast on the motion to adjourn; and at any adjourned meeting any business may be transacted which might have been transacted at the original meeting if a quorum exists with respect to the matter proposed.
Section 9. Proxies : Shares may be voted either in person or by one or more agents authorized by a written proxy executed by the shareholder or by the shareholders duly authorized attorney-in-fact. A proxy is not valid after the expiration of eleven (11) months from the date of its execution unless the person executing it specifies therein the length of time for which it is to continue in force, or limits its use to a particular meeting.
Section 10. Voting of Shares : Subject to the provisions of the Corporations articles of incorporation, each outstanding share shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders.
Except in the election of directors as provided in Section 4 of Article III, if a quorum exists, action on a matter by a voting group at a meeting of shareholders is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater vote is required by law or by the Corporations articles of incorporation or these Bylaws.
Absent special circumstances, shares of the Corporation are not entitled to vote if they are owned, directly or indirectly, by another corporation in which the Corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation; provided that this provision does not limit the power of the Corporation to vote its own shares held by it in a fiduciary capacity.
Section 11. Fixing Record Date : The Board of Directors of the Corporation may fix a future date as the record date for one or more voting groups in order to determine (a) the shareholders entitled to notice of a meeting of shareholders, (b) the shareholders entitled to demand a special meeting, (c) the shareholders entitled to vote, or (d) the shareholders entitled to take any other action. A record date fixed under this Section may not be more than seventy (70) days before the meeting or action requiring a determination of shareholders.
A determination of shareholders entitled to notice of or to vote at a meeting of shareholders is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, which it must do if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting.
3
If no record date is fixed by the Board of Directors for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, the close of business on the day before the first notice of the meeting is delivered to shareholders shall be the record date for such determination of shareholders.
ARTICLE III
Directors
Section 1. General Powers : The business and affairs of the Corporation shall be directed by the Board of Directors or by such Executive Committee or other committees as the Board may establish pursuant to these Bylaws.
Section 2. Number , Term and Qualifications : The number of directors constituting the Board of Directors of the Corporation shall be not less than six (6) nor more than fifteen (15) as from time to time may be fixed or changed within said minimum and maximum by the shareholders or by a majority of the full Board of Directors. If there are more than nine (9) directors, the directors shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the first annual meeting of shareholders after their election, the term of office of the second class to expire at the second annual meeting of shareholders after their election, and the term of office of the third class to expire at the third annual meeting of shareholders after their election. At each annual meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of three years or until their successors are elected and shall qualify. In the event of any increase or decrease in the number of directors, the additional or eliminated directorships shall be so classified or chosen so that all classes of directors shall remain and become equal in number, as nearly as possible. In the event of the death, resignation, retirement, removal or disqualification of a director, a successor shall be elected to serve only until the next meeting of shareholders at which directors are elected.
Each director shall retire from the Board of Directors on the date of his or her seventieth (70th) birthday provided, however, that any director serving as an initial director shall retire from the Board of Directors upon his or her eightieth (80 th ) birthday. Any vacancy created by such retirement shall be filled in accordance with the provisions of these Bylaws.
Section 3. Nominations : Nominations for election to the Board of Directors may be made by the Board of Directors or a committee thereof, and, subject to the conditions described below, any shareholder of common stock entitled to vote at that meeting for the election of directors. To be eligible for consideration at the meeting of shareholders, all nominations for election to the Board of Directors, other than those made by the Board of Directors or its committee, shall be in writing and must be delivered to the Secretary of the Corporation not less than one hundred and twenty (120) days prior to the meeting of shareholders.
4
Section 4. Election of Directors : Except as provided in Section 5 of this Article, the directors shall be elected at the annual meeting of the shareholders; and those persons who receive the highest number of votes at a meeting at which a quorum is present shall be deemed to have been elected.
Section 5. Removal : Any director may be removed from office only for cause (as cause is defined in the Articles of Incorporation) by a vote of shareholders whenever the number of votes cast in favor of removal of the director exceeds the number of votes cast against such removal. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove such director. A director may not be removed by the shareholders at a meeting unless the notice of the meeting states that the purpose, or one of the purposes, of the meeting is removal of the director. If any directors are so removed, new directors may be elected at the same meeting.
Section 6. Vacancies : If a vacancy occurs in the Board of Directors, including without limitation a vacancy resulting from an increase in the number of directors or from the failure by the shareholders to elect the full authorized number of directors, the shareholders may fill the vacancy or the Board of Directors may fill the vacancy. If the directors remaining in office do not constitute a quorum of the Board, the directors may fill the vacancy by the affirmative vote of a majority of the remaining directors, or by the sole remaining director, as the case may be. If the vacant directorship was held by a director elected by a voting group, only the remaining directors or director elected by that voting group or the holders of shares of that voting group are entitled to fill the vacancy. The term of a director elected to fill a vacancy expires at the next meeting of shareholders at which directors are elected.
Section 7. Chairman of the Board : There shall be a Chairman of the Board of Directors elected by the directors from their number at any meeting of the Board. The Chairman shall preside at all meetings of the Board of Directors and perform such other duties as may be directed by the Board.
Section 8. Vice Chairman of the Board : There shall be a Vice Chairman of the Board of Directors elected by the directors from their number at any meeting of the Board. The Vice Chairman shall perform the duties of Chairman of the Board in the event that the Chairman is absent or unable to carry out the functions of that position.
Section 9. Compensation : The Board of Directors may compensate directors for their services as such and may provide for the payment or reimbursement of all expenses incurred by directors in attending regular and special meetings of the Board.
Section 10. Appointment of Committees : The Board of Directors, by resolution of a majority of the number of directors in office, shall designate three or more directors to constitute an Executive Committee and may designate such other committees as the Board shall deem advisable, each of which, to the extent authorized by law and provided in such resolution, shall have and may exercise such authority of the Board of Directors in the management of the Corporation as the Board shall determine. The Executive
5
Committee shall have and may exercise all of the authority of the Board of Directors at such time as the Board of Directors is not convened and in session. The designation of any committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility or liability imposed upon the Board of Directors, or any member thereof, by law.
ARTICLE IV
Meetings of Directors
Section 1. Regular Meetings : A regular meeting of the Board of Directors shall be held immediately after, and at the same place as, the annual meeting of shareholders. In addition, the Board of Directors may provide, by resolution, the time and place, either within or without the State of North Carolina, for the holding of additional regular meetings, provided that at least one meeting shall be held each quarter.
Section 2. Special Meetings : Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the President or a majority of the directors. Such meetings may be held either within or without the State of North Carolina.
Section 3. Notice of Meetings : Regular meetings of the Board of Directors may be held without notice. The person or persons calling a special meeting of the Board of Directors, at least twenty-four (24) hours before the meeting, shall give notice thereof by any usual means of communication. Such notice need not specify the purpose for which the meeting is called. Any duly convened regular or special meeting may be adjourned by the directors to a later time without further notice.
Section 4. Waiver of Notice : Any director may waive notice of any meeting before or after the meeting. The waiver must be in writing, signed by the director entitled to the notice, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. The attendance by a director at, or the participation of a director in, a meeting shall constitute a waiver of any required notice of such meeting, unless the director, at the beginning of the meeting (or promptly upon the directors arrival thereat), objects to holding the meeting or to transacting any business at the meeting and does not thereafter vote for or assent to action taken at the meeting.
Section 5. Quorum : Unless the Corporations articles of incorporation provide otherwise, a majority of the number of directors fixed by or pursuant to these Bylaws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors.
Section 6. Manner of Acting : Except as otherwise provided in the Corporations articles of incorporation or these Bylaws or by applicable law, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. A director may not vote at a directors meeting by proxy or otherwise act by proxy at a meeting of the Board of Directors.
6
Section 7. Presumption of Assent : A director of the Corporation who is present at a meeting of the Board of Directors or at a meeting of any committee of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless (a) such director objects at the beginning of the meeting (or promptly upon the directors arrival thereat) to holding the meeting or to transacting any business at the meeting, or (b) such directors contrary vote is recorded or such directors dissent or abstention from the action taken otherwise is entered in the minutes of the meeting, or (c) such director files written notice of dissent or abstention to such action with the person presiding at the meeting before the adjournment thereof or forwards such notice by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right of dissent or abstention is not available to a director who voted in favor of the action taken.
Section 8. Informal Action by Directors : Action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board and evidenced by one or more written consents signed by each director before or after such action, describing the action taken, and delivered to the Secretary of the Corporation for inclusion in the minutes or filing with the corporate records.
ARTICLE V
Officers
Section 1. Number : The officers of the Corporation shall consist of a President, one or more Vice Presidents, a Secretary, a Treasurer and such Assistant Vice Presidents, Secretaries, Treasurers and other officers. The Board of Directors shall elect the President and the President may appoint, or the Board of Directors may elect, from time to time, such other officers as he or it shall deem appropriate. Any two (2) or more offices may be held by the same person, except that no officer may act in more than one capacity where action of two (2) or more officers is required.
Section 2. Election and Term : The President of the Corporation shall be elected by the Board of Directors. The remaining officers of the Corporation shall be appointed or elected as set forth in Section 1 of this Article V. Any elections by the Board of Directors may be held at any regular or special meeting of the Board. Each officer shall hold office until such officers death, resignation, retirement, removal or disqualification, or until the election and qualification of such officers successor. Each officer and employee of the Corporation shall give bond of suitable amount with security to be approved by the Board of Directors. Each bond shall be issued upon such form as may be approved by the Commissioner of Banks of North Carolina by a bonding company authorized to do business in North Carolina with the premium to be paid by the Corporation.
7
Section 3. Removal and Resignation : Any officer or agent elected or appointed by the Board of Directors may be removed by the Board with or without cause; but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
An officer may resign at any time by notifying the Corporation, orally or in writing, of such resignation. A resignation shall be effective upon receipt by the Corporation unless it specifies in writing a later effective date. In the event a resignation so specifies a later effective date, the Board of Directors may fill the pending vacancy prior to such date; however, the successor to the resigning officer may not take office until the effective date. An officers resignation does not affect the Corporations contract rights, if any, with such officer.
Section 4. Compensation : The compensation of the President of the Corporation shall be fixed by the Board of Directors. The President shall have the authority to fix the compensation of all other officers and shall report such compensation of any officer to the Board of Directors on a timely basis at its next regular or special meeting. The election of an officer does not of itself create any contract rights.
Section 5. President : The President shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall supervise and control the management of the Corporation in accordance with these Bylaws.
The President, when present, shall preside at all meetings of shareholders. The President, with any other proper officer, may sign certificates for shares of the Corporation and any deeds, leases, mortgages, bonds, contracts or other instruments which lawfully may be executed on behalf of the Corporation, except where required or permitted by law otherwise to be signed and executed and except where the signing and execution thereof shall be delegated by the Board of Directors to some other officer or agent. In general, the President shall perform all duties incident to the office of President and such other duties as from time to time may be assigned by the Board of Directors.
Section 6. Vice Presidents : In the absence of the President or in the event of the Presidents death, inability or refusal to act, the Vice President designated by the President and the Chairman of the Board, unless otherwise determined by the Board of Directors, shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President, with any other proper officer, may sign certificates for shares of the Corporation and shall perform such other duties as from time to time may be assigned by the President or by the Board of Directors.
Section 7. Assistant Vice Presidents : The Assistant Vice Presidents shall, in the absence or disability of their superior officers, perform the duties and exercise the powers of those offices, and they shall, in general, perform such other duties as shall be assigned to them by the President or their superior officers.
Section 8. Secretary : The Secretary shall keep accurate records of the acts and proceedings of all meetings of shareholders and directors. The Secretary shall give all
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notices required by law and by these Bylaws. The Secretary shall have general charge of the corporate books and records and of the corporate seal, and shall affix the corporate seal to any lawfully executed instrument requiring it. The Secretary shall keep all records required by law at the principal office of the Corporation. The Secretary shall have general charge of the stock transfer books of the Corporation and shall keep, at the registered or principal office of the Corporation, a record of shareholders showing the name and address of each shareholder and the number and class of the shares held by each. The Secretary, with any other proper officer, may sign certificates for shares of the Corporation and shall sign such instruments as may require the Secretarys signature. In general, the Secretary shall perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned by the President or by the Board of Directors.
Section 9. Assistant Secretaries : In the absence of the Secretary or in the event of the Secretarys death, inability or refusal to act, the Assistant Secretaries in the order of their length of service as Assistant Secretaries, unless otherwise determined by the Board of Directors, shall perform the duties of the Secretary, and when so acting shall have all the powers of and be subject to all the restrictions upon the Secretary. They shall perform such other duties as from time to time may be assigned by the Secretary, by the President, or by the Board of Directors. Any Assistant Secretary, with any other proper officer, may sign certificates for shares of the Corporation.
Section 10. Treasurer : The Treasurer shall have custody of all funds and securities belonging to the Corporation and shall receive, deposit or disburse the same under the direction of the Board of Directors. The Treasurer shall maintain appropriate accounting records as required by law and shall prepare, or cause to be prepared, annual financial statements of the Corporation that include a balance sheet as of the end of the fiscal year and an income and cash flow statement for that year, which statements, or a written notice of their availability, shall be mailed to each shareholder within one hundred twenty (120) days after the end of such fiscal year. The Treasurer, with any other proper officer, may sign certificates for shares of the Corporation. In general, the Treasurer shall perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned by the President or by the Board of Directors.
Section 11. Assistant Treasurers : In the absence of the Treasurer or in the event of the Treasurers death, inability or refusal to act, the Assistant Treasurers in the order of their length of service as Assistant Treasurers, unless otherwise determined by the Board of Directors, shall perform the duties of the Treasurer, and when so acting shall have all the powers of and be subject to all the restrictions upon the Treasurer. Any Assistant Treasurer, with any other proper officer, may sign certificates for shares of the Corporation. They shall perform such other duties as from time to time may be assigned by the Treasurer, by the President, or by the Board of Directors.
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ARTICLE VI
Contracts, Loans, Checks and Deposits
Section 1. Contracts : The Board of Directors may authorize any officer or officers or any agent or agents, to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. The Board of Directors may enter into employment contracts for any length of time it deems wise.
Section 2. Loans : No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution adopted by the Board of Directors. Such authority may be general or specific in nature and scope.
Section 3. Checks and Drafts : All checks, drafts or other orders for the payment of money issued in the name of the Corporation shall be signed by such officer or officers or such agent or agents of the Corporation and in such manner as from time to time shall be determined by resolution of the Board of Directors.
Section 4. Deposits : All funds of the Corporation not otherwise employed from time to time shall be deposited to the credit of the Corporation in such depositories as the Board of Directors shall direct.
ARTICLE VII
Certificates for Shares and Their Transfer
Section 1. Certificates for Shares : Certificates representing shares of the Corporation may be issued in such form as the Board of Directors shall determine to every shareholder for the fully paid shares owned thereby and shall indicate thereon or reference any and all restrictive conditions of said shares. The certificates shall be in such form as required by law and as determined by the Board of Directors and shall be signed by the President or any Vice President and either the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. All certificates for shares shall be numbered consecutively or otherwise identified; and the name and address of the persons to whom they are issued, with the number of shares and the date of issue, shall be entered on the stock transfer books of the Corporation.
Section 2. Transfer of Shares : Transfer of shares shall be made on the stock transfer books of the Corporation only upon surrender of the certificates for the shares sought to be transferred by the record holder thereof or by such shareholders duly authorized agent, transferee or legal representative. All certificates surrendered for transfer shall be canceled before new certificates for the transferred shares shall be issued. Transfer of shares may be restricted by an agreement of the shareholder(s).
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Section 3. Lost Certificates : The Board of Directors may authorize the issuance of a new share certificate in place of a certificate theretofore issued by the Corporation claimed to have been lost or destroyed, upon receipt of an affidavit to such fact from the person claiming the loss or destruction. When authorizing such issuance of a new certificate, the Board shall require the claimant to give the Corporation a bond in such sum as the Board may direct to indemnify the Corporation against loss from any claim with respect to the certificate claimed to have been lost or destroyed; provided, however, that the Board, by resolution reciting the circumstances justifying such action, may authorize the issuance of the new certificate without requiring such a bond.
Section 4. Holder of Record : Except as otherwise required by law, the Corporation may treat as absolute owner of shares and as the person exclusively entitled to receive notification and distributions, to vote and otherwise to exercise the rights, powers and privileges of ownership of such shares, the person in whose name the shares stand of record on its books.
Section 5. Reacquired Shares : Shares of the Corporation that have been issued and thereafter reacquired by the Corporation shall constitute authorized but unissued shares.
ARTICLE VIII
General Provisions
Section 1. Distributions : The Board of Directors from time to time may authorize, and the Corporation may pay, distributions and share dividends on the Corporations outstanding shares in the manner and upon the terms and conditions provided by law and by the Corporations articles of incorporation.
Section 2. Seal : The corporate seal of the Corporation shall consist of two concentric circles between which is the name of the Corporation and in the center of which is inscribed SEAL; and such seal, in the form approved and adopted by the Board of Directors, shall be the corporate seal of the Corporation.
Section 3. Amendments : Except to the extent otherwise provided in the Corporations articles of incorporation or by law, these Bylaws may be amended or repealed and new bylaws may be adopted by a vote of the Board of Directors. No bylaw adopted, amended or repealed by the shareholders shall be readopted, amended or repealed by the Board of Directors unless the Corporations articles of incorporation or a bylaw adopted by the shareholders authorizes the Board of Directors to adopt, amend or repeal that particular bylaw or the Bylaws generally.
The shareholders may amend or repeal these Bylaws even though these Bylaws also may be amended or repealed by the Board of Directors.
Section 4. Fiscal Year : The fiscal year of the Corporation shall be the calendar year ending December 31 of each year.
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Section 5. Indemnification : The Corporation shall indemnify any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (and any appeal therein), whether civil, criminal, administrative, arbitrative or investigative and whether or not brought by or on behalf of the Corporation, by reason of the fact that such party is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a trustee or administrator under an employee benefit plan, or arising out of such partys activities in any of the foregoing capacities, against all liability and litigation expense, including reasonable attorneys fees; PROVIDED, however, that the Corporation shall not indemnify any such person against liability or expense incurred on account of such persons activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of the Corporation. The Corporation likewise shall indemnify any such person for all reasonable costs and expenses (including attorneys fees) incurred by such person in connection with the enforcement of such persons right to indemnification granted herein. The Corporation shall pay all expenses incurred by any director, officer, employee or agent in defending a civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director, officer, employee or agent to repay such amount unless it ultimately shall be determined that such party is entitled to be indemnified by the Corporation against such expenses.
The Board of Directors of the Corporation shall take all such action as may be necessary and appropriate to authorize the Corporation to pay the indemnification required by this bylaw, including without limitation a determination by a majority vote of disinterested directors that the activities giving rise to the liability or expense for which indemnification is requested were not, at the time taken, known or believed by the person requesting indemnification to be clearly in conflict with the best interests of the Corporation.
Any person who at any time after the adoption of this bylaw serves or has served in any of the aforesaid capacities for or on behalf of the Corporation shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein. Such right shall inure to the benefit of the legal representatives of any such person and shall not be exclusive of, but shall be in addition to, any rights to which such person may be entitled apart from the provision of this bylaw.
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Exhibit 4
[Specimen Stock Certificate]
NEW CENTURY BANCORP, INC., Dunn, North Carolina
Incorporated under the laws of the state of North Carolina.
This Certifies that is the owner of fully paid shares of common stock, $1.00 par value per share, of New Century Bancorp, Inc. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
In witness whereof, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its corporate seal to be hereunto affixed.
Dated: |
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[SEAL] |
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Corporate Secretary |
President and Chief Executive Officer |
________________________________________
NEW CENTURY BANCORP, INC., Dunn, North Carolina
The Corporation will furnish to any shareholder upon request and without charge a copy of the Certificate of Incorporation and Bylaws of the Corporation, which set forth certain other provisions with respect to acquisition of shares of the Corporation, as well as a description of the Corporations authorized common stock and other provisions affecting stockholders rights and corporate governance.
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations.
TEN COM as tenants in common
TEN ENT as tenants in the entireties
JT TEN as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT | Custodian | |||||
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(Cust) |
(Minor) |
under the Uniform Gifts to Minors Act |
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(State) |
For Value Received, hereby sell, assign and transfer unto Shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Please insert Social Security number of other identifying number of assignee:
Dated
Signature:
Signature:
Signature(s) Guaranteed:
Exhibit 10(i)
NEW CENTURY BANCORP, INC.
2000 INCENTIVE STOCK OPTION PLAN
New Century Bancorp, Inc., a North Carolina corporation (hereinafter referred to as the Corporation), does herein set forth the terms of the New Century Bancorp, Inc. 2000 Incentive Stock Option Plan (hereinafter referred to as this Plan) which was adopted by the Corporations Board of Directors (hereinafter referred to as the Board) and which was originally adopted by the Board of Directors of New Century Bank and its shareholders prior to the creation of the Corporation and the reorganization of New Century Bank as a wholly-owned subsidiary or the Corporation.
1. Purpose of the Plan . The purpose of this Plan is to provide for the grant of Incentive Stock Options (hereinafter referred to as Option or Options) qualifying for the tax treatment afforded by Section 422 of the Internal Revenue Code of 1986, as amended, to eligible officers and employees of the Corporation and its subsidiaries (hereinafter referred to as Eligible Employees) who wish to invest in the Corporations common stock (hereinafter referred to as Common Stock). The Corporation believes that participation in the ownership of the Corporation by Eligible Employees will be to the mutual benefit of the Corporation and Eligible Employees. The existence of this Plan will enhance the Corporations ability to attract capable individuals to employment in key employee positions.
2. Administration of the Plan .
(a) This Plan shall be administered by the Option Committee of the Board (hereinafter referred to as the Committee). The Committee shall consist of at least three (3) members of the Board all of whom shall qualify as disinterested persons as provided in Section 16(b) and the rules and regulations thereunder of the Securities Exchange Act of 1934, as amended. The members of the Committee shall be appointed by the Board and shall serve at the pleasure of the Board, which may remove members from, add members to, or fill vacancies in the Committee.
(b) The Committee shall decide to whom Options shall be granted under this Plan, the number of shares as to which Options shall be granted subject to the limitations set forth in Paragraph 11 of this Plan, the Option Price (as hereinafter defined) for such shares and such additional terms and conditions for such Options as the Committee deems appropriate.
(c) A majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved unanimously in writing by the Committee, shall be considered as valid actions by the Committee.
(d) The Board may designate any officers or employees of the Corporation to assist in the administration of this Plan. The Board may authorize such individuals to execute documents on its behalf and may delegate to them such other ministerial and limited discretionary duties as the Board may deem fit.
3. Shares of Common Stock Subject to the Plan . The maximum number of shares of Common Stock that shall be available initially for Options under this Plan is one hundred thirteen thousand seventeen (113,017) shares, subject to adjustment as provided in Paragraph 15 hereof. Shares subject to Options which expire or terminate prior to the issuance of the shares of Common Stock shall again be available for future grants of Options under this Plan.
4. Eligibility . Options under this Plan may be granted to any Eligible Employee as determined by the Committee. An individual may hold more than one Option under this or other plans adopted by the Corporation.
5. Grant of Options .
(a) The Committee shall authorize that Options for shares of Common Stock shall be granted to certain Eligible Employees of the Corporation which Options shall be granted based upon the past service and the continued participation of those individuals in the operations of the Corporation. The allocation of said Options shall be as determined by a majority vote of the Committee at one or more meetings called for such purpose.
(b) Upon the forfeiture of an Option for whatever reason prior to the expiration of the Option Period (as defined in Paragraph 10 hereof) the shares of Common Stock covered by a forfeited Option shall be available for the granting of additional Options to Eligible Employees during the remaining term of this Plan upon such terms and conditions as may be determined by the Committee. The number of additional Options to be granted to specific Eligible Employees during the term of this Plan shall be determined by the Committee as provided in Subparagraph 2(b) hereof.
6. Vesting of Options .
(a) Options granted under this Plan shall vest and the right of an Optionee to exercise an Option shall be nonforfeitable in accordance with the following schedule:
Date When Such Options Become Vested |
Percentage of Such Options Vested |
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Date of grant |
0 | % | |
First Anniversary of the date of grant |
33 1 / 3 | % | |
Second Anniversary of the date of grant |
33 1 / 3 | % | |
Third Anniversary of the date of grant |
33 1 / 3 | % |
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(b) In determining the number of shares of Common Stock under each Option vested under the above vesting schedule, an Optionee shall not be entitled to exercise an Option to purchase a fractional number of shares of the Common Stock. If the product resulting from multiplying the vested percentage times the Option results in a fractional number of shares of Common Stock, then an Optionees vested right shall be to the whole number of shares of Common Stock disregarding any fractional shares of Common Stock.
(c) In the event that the employment of an Optionee at the Corporation terminates for any reason, other than the Optionees disability, death, retirement, or following a change in control of the Corporation, the Optionees Options under this Plan shall be forfeited and shall be available again for grant to Eligible Employees as may be determined by the Committee. Such forfeiture shall apply whether or not any such Options have been vested.
(d) In the event that the employment of an Optionee with the Corporation should terminate because of such Optionees disability, death, or retirement, or following a change in control of the Corporation prior to the date when all Options allocated to the Optionee would be 100% vested in accordance with the applicable schedule in subparagraph 6(a) above, then, notwithstanding the foregoing schedule in subparagraph 6(a) above, all Options allocated to such Optionee shall immediately become fully vested and nonforfeitable. For purposes of this Plan, the term disability shall be defined in the same manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. When used in this Plan, the phrase change in control refers to (i) the acquisition by any person, group of persons or entity of the beneficial ownership or power to vote more than twenty-five (25%) percent of the Corporations outstanding stock, (ii) during any period of two (2) consecutive years, a change in the majority of the Board unless the election of each new Director was approved by at least two-thirds of the Directors then still in office who were Directors at the beginning of such two (2) year period, or (iii) a reorganization, merger, or consolidation of the Corporation with one or more other entities in which the Corporation is not the surviving entity, or the transfer of all or substantially all of the assets or shares of the Corporation to another person or entity. Further, notwithstanding anything else herein, a transaction or event shall not be considered a change in control if, prior to the consummation or occurrence of such transaction or event, the Optionee and the Corporation agree in writing that the same shall not be treated as a change in control for purposes of this Plan.
7. Option Price .
(a) The price per share of each Option granted under this Plan (hereinafter called the Option Price) shall be determined by the Committee as of the effective date of grant of such Option, but in no event shall the Option Price be less than 100% of the fair market value of Common Stock on the date of grant. If an Optionee (as hereinafter defined) at the time that an Option is granted owns stock possessing more than ten (10%) percent of the total combined voting power of all classes of stock of the Corporation, then the Option Price per share of each Option granted under this Plan shall be no less than 110% of the fair market value of Common Stock on the date of grant and such Option shall not be exercisable more than five (5)
3
years from the date of grant. An Option shall be considered as granted on the date that the Committee acts to grant such Option or such later date as the Committee shall specify in an Option Agreement (as hereinafter defined).
(b) The fair market value of a share of Common Stock shall be determined as follows: (i) if on the date as of which such determination is being made, Common Stock being valued is admitted to trading on a securities exchange or exchanges for which actual sale prices are regularly reported, or actual sale prices are otherwise regularly published, the fair market value of a share of Common Stock shall be deemed to be equal to the mean of the closing sale price as reported on each of the five (5) trading days immediately preceding the date as of which such determination is made; provided , however , that, if a closing sale price is not reported for each of the five (5) trading days immediately preceding the date as of which such determination is made, then the fair market value shall be equal to the mean of the closing sale prices on those trading days for which such price is available, or (ii) if on the date as of which such determination is made, no such closing sale prices are reported, but quotations for Common Stock being valued are regularly listed on the National Association of Securities Dealers Automated Quotation System or another comparable system, the fair market value of a share of Common Stock shall be deemed to be equal to the mean of the average of the closing bid and asked prices for such Common Stock quoted on such system on each of the five (5) trading days preceding the date as of which such determination is made, but if a closing bid and asked price is not available for each of the five (5) trading days, then the fair market value shall be equal to the mean of the average of the closing bid and asked prices on those trading days during the five-day period for which such prices are available, or (iii) if no such quotations are available, the fair market value of a share of Common Stock shall be deemed to be the average of the closing bid and asked prices furnished by a professional securities dealer making a market in such shares, as selected by the Committee, for the trading date first preceding the date as of which such determination is made. If the Committee determines that the price as determined above does not represent the fair market value of a share of Common Stock, the Committee may then consider such other factors as it deems appropriate and then fix the fair market value for the purposes of this Plan.
8. Payment of Option Price . Payment for shares subject to an Option may only be made in cash or in other stock of the Corporation owned by an Eligible Employee or such other person as may be entitled to exercise such Option. Any shares of the Corporations stock that are delivered in payment of the aggregate Option Price shall be valued at their fair market value, as determined by the Board, on the date of exercise of such Option.
9. Terms and Conditions of Grant of Options . Each Option granted pursuant to this Plan shall be evidenced by a written Incentive Stock Option Agreement (hereinafter referred to as Option Agreement) with each Eligible Employee (hereinafter referred to as Optionee) to whom an Option is granted; such agreement shall be substantially in the form attached hereto as Exhibit A, unless the Committee shall adopt a different form and, in each case, may contain such other, different, or additional terms and conditions as the Committee may determine. The Option shall terminate as provided in paragraph 13 hereof. In addition to any further conditions provided herein and in the Option Agreement, the right of an
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Optionee to exercise the Option to purchase the Option Shares, either in whole or in part, shall be conditioned upon the completion by the Optionee of one (1) full year of service in the employment of the Corporation following the date of grant of the Option.
10. Option Period . Each Option Agreement shall set forth a period during which such Option may be exercised (hereinafter referred to as the Option Period); provided , however , that the Option Period shall not exceed ten (10) years after the date of grant of such Option as specified in an Option Agreement.
11. Limitation on Grant of Incentive Stock Options . Moreover, notwithstanding any other provision of this Plan, no person shall be granted an Option under this Plan which would cause such persons annual vesting amount to exceed $100,000.00. With respect to any calendar year, a persons annual vesting amount is the aggregate fair market value of stock subject to incentive stock options with respect to which such options are first exercisable during such calendar year. For purposes of the foregoing, the aggregate fair market value of stock with respect to which incentive stock options are first exercisable during any calendar year shall be determined by taking into account all such options granted to such person under all incentive stock option plans of the Corporation or of any of its subsidiaries.
12. Exercise of Incentive Stock Options . An Option shall be exercised by written notice to the Committee signed by an Optionee or by such other person as may be entitled to exercise such Option. In the exercise of an Option, the aggregate Option Price for the shares being purchased may only be paid in cash or in shares of the Corporations stock (value as determined by the Committee as of the date of exercise) or any combination thereof and must be accompanied by a notice of exercise. The written notice shall state the number of shares with respect to which an Option is being exercised and, shall either be accompanied by the payment of the aggregate Option Price for such shares or shall fix a date (not more than ten (10) business days from the date of such notice) by which the payment of the aggregate Option Price will be made. An Optionee shall not exercise an Option to purchase less than 100 shares, unless the Committee otherwise approves or unless the partial exercise is for the remaining shares available under such Option. A certificate or certificates for the shares of Common Stock purchased by the exercise of an Option shall be issued in the regular course of business subsequent to the exercise of such Option and the payment therefor. During the Option Period, no person entitled to exercise any Option granted under this Plan shall have any of the rights or privileges of a shareholder with respect to any shares of Common Stock issuable upon exercise of such Option, until certificates representing such shares shall have been issued and delivered and the individuals name entered as a shareholder of record on the books of the Corporation for such shares.
13. Effect of Termination of Employment, Retirement, Disability or Death .
(a) In the event of the termination of employment of an Optionee either by reason of (i) being discharged for cause or (ii) termination of employment for a reason other than the Optionees death, retirement, disability, or following a change in control of the
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Corporation (as defined in Paragraph 6(d)), any Option or Options granted to the Optionee under this Plan, to the extent not previously exercised or expired, and regardless of any vesting pursuant to Paragraph 6 hereof, shall immediately terminate. The phrase discharged for cause shall include termination at the sole discretion of the Board because of such Optionees personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses), a final cease and desist order, or material breach of any provision of any employment agreement that such Optionee may have with the Corporation.
(b) In the event of the termination of employment of an Optionee as a result of such Optionees retirement, all Options granted such Optionee shall vest and such Optionee shall have the right to exercise an Option granted under this Plan, to the extent that it has not previously been exercised or expired, for a period of three (3) months after the date of retirement, but in no event may any Option be exercised later than the end of the Option Period provided in such Option Agreement in accordance with Paragraph 10 hereof. For purposes of this Plan, the term retirement shall mean, subject to Board approval in each instance, (i) termination of an Optionees employment under conditions which would constitute retirement under any tax qualified retirement plan maintained by the Corporation or any of its subsidiaries or (ii) attaining age 65.
(c) In the event of the termination of employment of an Optionee by reason of such Optionees disability, all Options granted such Optionee shall vest and such Optionee shall have the right to exercise an Option granted under this Plan, to the extent that it has not previously been exercised or expired, at any time within twelve (12) months after the last date on which such Optionee provides services as an officer or an employee of the Corporation before being disabled, but in no event may any Option be exercised later than the end of the Option Period provided in such Option Agreement in accordance with Paragraph 10 hereof. For purposes of this Plan, the term disability shall be defined in the same manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.
(d) Notwithstanding anything else herein, in the event that an Optionee should die (i) while employed by the Corporation or any of its subsidiaries, (ii) within three (3) months after retirement, (iii) within three (3) months after Optionees termination following a change in control, or (iv) within twelve (12) months after Optionees termination by reason of Optionees disability, any Option or Options granted to the Optionee under this Plan and not previously exercised or expired shall vest and shall be exercisable, according to their respective terms, by the personal representative of such Optionee or by any person or persons who acquired such Options by bequest or inheritance from such Optionee, notwithstanding any limitations placed on the exercise of such Options by this Plan or an Option Agreement, immediately in full and at any time within twelve (12) months after the date of death of such Optionee, but in no event may any Option be exercised later than the end of the Option Period provided in such Option Agreement in accordance with Paragraph 10 hereof. Any references herein to an Optionee shall be deemed to include any person entitled to exercise an Option under the terms of this Plan after the death of such Optionee under the terms of this Plan.
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(e) In the event of the termination of employment of an Optionee following a change in control of the Corporation (as defined in Paragraph 6(d)), all Options granted such Optionee shall vest and such Optionee shall have the right to exercise any Option or Options granted to the Optionee under this Plan, to the extent they have not previously been exercised or expired, for a period of three (3) months after the date of termination, but in no event may any Option be exercised later than the end of the Option period provided in such Option Agreement in accordance with Paragraph 10 hereof.
14. Effect of Plan on Employment Status . The fact that the Committee has granted an Option to an Optionee under this Plan shall not confer on such Optionee any right to employment with the Corporation or to a position as an officer or an employee of the Corporation, nor shall it limit the right of the Corporation to remove such Optionee from any position held by the Optionee or to terminate the Optionees employment at any time.
15. Adjustment Upon Changes in Capitalization; Dissolution or Liquidation .
(a) In the event of a change in the number of shares of Common Stock outstanding by reason of a stock dividend, stock split, recapitalization, reorganization, merger, exchange of shares, or other similar capital adjustment, prior to the termination of an Optionees rights under this Plan, equitable proportionate adjustments shall be made by the Committee in (i) the number and kind of shares which remain available under this Plan and (ii) the number, kind, and the Option Price of shares subject to unexercised Options under this Plan. The adjustments to be made shall be determined by the Committee and shall be consistent with such change or changes in the Corporations total number of outstanding shares; provided , however , that no adjustment shall change the aggregate Option Price for the exercise of Options granted under this Plan.
(b) The grant of Options under this Plan shall not affect in any way the right or power of the Corporation or its shareholders to make or authorize any adjustment, recapitalization, reorganization, or other change in the Corporations capital structure or its business, or any merger or consolidation of the Corporation, or to issue bonds, debentures, preferred or other preference stock ahead of or affecting Common Stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of the Corporations assets or business.
(c) Except upon a change in control as defined in Paragraph 6(d) hereof, upon the effective date of the dissolution or liquidation of the Corporation, this Plan and any Options granted hereunder, shall terminate.
16. Non-Transferability . Any Option granted under this Plan shall not be assignable or transferable except, in the case of the death of an Optionee, by will or by the laws of descent and distribution. In the event of the death of an Optionee, the personal representative, the executor or the administrator of such Optionees estate, or the person or persons who acquired by bequest or inheritance the rights to exercise such Option, may exercise any Option or portion thereof to the extent not previously exercised by an Optionee or expired, in accordance with its terms and Subparagraph 13(d) hereof.
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17. Tax Withholding . The employer of a person granted an Option under this Plan shall have the right to deduct or otherwise effect a withholding of any amount required by federal or state laws to be withheld with respect to the grant, exercise or the sale of stock acquired upon the exercise of an Option in order for the employer to obtain a tax deduction otherwise available as a consequence of such grant, exercise or sale, as the case may be.
18. Listing and Registration of Option Shares . Any Option granted under the Plan shall be subject to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration, or qualification of the shares covered thereby upon any securities exchange or under any state or federal law or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of such Option or the issuance or purchase of shares thereunder, such Option may not be exercised in whole or in part unless and until such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.
19. Exculpation and Indemnification . In connection with this Plan, no member of the Committee shall be personally liable for any act or omission to act in such persons capacity as a member of the Committee, nor for any mistake in judgment made in good faith, unless arising out of, or resulting from, such persons own bad faith, gross negligence, willful misconduct, or criminal acts. To the extent permitted by applicable law and regulation, the Corporation shall indemnify and hold harmless the members of the Committee, and each other officer or employee of the Corporation or of any subsidiary thereof to whom any duty or power relating to the administration or interpretation of this Plan may be assigned or delegated, from and against any and all liabilities (including any amount paid in settlement of a claim with the approval of the Board) and any costs or expenses (including counsel fees) incurred by such persons arising out of, or as a result of, any act or omission to act in connection with the performance of such persons duties, responsibilities, and obligations under this Plan, other than such liabilities, costs, and expenses as may arise out of, or result from, the bad faith, gross negligence, willful misconduct, or criminal acts of such persons.
20. Amendment and Modification of the Plan . The Board may at any time and from time to time amend or modify this Plan (including the form of Option Agreement) in any respect consistent with applicable regulations; provided , however , that no amendment or modification shall be made that increases the total number of shares of Common Stock covered by this Plan or effects any change in the categories of persons who may receive Options under this Plan or materially increases the benefits accruing to Optionees under this Plan unless such change is approved by the holders of a majority of the issued and outstanding shares of Common Stock. Any amendment or modification of this Plan shall not materially reduce the benefits under any Option theretofore granted to an Optionee under this Plan without the consent of such Optionee or the transferee thereof in the event of the death of such Optionee.
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21. Termination and Expiration of the Plan . This Plan may be abandoned, suspended, or terminated at any time by the Board; provided , however , that abandonment, suspension, or termination of this Plan shall not affect any Options then outstanding under this Plan. No Option shall be granted pursuant to this Plan after ten (10) years from the effective date of this Plan as provided in Paragraph 22 hereof.
22. Effective Date; Shareholder Approval; Regulatory Approval . This Plan was effective upon its approval as the New Century Bank 2000 Incentive Stock Option Plan by the requisite number of shareholders of New Century Bank on June 29, 2000 (the Effective Date).
23. Captions and Headings; Gender and Number . Captions and paragraph headings used herein are for convenience only, do not modify or affect the meaning of any provision herein, are not a part hereof, and shall not serve as a basis for interpretation or in construction of this Plan. As used herein, the masculine gender shall include the feminine and neuter, the singular number the plural, and vice versa, whenever such meanings are appropriate.
24. Expenses of Administration of Plan . All costs and expenses incurred in the operation and administration of this Plan shall be borne by the Corporation or one or more of its subsidiaries.
25. Governing Law . Without regard to the principles of conflicts of laws, the laws of the State of North Carolina shall govern and control the validity, interpretation, performance, and enforcement of this Plan.
26. Inspection of Plan . A copy of this Plan, and any amendments thereto or modification thereof, shall be maintained by the Secretary of the Corporation and shall be shown to any proper person making inquiry about it.
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STATE OF NORTH CAROLINA |
EXHIBIT A | |
COUNTY OF HARNETT |
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (hereinafter referred to as this Agreement) is made and entered into as of this day of , , between NEW CENTURY BANCORP, INC., a North Carolina corporation (hereinafter referred to as the Corporation), and a resident of County, North Carolina (hereinafter referred to as the Optionee).
WHEREAS, the Board of Directors of the Corporation (hereinafter referred to as the Board) has adopted the New Century Bancorp, Inc. 2000 Incentive Stock Option Plan (hereinafter referred to as the Plan) which was originally adopted by the Board of Directors of New Century Bank and its shareholders prior to the creation of the Corporation and the reorganization of New Century Bank as a wholly-owned subsidiary of the Corporation; and
WHEREAS, the shareholders of New Century Bank at an annual meeting duly called and held on June 29, 2000, approved the Plan (the Effective Date); and
WHEREAS, the Plan provides that the Compensation Committee (hereinafter referred to as the Committee) of the Board will make available to certain officers and employees of the Corporation and its subsidiaries (the Employer) the right to purchase shares of the Corporations common stock (hereinafter referred to as Common Stock); and
WHEREAS, the Committee has determined that the Optionee should be granted an option to purchase shares of Common Stock under the Plan;
NOW, THEREFORE, the Corporation and the Optionee agree as follows:
1. Date of Grant of Option . The date of grant of the option granted under this Agreement is the day of , .
2. Grant of Option . Pursuant to the Plan, the Corporation grants to the Optionee the right (hereinafter referred to as the Option) to purchase from the Corporation all or any part of an aggregate of ( ) shares of Common Stock (hereinafter referred to as the Option Shares) which shall be authorized but unissued shares.
3. Vesting of Options .
(a) Periodic Vesting . Subject to subparagraphs 3(b) and 3(c) below, the Option shall vest and become exercisable in accordance with the following schedule:
Date of grant |
0 | % | |
First Anniversary of the date of grant |
33 1 / 3 | % | |
Second Anniversary of the date of grant |
33 1 / 3 | % | |
Third Anniversary of the date of grant |
33 1 / 3 | % |
(b) Fractional Option Shares . In determining the number of Option Shares vested under the above vesting schedule, an Optionee shall not be entitled to exercise an Option for a fractional number of Option Shares. If the product resulting from multiplying the vested percentage times the allocated Option results in a fractional number of Option Shares, then the Optionees vested right shall be to the whole number of Option Shares, disregarding any fractional number.
(c) Accelerated Vesting . Notwithstanding paragraph 3(a) above, all Options previously not vested and subject to forfeiture shall become 100% vested and the right of the Optionee to exercise such Options shall become nonforfeitable upon the death, disability or retirement of the Optionee, or upon a change in control of the Corporation. For purposes of this Agreement, the term disability shall be defined in the same manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the Code).
(d) Other Terminations of Employment . In the event any Optionees employment with the Corporation terminates for any reason, other than the Optionees death, disability, retirement, or following a change in control of the Corporation, then the Optionees Options, to the extent unexercised, shall be forfeited and shall be available again for grant to other officers and employees as may be determined by the Committee. Such forfeiture shall apply whether or not any such options have vested.
4. Option Price . The price to be paid for the Option Shares shall be and /100 Dollars ($ ) per share (hereinafter referred to as the Option Price) which is the fair market value of the Option Shares as determined by the Committee as of the date of grant of this Option.
5. When and Extent to which Options may be Exercised . Subject to any further restrictions in this Agreement, the right of the Optionee to exercise the Option to purchase the Option Shares, either in whole or in part, shall be conditioned upon the completion by the Optionee of one (1) full year of service in the employment of the Employer following the date of grant of the Option set forth in paragraph 1 hereof. At such time as the Option shall become exercisable in accordance with this Agreement, the Optionee, in his discretion, may exercise all or any portion of the Option, subject to paragraphs 3 and 7 hereof. The Option shall terminate as provided in paragraph 8 hereof.
6. Change in Control . When used herein, the phrase change in control refers to (i) the acquisition by any person, group of persons or entity of the beneficial ownership
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or power to vote more than twenty-five (25%) percent of the Corporations outstanding stock, (ii) during any period of two (2) consecutive years, a change in the majority of the Board unless the election of each new Director was approved by at least two-thirds of the Directors then still in office who were Directors at the beginning of such two (2) year period or (iii) a reorganization, merger, or consolidation of the Corporation with one or more other entities in which the Corporation is not the surviving entity, or the transfer of all or substantially all of the assets or shares of the Corporation to another person or entity. Further, notwithstanding anything else herein, a transaction or event shall not be considered a change in control if, prior to the consummation or occurrence of such transaction or event, the Optionee and the Corporation agree in writing that the same shall not be treated as a change in control for purposes of this Agreement.
7. Method of Exercise . The Option shall be exercised by written notice to the Committee signed by the Optionee or by such other person as may be entitled to exercise the Option. In the exercise of the Option, the aggregate Option Price for the shares being purchased may only be paid in cash and must be accompanied by a notice of exercise. The written notice shall state the number of shares with respect to which the Option is being exercised and, shall either be accompanied by the payment of the aggregate Option Price for such shares or shall fix a date (not more than ten (10) business days from the date of such notice) by which the payment of the aggregate Option Price will be made. The Optionee shall not exercise the Option to purchase less than one hundred (100) shares, unless the Committee otherwise approves or unless the partial exercise is for the remaining shares available under the Option. A certificate or certificates for the shares of Common Stock purchased by the exercise of the Option shall be issued in the regular course of business subsequent to the exercise of the Option and the payment therefor. During the Option Period, no person entitled to exercise the Option granted under this Agreement shall have any of the rights or privileges of a shareholder with respect to any shares of Common Stock issuable upon exercise of the Option, until certificates representing such shares shall have been issued and delivered and the individuals name entered as a shareholder of record on the books of the Corporation for such shares.
8. Termination of Option . The Option shall terminate as follows:
(a) Except as provided in subparagraphs (b), (c), (d) and (e) below, the Option granted under this Agreement, to the extent that it has not been exercised or expired, and regardless of any vesting pursuant to paragraph 3 hereof, shall terminate on the earlier of (i) the date that the Optionee is discharged for cause, (ii) the date the Optionee gives notice that the Optionee terminates his or her employment with the Employer for a reason other than retirement or disability or following a change in control of the Corporation or (iii) the date which is ten (10) years from the date of grant of the Option set forth in paragraph 1 hereof. Options which terminate within ten (10) years from the date of grant set forth in paragraph 1 shall be available again for grant to certain officers and employees as may be determined by the Committee. The phrase discharged for cause shall include termination at the sole discretion of the Board of Directors of the Employer of the Optionee because of the Optionees personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or a final cease and desist order, or material breach of any provision of any employment agreement that the Optionee may have with the Employer.
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(b) In the event the Optionee retires prior to the date which is ten (10) years after the date of grant of the Option, the Optionee shall have the right to exercise the Option, to the extent that it has not been exercised by the Optionee or expired, immediately in full and at any time within three (3) months after the date of retirement, but in no event may the Option be exercised later than ten (10) years after the date of grant of the Option set forth in paragraph 1 hereof. For purposes of this Agreement, the term retirement shall mean, subject to Board approval in each instance, (i) termination of the Optionees employment under conditions which would constitute retirement under any tax qualified retirement plan maintained by the Employer or (ii) attaining age 65.
(c) In the event the Optionee becomes disabled prior to the date which is ten (10) years after the date of grant of the Option, the Optionee shall have the right to exercise the Option, to the extent that it has not been exercised by the Optionee or expired, notwithstanding any limitation placed on the exercise of the Option by the Plan or by this Agreement, immediately in full and at any time within twelve (12) months after the last date on which the Optionee provided services as an officer or an employee of the Employer before being disabled, but in no event may the Option be exercised later than ten (10) years after the date of grant of the Option set forth in paragraph 1 hereof. For purposes of this Agreement, the term disability shall be defined in the same manner as such term is defined in Section 22(e)(3) of the Code.
(d) Notwithstanding anything else herein, in the event that an Optionee should die (i) while employed by the Corporation or any of its subsidiaries, (ii) within three (3) months after retirement, (iii) within three (3) months after Optionees termination following a change in control, or (iv) within twelve (12) months after Optionees termination by reason of Optionees disability, the Option, to the extent it has not been exercised by the Optionee or expired, shall be exercisable, according to its terms, by the personal representative, the executor or administrator of the Optionees estate, or any person or persons who acquired the Option by bequest or inheritance from the Optionee, notwithstanding any limitation placed on the exercise of the Option by the Plan or by this Agreement, immediately in full and at any time within twelve (12) months after the date of death of the Optionee, but in no event may the Option be exercised later than ten (10) years from the date of grant of the Option as set forth in paragraph 1 hereof.
(e) In the event the Optionees employment with the Employer is terminated following a change in control of the Corporation, the Optionee shall have the right to exercise the Option, to the extent that it has not been exercised by the Optionee or expired, immediately in full and at any time within three (3) months after the date of termination, but in no event may the Option be exercised later than ten (10) years after the date of grant of the Options set forth in paragraph 1 hereof.
4
9. Effect of Agreement on Employment Status of Optionee . The fact that the Committee has granted the Option to the Optionee under this Agreement shall not confer on the Optionee any right to employment with the Employer or to a position as an officer or an employee of the Employer, nor shall it limit the right of the Employer to remove the Optionee from any position held by the Optionee or to terminate his or her employment at any time.
10. Listing and Registration of Option Shares .
(a) The Corporations obligation to issue shares of Common Stock upon exercise of the Option is expressly conditioned upon (i) the completion by the Corporation of any registration or other qualification of such shares under any state or federal law or regulations or rulings of any government regulatory body or (ii) the making of such investment representations or other representations and agreements by the Optionee or any person entitled to exercise the Option in order to comply with the requirements of any exemption from any such registration or other qualification of the Option Shares which the Committee shall, in its sole discretion, deem necessary or advisable. Notwithstanding the foregoing, the Corporation shall be under no obligation to register or qualify the Option Shares under any state or federal law. The required representations and agreements referenced above may include representations and agreements that the Optionee, or any other person entitled to exercise the Option, (i) is purchasing such shares on his or her own behalf as an investment and not with a present intention of distribution or re-sale and (ii) agrees to have placed upon any certificates representing the Option Shares a legend setting forth any representations and agreements which have been given to the Committee or a reference thereto and stating that such shares may not be transferred except in accordance with all applicable state and federal securities laws and regulations, and further representing that, prior to making any sale or other disposition of the Option Shares, the Optionee, or any other person entitled to exercise the Option, will give the Corporation notice of the intention to sell or dispose of such shares not less than five (5) days prior to such sale or disposition.
11. Adjustment Upon Change in Capitalization; Dissolution or Liquidation .
(a) In the event of a change in the number of shares of Common Stock outstanding by reason of a stock dividend, stock split, recapitalization, reorganization, merger, exchange of shares, or other similar capital adjustment, prior to the termination of the Optionees rights under this Agreement, equitable proportionate adjustments shall be made by the Committee in the number, kind, and the Option Price of shares subject to the unexercised portion of the Option granted under this Agreement. The adjustments to be made shall be determined by the Committee and shall be consistent with such change or changes in the Corporations total number of outstanding shares; provided , however , that no adjustment shall change the aggregate Option Price for the exercise of the Option granted under this Agreement.
(b) The grant of the Option under this Agreement shall not affect in any way the right or power of the Corporation or its shareholders to make or authorize any adjustment, recapitalization, reorganization, or other change in the Corporations capital structure
5
or its business, or any merger or consolidation of the Corporation, or to issue bonds, debentures, preferred or other preference stock ahead of or affecting Common Stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of the Corporations assets or business.
(c) Except upon a change in control as set forth in paragraph 6 hereof, upon the effective date of the dissolution or liquidation of the Corporation, the Option granted under this Agreement shall terminate.
12. Nontransferability . The Option granted under this Agreement shall not be assignable or transferable except, in the event of the death of the Optionee, by will or by the laws of descent and distribution. In the event of the death of the Optionee, the personal representative, the executor or the administrator of the Optionees estate, or the person or persons who acquired by bequest or inheritance the right to exercise the Option may exercise the unexercised Option or a portion thereof, in accordance with the terms of this Agreement, prior to the date which is ten (10) years after the date of grant of Option as set forth in paragraph 1 hereof.
13. Notices . Any notice or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given when delivered personally or when deposited in the United States mail as Certified Mail, return receipt requested, properly addressed with postage prepaid, if to the Corporation at its principal office at 700 West Cumberland Street, Dunn, North Carolina 28334; and, if to the Optionee to his or her last address appearing on the books of the Employer. The Employer and the Optionee may change their address or addresses by giving written notice of such change as provided herein. Any notice or other communication hereunder shall be deemed to have been given on the date actually delivered or as of the third (3rd) business day following the date mailed, as the case may be.
14. Construction Controlled by Plan . This Agreement shall be construed so as to be consistent with the Plan; and the provisions of the Plan shall be deemed to be controlling in the event that any provision hereof should appear to be inconsistent therewith. The Optionee hereby acknowledges receipt of a copy of the Plan from the Corporation.
15. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be valid and enforceable under applicable law, but if any provision of this Agreement is determined to be unenforceable, invalid or illegal, the validity of any other provisions or part thereof, shall not be affected thereby and this Agreement shall continue to be binding on the parties hereto as if such unenforceable, invalid or illegal provision or part thereof had not been included herein.
16. Modification of Agreement; Waiver . This Agreement may be modified, amended, suspended, or terminated, and any terms, representations or conditions may be waived, but only by written instrument signed by each of the parties hereto. No waiver hereunder shall constitute a waiver with respect to any subsequent occurrence or other transaction hereunder or of any other provision hereof.
6
17. Captions and Headings; Gender and Number . Captions and paragraph headings used herein are for convenience only, do not modify or affect the meaning of any provision herein, are not a part hereof, and shall not serve as a basis for interpretation or in construction of this Agreement. As used herein, the masculine gender shall include the feminine and neuter, the singular number the plural, and vice versa, whenever such meanings are appropriate.
18. Governing Law; Venue and Jurisdiction . Without regard to the principles of conflicts of laws, the laws of the State of North Carolina shall govern and control the validity, interpretation, performance, and enforcement of this Agreement. The parties hereto agree that any suit or action relating to this Agreement shall be instituted and prosecuted in the courts of the County of Harnett, State of North Carolina, and each party hereby does waive any right or defense relating to such jurisdiction and venue.
19. Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the Corporation, its successors and assigns, and shall be binding upon and inure to the benefit of the Optionee, his heirs, legatees, personal representatives, executors, and administrators.
20. Entire Agreement . This Agreement constitutes and embodies the entire understanding and agreement of the parties hereto and, except as otherwise provided hereunder, there are no other agreements or understandings, written or oral, in effect between the parties hereto relating to the matters addressed herein.
21. Counterparts . This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
7
IN WITNESS WHEREOF , the Corporation, has caused this instrument to be executed in its corporate name by its Chairman and attested by its Secretary or one of its Assistant Secretaries, and its corporate seal to be hereto affixed, all by authority of its Board of Directors first duly given, and the Optionee has hereunto set his or her hand and adopted as his or her seal the typewritten word SEAL appearing beside his or her name, all done this the day and year first above written.
NEW CENTURY BANCORP, INC. | ||
By: |
|
|
C. L. Tart, Chairman |
ATTEST: |
, Corporate Secretary |
[CORPORATE SEAL]
OPTIONEE | ||
By: |
(SEAL) |
|
|
8
EXHIBIT A
NOTICE OF EXERCISE OF
INCENTIVE STOCK OPTION
To: | The Compensation Committee of the Board of Directors of |
New Century Bancorp, Inc.
The undersigned hereby elects to purchase whole shares of Common Stock of New Century Bancorp, Inc. (the Corporation) pursuant to the Incentive Stock Option granted to the undersigned in that certain Incentive Stock Option Agreement between the Corporation and the undersigned dated the day of , . The aggregate purchase price for such Shares is $ , which amount is (i) being tendered herewith, (ii) will be tendered on or before , (cross out provision which does not apply) in cash and/or stock of the Corporation owned by me, and I request that a value as of the date of exercise of the Option be placed on any stock being tendered in payment of the purchase price. The effective date of this election shall be , , or the date of receipt of this Notice by the Corporation if later.
Executed this day of , , at .
|
|
(Social Security Number) |
9
Exhibit 10(ii)
NEW CENTURY BANCORP, INC.
2000 NONSTATUTORY STOCK OPTION PLAN
New Century Bancorp, Inc., a North Carolina corporation (hereinafter referred to as the Corporation), does herein set forth the terms of the New Century Bancorp, Inc. 2000 Nonstatutory Stock Option Plan (hereinafter referred to as this Plan), which was adopted by the Board of Directors (hereinafter referred to as the Board) and which was originally adopted by the Board of Directors of New Century Bank and its shareholders prior to the creation of the Corporation and the reorganization of New Century Bank as a wholly-owned subsidiary of the Corporation.
1. Purpose of this Plan . The purpose of this Plan is to provide for the grant of Nonstatutory Stock Options (hereinafter referred to as Options or singularly, Option) to Eligible Directors (as hereinafter defined) of the Corporation and its subsidiaries who wish to invest in the Corporations common stock (hereinafter referred to as Common Stock). The Board believes that participation in the ownership of the Corporation by the Eligible Directors will be to the mutual benefit of the Corporation and the Eligible Directors. In addition, the existence of this Plan will make it possible for the Corporation to attract capable individuals to serve on the Board. As used herein, the term Eligible Directors or singularly, Eligible Director, shall mean members of the Board of Directors of the Corporation and its subsidiaries serving at the time of adoption of this Plan or who may serve thereon from time to time and those individuals holding the title Director Emeritus.
2. Administration of this Plan .
(a) This Plan shall be administered by the Board. The Board shall have full power and authority to construe, interpret and administer this Plan. All actions, decisions, determinations, or interpretations of the Board shall be final, conclusive, and binding upon all parties.
(b) The Board may designate any officers or employees of the Corporation or of any of its subsidiaries to assist in the administration of this Plan. The Board may authorize such individuals to execute documents on its behalf and may delegate to them such other ministerial and limited discretionary duties as the Board may see fit.
3. Shares of Common Stock Subject to this Plan . The maximum number of shares of Common Stock that shall be offered under this Plan is one hundred eleven thousand two hundred sixty-eight (111,268) shares, subject to adjustment as provided in paragraph 14. Shares subject to Options which expire or terminate prior to the issuance of the shares of Common Stock shall lapse and the shares of Common Stock originally subject to such Options shall again be available for future grants of Options under this Plan.
4. Eligibility; Grant of Options . Each Eligible Director serving on the Board shall receive an Option to purchase shares of Common Stock in the amount as shall be determined by the Board of Directors by a majority vote. Any Options not granted hereby may be reserved for future issuance by a majority vote of the entire Board.
5. Vesting of Options . Options granted under this Plan shall be fully vested upon grant.
6. Option Price .
(a) The price per share of each Option granted under this Plan (hereinafter called the Option Price) shall be determined by the Board as of the effective date of grant of such Option, but in no event shall such Option Price be less than 100% of the fair market value of Common Stock on the date of grant. An Option shall be considered as granted on the later of (i) the date that the Board acts to grant such Option, or (ii) such later date as the Board shall specify in an Option Agreement (as hereinafter defined).
(b) The fair market value of a share of Common Stock shall be determined as follows: (i) if on the date as of which such determination is being made, Common Stock being valued is admitted to trading on a securities exchange or exchanges for which actual sale prices are regularly reported, or actual sale prices are otherwise regularly published, the fair market value of a share of Common Stock shall be deemed to be equal to the mean of the closing sale price as reported for each of the five (5) trading days immediately preceding the date as of which such determination is made; provided , however , that, if a closing sale price is not reported for each of the five (5) trading days immediately preceding the date as of which such determination is made, then the fair market value shall be equal to the mean of the closing sale prices on those trading days for which such price is available, or (ii) if on the date as of which such determination is made, no such closing sale prices are reported, but quotations for Common Stock being valued are regularly listed on the National Association of Securities Dealers Automated Quotation System or another comparable system, the fair market value of a share of Common Stock shall be deemed to be equal to the mean of the average of the closing bid and asked prices for such Common Stock quoted on such system on each of the five (5) trading days preceding the date as of which such determination is made, but if a closing bid and asked price is not available for each of the five (5) trading days, then the fair market value shall be equal to the mean of the average of the closing bid and asked prices on those trading days during the five-day period for which such prices are available, or (iii) if no such quotations are available, the fair market value of a share of Common Stock shall be deemed to be the average of the closing bid and asked prices furnished by a professional securities dealer making a market in such shares, as selected by the Board, for the trading date first preceding the date as of which such determination is made. If the Board determines that the price as determined above does not represent the fair market value of a share of Common Stock, the Board may then consider such other factors as it deems appropriate and then fix the fair market value for the purposes of this Plan.
2
7. Payment of Option Price . Payment for shares subject to an Option may only be made in cash or in other stock of the Corporation owned by an Eligible Director or such other person as may be entitled to exercise such Option. Any shares of the Corporations stock that are delivered in payment of the aggregate Option Price shall be valued at their fair market value, as determined by the Board, on the date of the exercise of such Option.
8. Terms and Conditions of Grant of Options . Each Option granted pursuant to this Plan shall be evidenced by a written Nonstatutory Stock Option Agreement (hereinafter referred to as Option Agreement) with each Eligible Director (hereinafter referred to as Optionee) to whom an Option is granted; such agreement shall be substantially in the form attached hereto as Exhibit A, unless the Board shall adopt a different form and, in each case, may contain such other, different, or additional terms and conditions as the Board may determine. The Option shall terminate as provided in paragraph 12 hereof.
9. Option Period . Each Option Agreement shall set forth a period during which such Option may be exercised (hereinafter referred to as the Option Period); provided , however , that the Option Period shall not exceed ten (10) years after the date of grant of such Option as specified in an Option Agreement.
10. [Reserved]
11. Exercise of Options . An Option shall be exercised by written notice to the Board signed by an Optionee or by such other person as may be entitled to exercise such Option. In the case of the exercise of an Option, the aggregate Option Price for the shares being purchased may be paid in cash or in the Corporations stock (value as determined by the Board as of the date of exercise) or any combination thereof and must be accompanied by a notice of exercise. The written notice shall state the number of shares with respect to which an Option is being exercised and shall either be accompanied by the payment of the aggregate Option Price for such shares or shall fix a date (not more than ten (10) business days after the date of such notice) by which the payment of the aggregate Option Price will be made. An Optionee shall not exercise an Option to purchase less than 100 shares, unless the Board otherwise approves or unless the partial exercise is for the remaining shares available under such Option. A certificate or certificates for the shares of Common Stock purchased by the exercise of an Option shall be issued in the regular course of business subsequent to the exercise of such Option and the payment therefor. During the Option Period, no person entitled to exercise any Option granted under this Plan shall have any of the rights or privileges of a shareholder with respect to any shares of Common Stock issuable upon exercise of such Option, until certificates representing such shares shall have been issued and delivered and the individuals name entered as a shareholder of record on the books of the Corporation for such shares.
3
12. Effect of Leaving the Service of the Corporation .
(a) In the event that an Optionee leaves the service of the Corporation for any reason other than retirement, disability, death, or following a change in control of the Corporation (as defined in paragraph 12(e)) any Option granted to the Optionee under this Plan, to the extent not previously exercised by the Optionee or expired, shall immediately terminate and shall be available again for the granting of additional options to Eligible Directors during the remaining term of this Plan upon such terms and conditions as may be determined by the Board.
(b) In the event that an Optionee should leave the service of the Corporation as a result of such Optionees retirement, such Optionee shall have the right to exercise an Option granted under this Plan, to the extent that it has not previously been exercised by the Optionee or expired, for such period of time as may be determined by the Board and specified in an Option Agreement, but in no event may any Option be exercised later than the end of the Option Period provided in the Option Agreement in accordance with paragraph 9 hereof. For purposes of this Plan, the term retirement shall mean termination of an Eligible Directors membership on the Board (i) at any time after attaining age 65 with the approval of the Board; or (ii) at the election of the Eligible Director, at any time after not less than five (5) years service as a member of the Board, such service shall be computed cumulatively for purposes of this clause (ii).
(c) In the event that an Optionee should leave the service of the Corporation by reason of such Optionees disability, such Optionee shall have the right to exercise an Option granted under this Plan, to the extent that it has not previously been exercised or expired, for such period of time as may be determined by the Board and specified in an Option Agreement, but in no event may any Option be exercised later than the end of the Option Period provided in the Option Agreement in accordance with paragraph 9 hereof. For purposes of this Plan, the term disability shall be defined as may be determined by the Board, from time to time, or as determined at any time with respect to any individual Optionee.
(d) In the event that an Optionee should die while in the service of the Corporation or after leaving by reason of disability or retirement or following a change in control during the Option Period provided in an Option Agreement in accordance with paragraph 9 hereof, an Option granted under this Plan, to the extent that it has not previously been exercised or expired, shall be exercisable, in accordance with its terms, by the personal representative of such Optionee, the executor or administrator of such Optionees estate, or by any person or persons who acquired such Option by bequest or inheritance from such Optionee, notwithstanding any limitations placed on the exercise of such Option by this Plan or an Option Agreement, at any time within twelve (12) months after the date of death of such Optionee, but in no event may an Option be exercised later than the end of the Option Period provided in an Option Agreement in accordance with paragraph 9 hereof. Any references herein to an Optionee shall be deemed to include any person entitled to exercise an Option after the death of such Optionee under the terms of this Plan.
(e) In the event an Optionee shall leave the service of the Corporation as a result of a change in control of the Corporation, such Optionee shall have the right to exercise
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the Option granted under this Plan, to the extent that it has not previously been exercised by the Optionee or expired, for such period of time as may be determined by the Board as specified in an Option Agreement, but in no event may any Option be exercised later than the end of the Option Period provided in the Option Agreement in accordance with paragraph 9 hereof. For purposes of this Plan, the phrase change in control refers to (i) the acquisition by any person, group of persons or entity of the beneficial ownership or power to vote more than twenty-five percent (25%) of the Corporations outstanding stock, (ii) during any period of two (2) consecutive years, a change in the majority of the Board unless the election of each new Director was approved by at least two-thirds of the Directors then still in office who were Directors at the beginning of such two (2) year period, or (iii) a reorganization, merger, or consolidation of the Corporation with one or more other entities in which the Corporation is not the surviving entity, or the transfer of all or substantially all of the assets or shares of the Corporation to another person or entity. Further, notwithstanding anything else herein, a transaction or event shall not be considered a change in control if, prior to the consummation or occurrence of such transaction or event, the Optionee and the Corporation agree in writing that the same shall not be treated as a change in control for purposes of this Plan.
13. Effect of Plan on Status as Member of a Board . The fact that an Eligible Director has been granted an Option under this Plan shall not confer on such Eligible Director any right to continued service with the Corporation, nor shall it limit the right of the Corporation to remove such Eligible Director from service with the Corporation at any time.
14. Adjustment Upon Changes in Capitalization; Dissolution or Liquidation .
(a) In the event of a change in the number of shares of Common Stock outstanding by reason of a stock dividend, stock split, recapitalization, reorganization, merger, exchange of shares, or other similar capital adjustment prior to the termination of an Optionees rights under this Plan, equitable proportionate adjustments shall be made by the Board in (i) the number and kind of shares which remain available under this Plan, and (ii) the number, kind, and the Option Price of shares subject to the unexercised portion of an Option under this Plan. The adjustments to be made shall be determined by the Board and shall be consistent with such change or changes in the Corporations total number of outstanding shares; provided , however , that no adjustment shall change the aggregate Option Price for the exercise of Options granted under this Plan.
(b) The grant of Options under this Plan shall not affect in any way the right or power of the Corporation or its shareholders to make or authorize any adjustment, recapitalization, reorganization, or other change in the Corporations capital structure or its business, or any merger or consolidation of the Corporation, or to issue bonds, debentures, preferred or other preference stock ahead of or affecting Common Stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of the Corporations assets or business.
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(c) Except upon a change in control, upon the effective date of the dissolution or liquidation of the Corporation, this Plan and any Options granted hereunder, shall terminate.
15. Non-Transferability . An Option granted under this Plan shall not be assignable or transferable except, in the event of the death of an Optionee, by will or by the laws of descent and distribution. In the event of the death of an Optionee, his personal representative, the executor or the administrator of such Optionees estate, or the person or persons who acquired by bequest or inheritance the rights to exercise such Options, may exercise any Option or portion thereof to the extent not previously exercisable or surrendered by an Optionee or expired, in accordance with its terms, prior to the expiration of the exercise period as specified in subparagraph 12(d) hereof.
16. Tax Withholding . The Corporation or any of its subsidiaries shall have the right to deduct or otherwise effect a withholding of any amount required by federal or state laws to be withheld with respect to the grant, exercise or the sale of stock acquired upon the exercise of an Option in order for the Corporation or any of its subsidiaries to obtain a tax deduction otherwise available as a consequence of such grant, exercise or sale, as the case may be.
17. Listing and Registration of Option Shares . Any Option granted under this Plan shall be subject to the requirement that if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of the shares covered thereby upon any securities exchange or under any state or federal law or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of such Option or the issuance or purchase of shares thereunder, such Option may not be exercised in whole or in part unless and until such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Board.
18. Exculpation and Indemnification . In connection with this Plan, no member of the Board shall be personally liable for any act or omission to act in such persons capacity as a member of the Board, nor for any mistake in judgment made in good faith, unless arising out of, or resulting from, such persons own bad faith, gross negligence, willful misconduct, or criminal acts. To the extent permitted by applicable law and regulation, the Corporation shall indemnify and hold harmless the members of the Board, and each other officer or employee of the Corporation or of any of its subsidiaries to whom any duty or power relating to the administration or interpretation of this Plan may be assigned or delegated, from and against any and all liabilities (including any amount paid in settlement of a claim with the approval of the Board) and any costs or expenses (including counsel fees) incurred by such persons arising out of or as a result of, any act or omission to act in connection with the performance of such persons duties, responsibilities, and obligations under this Plan, other than such liabilities, costs, and expenses as may arise out of, or result from, the bad faith, gross negligence, willful misconduct, or criminal acts of such persons.
19. Amendment and Modification of this Plan . The Board may at any time, and from time to time, amend or modify this Plan (including the form of Option Agreement) in any
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respect consistent with applicable regulations; provided , however , that no amendment or modification shall be made that increases the total number of shares covered by this Plan or effects any change in the category of persons who may receive Options under this Plan or materially increases the benefits accruing to Optionees under this Plan unless such change is approved by the holders a majority of the issued and outstanding shares of Common Stock. Any amendment or modification of this Plan shall not materially reduce the benefits under any Option theretofore granted to an Optionee under this Plan without the consent of such Optionee or the transferee in the event of the death of such Optionee.
20. Termination and Expiration of this Plan . This Plan may be abandoned, suspended, or terminated at any time by the Board; provided , however , that abandonment, suspension, or termination of this Plan shall not affect any Options then outstanding under this Plan. No Option shall be granted pursuant to this Plan after ten (10) years from the effective date of this Plan as provided in paragraph 21 hereof.
21. Effective Date; Shareholder Approval; Regulatory Approval . This Plan was effective upon its approval as the New Century Bank 2000 Nonstatutory Stock Option Plan by the requisite number of shareholders of New Century Bank on June 29, 2000 (the Effective Date).
22. Captions and Headings; Gender and Number . Captions and paragraph headings used herein are for convenience only, do not modify or affect the meaning of any provision herein, are not a part hereof, and shall not serve as a basis for interpretation or in construction of this Plan. As used herein, the masculine gender shall include the feminine and neuter, the singular number, the plural, and vice versa, whenever such meanings are appropriate.
23. Expenses of Administration of Plan . All costs and expenses incurred in the operation and administration of this Plan shall be borne by the Corporation or by one of its subsidiaries.
24. Governing Law . Without regard to the principles of conflicts of laws, the laws of the State of North Carolina shall govern and control the validity, interpretation, performance, and enforcement of this Plan.
25. Inspection of Plan . A copy of this Plan, and any amendments thereto or modifications thereof, shall be maintained by the Secretary of the Corporation and shall be shown to any proper person making inquiry about it.
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STATE OF NORTH CAROLINA |
EXHIBIT A | |
COUNTY OF HARNETT |
NONSTATUTORY STOCK OPTION AGREEMENT
THIS NONSTATUTORY STOCK OPTION AGREEMENT (hereinafter referred to as this Agreement) is made and entered into as of this day of , , between NEW CENTURY BANCORP, INC., a North Carolina Corporation (hereinafter referred to as the Corporation), and , a resident of County, North Carolina (hereinafter referred to as the Optionee).
WHEREAS, the Board of Directors of the Corporation (hereinafter referred to as the Board) has adopted the New Century Bancorp, Inc. 2000 Nonstatutory Stock Option Plan (hereinafter referred to as the Plan) which was originally adopted by the Board of Directors of New Century Bank and its shareholders prior to the creation of the Corporation and the reorganization of New Century Bank as a wholly-owned subsidiary of the Corporation; and
WHEREAS, the shareholders of New Century Bank at an annual meeting duly called and held on June 29, 2000, approved the Plan (the Effective Date); and
WHEREAS, the Plan provides that the Board will make available to the Directors (as defined in the Plan) of the Corporation, the right to purchase shares of the Corporations common stock (hereinafter referred to as Common Stock); and
WHEREAS, the Board has determined that the Optionee is entitled to purchase shares of Common Stock under the Plan;
NOW, THEREFORE, the Corporation and the Optionee agree as follows:
1. Date of Grant of Option . The date of grant of the option granted under this Agreement is the day of , .
2. Grant of Option . Pursuant to the Plan, the Corporation grants to the Optionee the right (hereinafter referred to as the Option) to purchase from the Corporation all or a portion of an aggregate number of ( ) shares of Common Stock (hereinafter referred to as the Option Shares) which shall be authorized but unissued shares.
3. Vesting of Options . The Option shall fully vest upon grant.
4. Option Price . The price to be paid for the Option Shares shall be Dollars ($ ) per share (hereinafter referred to as the Option Price) which is the fair market value of the Option Shares as determined by the Board as of the date of grant of this Option.
5. When and Extent to Which Options may be Exercised . At such time as the Option shall become exercisable in accordance with this Agreement, the Optionee, in his discretion, may exercise all or any portion of the Option, subject to paragraph 7 hereof. The Option shall terminate as provided in paragraph 8 hereof.
6. Change in Control . When used herein, the phrase change in control refers to (i) the acquisition by any person, group of persons or entity of the beneficial ownership or power to vote more than twenty-five (25%) percent of the Corporations outstanding stock, (ii) during any period of two (2) consecutive years, a change in the majority of the Board unless the election of each new Director was approved by at least two-thirds of the Directors then still in office who were Directors at the beginning of such two (2) year period, or (iii) a reorganization, merger, or consolidation of the Corporation with one or more other corporations in which the Corporation is not the surviving corporation, or the transfer of all or substantially all of the assets or shares of the Corporation to another person or entity. Further, notwithstanding anything else herein, a transaction or event shall not be considered a change in control if, prior to the consummation or occurrence of such transaction or event, the Optionee and the Corporation agree in writing that the same shall not be treated as a change in control for purposes of this Plan.
7. Method of Exercise . The Option shall be exercised by written notice to the Board signed by the Optionee or by such other person as may be entitled to exercise the Option. In the exercise of the Option, the aggregate Option Price for the shares being purchased may only be paid in cash or in shares of the Corporations stock (valued as determined by the Committee as of the date of exercise) or any combination thereof and must be accompanied by a notice of exercise. The written notice shall state the number of shares with respect to which the Option is being exercised and, shall either be accompanied by the payment of the aggregate Option Price for such shares or shall fix a date (not more than ten (10) business days after the date of such notice) by which the payment of the aggregate Option Price will be made. The Optionee shall not exercise the Option to purchase less than 100 shares, unless the Board otherwise approves or unless the partial exercise is for the remaining shares available under the Option. A certificate or certificates for the shares of Common Stock purchased by the exercise of the Option shall be issued in the regular course of business subsequent to the exercise of the Option and the payment therefor. Neither the Optionee, nor any other person who may be entitled to exercise the Option, shall have any of the rights or privileges of a shareholder with respect to any shares of Common Stock issuable upon exercise of the Option, until certificates representing such shares shall have been issued and delivered and the individuals name entered as a shareholder of record on the books of the Corporation for such shares.
8. Termination of Option . The Option shall terminate, and shall thereupon be available again for grant to Eligible Directors as may be determined by the Board, as follows:
(a) Except as provided in subparagraphs (b), (c), (d) and (e) below, the Option, to the extent that it has not been exercised or expired, shall terminate on the earlier of (i) the date the Optionee leaves the service of the Corporation for any reason other than the Optionees retirement, disability, death, or following a change in control of the Corporation or (ii) the date which is ten (10) years after the date of grant of the Option as set forth in paragraph 1 hereof.
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(b) In the event the Optionee retires prior to the date which is ten (10) years after the date of grant of the Option as set forth in paragraph 1 hereof, the Optionee shall have the right to exercise all Options, to the extent not exercised or expired, for the remainder of such ten (10) year period. For purposes of the plan, the term retirement shall mean any termination of an Optionees service with the Corporation (i) at any time after attaining age 65 with the approval of the Board, or (ii) at the election of the Optionee, at any time after not less than five years service as a member of the Board, computed on a cumulative basis.
(c) In the event the Optionee leaves the service of the Corporation by reason of such Optionees disability prior to the date which is ten (10) years after the date of grant of the Option as set forth in paragraph 1 hereof, the Optionee shall have the right to exercise all Options, to the extent not exercised by him or expired, for the remainder of such ten (10) year period. For purposes of the Plan, the term disability shall be defined as may be determined by the Board, from time to time, or as determined at any time with respect to any individual Optionee.
(d) In the event the Optionee dies while in the service of the Corporation or after his or her retirement or after his or her leaving by reason of disability or following a change in control and prior to the date which is ten (10) years after the date of grant of the Option as set forth in paragraph 1 hereof, all Options, to the extent not exercised by the Optionee or expired, shall be exercisable, according to its terms, by the personal representative, the executor or the administrator of the Optionees estate, or the person or persons who acquired the Option by bequest or inheritance from the Optionee, at any time within twelve (12) months after the date of death of the Optionee, but in no event may the Option be exercised later than ten (10) years after the date of grant of the Option as set forth in paragraph 1 hereof.
(e) In the event the Optionee leaves the service of the Corporation following a change in control of the Corporation, prior to the date which is ten (10) years after the date of grant of Options as set forth in paragraph 1 hereof, the Optionee shall have the right to exercise the Option, to the extent that it has not been exercised by him or her or expired, for the remainder of such ten (10) year period.
9. Effect of Agreement on Status of Optionee . The fact that the Optionee has been granted the Option under the Plan shall not confer on the Optionee any right to continued service with the Corporation, nor shall it limit the right of the Corporation to remove the Optionee from service with the Corporation at any time.
10. Listing and Registration of Option Shares . The Corporations obligation to issue shares of Common Stock upon exercise of the Option is expressly conditioned upon the completion by the Corporation of any registration or other qualification of such shares under any state or federal law or regulations or rulings of any governmental regulatory body or the making of such investment representations or other representations and agreements by the
3
Optionee or any person entitled to exercise the Option in order to comply with the requirements of any exemption from any such registration or other qualification of the Option Shares which the Board shall, in its discretion, deem necessary or advisable. Notwithstanding the foregoing, the Corporation shall be under no obligation to register or qualify the Option Shares under any state or federal law. The required representations and agreements referenced above may include representations and agreements that the Optionee, or any other person entitled to exercise the Option, (i) is purchasing such shares on his or her own behalf as an investment and not with a present intention of distribution or re-sale and (ii) agrees to have placed upon any certificates representing the Option Shares a legend setting forth any representations and agreements which have been given to the Board or a reference thereto and stating that such shares may not be transferred except in accordance with all applicable state and federal securities laws and regulations, and further representing that, prior to making any sale or other disposition of the Option Shares, the Optionee, or any other person entitled to exercise the Option, will give the Corporation notice of the intention to sell or dispose of such shares not less than five (5) days prior to such sale or disposition.
11. Adjustment Upon Changes in Capitalization; Dissolution or Liquidation .
(a) In the event of a change in the number of shares of Common Stock outstanding by reason of a stock dividend, stock split, recapitalization, reorganization, merger, exchange of shares, or other similar capital adjustment, prior to the termination of the Optionees rights under this Agreement, equitable proportionate adjustments shall be made by the Board in the number, kind, and the Option Price of shares subject to the unexercised portion of the Option. The adjustments to be made shall be determined by the Board and shall be consistent with such changes or changes in the Corporations total number of outstanding shares; provided , however , that no adjustment shall change the aggregate Option Price for the exercise of the Option granted.
(b) The grant of the Option under this Agreement shall not affect in any way the right or power of the Corporation or its shareholders to make or authorize any adjustment, recapitalization, reorganization, or other change in the Corporations capital structure or its business, or any merger or consolidation of the Corporation, or to issue bonds, debentures, preferred or other preference stock ahead of or affecting Common Stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of the Corporations assets or business.
(c) Except upon a change in control as set forth in paragraph 6 hereof, upon the effective date of the dissolution or liquidation of the Corporation, the Option granted under this Agreement shall terminate.
12. Non-Transferability . The Option granted under this Agreement shall not be assignable or transferable except, in the event of the death of the Optionee, by will or by the laws of descent and distribution. In the event of the death of the Optionee, the personal representative, the executor or the administrator of the Optionees estate, or the person or persons who acquired by bequest or inheritance the right to exercise the Option may exercise the
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unexercised Option or portion thereof, in accordance with its terms and paragraph 8(d) hereof, prior to the date which is ten (10) years after the date of grant of the Option as set forth in paragraph 1 hereof.
13. Tax Withholding . The grant of the Option and Option Shares delivered pursuant to this Agreement, and any amounts distributed with respect thereto, may be subject to applicable federal, state and local withholding for taxes. The Optionee expressly acknowledges and agrees to such withholding, where applicable, without regard to whether the Option Shares may then be sold or otherwise transferred by the Optionee.
14. Notices . Any notices or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered personally or when deposited in the United States mail as Certified Mail, return receipt requested, properly addressed and postage prepaid, if to the Corporation, at its principal office at 700 West Cumberland Street, Dunn, North Carolina 28334; and, if to the Optionee, at his or her last address appearing on the books of the Corporation. The Corporation and the Optionee may change their address or addresses by giving written notice of such change as provided herein. Any notice or other communication hereunder shall be deemed to have been given on the date actually delivered or as of the third (3rd) business day following the date mailed, as the case may be.
15. Construction Controlled by Plan . This Agreement shall be construed so as to be consistent with the Plan; and the provisions of the Plan shall be deemed to be controlling in the event that any provision hereof should appear to be inconsistent therewith. The Optionee hereby acknowledges receipt of a copy of the Plan from the Corporation.
16. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid and enforceable under applicable law, but if any provision of this Agreement is determined to be unenforceable, invalid or illegal, the validity of any other provision or part thereof, shall not be affected thereby and this Agreement shall continue to be binding on the parties hereto as if such unenforceable, invalid or illegal provision or part thereof had not been included herein.
17. Modification of Agreement; Waiver . This Agreement may be modified, amended, suspended or terminated, and any terms, representations or conditions may be waived, but only by a written instrument signed by each of the parties hereto. No waiver hereunder shall constitute a waiver with respect to any subsequent occurrence or other transaction hereunder or of any other provision hereof.
18. Captions and Hearings; Gender and Number . Captions and paragraph headings used herein are for convenience only, do not modify or affect the meaning of any provision herein, are not a part hereof, and shall not serve as a basis for interpretation or in construction of this Agreement. As used herein, the masculine gender shall include the feminine and neuter, the singular number, the plural, and vice versa, whenever such meanings are appropriate.
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19. Governing Law; Venue and Jurisdiction . Without regard to the principles of conflicts of laws, the laws of the State of North Carolina shall govern and control the validity, interpretation, performance, and enforcement of this Agreement. The parties hereto agree that any suit or action relating to this Agreement shall be instituted and prosecuted in the courts of the County of Harnett, State of North Carolina, and each party hereby does waive any right or defense relating to such jurisdiction and venue.
20. Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the Corporation, its successors and assigns, and shall be binding upon and inure to the benefit of the Optionee, his heirs, legatees, personal representatives, executors, and administrators.
21. Entire Agreement . This Agreement constitutes and embodies the entire understanding and agreement of the parties hereto and, except as otherwise provided hereunder, there are no other agreements or understandings, written or oral, in effect between the parties hereto relating to the matters addressed herein.
22. Counterparts . This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed an original, but all of which taken together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF , the Corporation has caused this instrument to be executed in its corporate name by its President, or one of its Vice Presidents, and attested by its Secretary or one of its Assistant Secretaries, and its corporate seal to be hereto affixed, all by authority of its Board of Directors first duly given, and the Optionee has hereunto set his or her hand and adopted as his or her seal the typewritten word SEAL appearing beside his or her name, all done this the day and year first above written.
NEW CENTURY BANCORP, INC. | ||
By: |
|
|
C. L. Tart, Jr., Chairman |
ATTEST: |
, Corporate Secretary |
[CORPORATE SEAL]
(SEAL) |
||
, Optionee |
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EXHIBIT A
NOTICE OF EXERCISE OF
NONSTATUTORY STOCK OPTION
To: The Board of Directors of New Century Bancorp, Inc.
The undersigned hereby elects to purchase whole shares of Common Stock of New Century Bancorp, Inc. (the Corporation) pursuant to the Nonstatutory Stock Option granted to the undersigned in that certain Nonstatutory Stock Option Agreement between the Corporation and the undersigned dated the day of , . The aggregate purchase price for such shares is $ , which amount is (i) being tendered herewith, (ii) will be tendered on or before , , (cross out provision which does not apply) in cash and/or stock of the Corporation owned by me, and I request that a value as of the date of exercise of the Option be placed on any stock being tendered in payment of the purchase price. The effective date of this election shall be , , or the date of receipt of this Notice by the Corporation if later.
Executed this day of , , at .
|
|
(Social Security Number) |
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Exhibit 10(iii)
STATE OF NORTH CAROLINA
COUNTY OF HARNETT
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of May 24, 2000 by and between NEW CENTURY BANK (hereinafter referred to as the Bank) and JOHN Q. SHAW, JR. (hereinafter referred to as Shaw).
W I T N E S S E T H:
WHEREAS , the expertise and experience of Shaw and his relationships and reputation in the financial institutions industry are extremely valuable to the Bank; and
WHEREAS , it is in the best interests of the Bank and its shareholders to maintain an experienced and sound executive management team to manage the Bank and to further the Banks overall strategies to protect and enhance the value of its shareholders investments; and
WHEREAS , the Bank and Shaw desire to enter into this Agreement to establish the scope, terms and conditions of Shaws employment by the Bank; and
WHEREAS , the Bank and Shaw desire to enter into this Agreement also to provide Shaw with security in the event of a change in control in the Bank and to insure the continued loyalty of Shaw during any such change in control in order to maximize shareholder value as well as the continued safe and sound operation of the Bank.
NOW, THEREFORE , for and in consideration of the premises and mutual promises, covenants and conditions hereinafter set forth, and other good and valuable considerations, the receipt and sufficiency of which hereby are acknowledged, the Bank and Shaw hereby agree as follows:
1. Employment . The Bank hereby agrees to employ Shaw, and Shaw hereby agrees to serve as an officer of the Bank, all upon the terms and conditions stated herein. As an officer of the Bank, Shaw will (i) serve as President and Chief Executive Officer of the Bank, and (ii) have such other duties and responsibilities, and render to the Bank such other management services, as are customary for persons in Shaws position with the Bank or as shall otherwise be reasonably assigned to him from time to time by the Bank. Shaw shall faithfully and diligently discharge his duties and responsibilities under this Agreement and shall use his
best efforts to implement the policies established by the Bank. Shaw hereby agrees to devote such number of hours of his working time and endeavors to the employment granted hereunder as Shaw and the Bank shall deem to be necessary to discharge his duties hereunder, and, for so long as employment hereunder shall exist, Shaw shall not engage in any other occupation which requires a significant amount of Shaws personal attention during the Banks regular business hours or which otherwise interferes with Shaws attention to or performance of his duties and responsibilities as an officer of the Bank hereunder except with the prior written consent of the Bank. However, nothing herein contained shall restrict or prevent Shaw from personally, and for Shaws own account, trading in stocks, bonds, securities, real estate or other forms of investment for Shaws own benefit so long as said activities do not interfere with Shaws attention to or performance of his duties and responsibilities as an officer of the Bank hereunder.
During the term of this Agreement, Shaw shall be allowed, in his sole discretion, to maintain his primary work location in Dunn, North Carolina.
2. Compensation . For all services rendered by Shaw to the Bank under this Agreement, the Bank shall pay Shaw a base salary at a rate of Ninety Five Thousand Dollars and 00/100s ($95,000.00) per annum; provided that the rate of such salary shall be reviewed by the Board of Directors not less often than annually. Salary paid under this Agreement shall be payable in cash not less frequently than monthly. All compensation hereunder shall be subject to customary withholding taxes and such other employment taxes as are required by law. In the event of a Change in Control (as defined in Paragraph 8), Shaws base salary shall be increased not less than six percent (6%.) annually during the term of this Agreement.
In addition to the foregoing, Shaw shall be entitled to receive cash bonuses on an annual basis during the term of this Agreement as may be determined by the Board of Directors of the Bank or its Compensation Committee.
3. Participation in Retirement and Employee Benefit Plans; Fringe Benefits . Subject to the terms and conditions of this Agreement, Shaw shall be entitled to participate in any and all employee benefit programs and compensation plans from time to time maintained by the Bank and available to all employees of the Bank, all in accordance with the terms and conditions (including eligibility requirements) of such programs and plans of the Bank,
2
resolutions of the Banks Board of Directors establishing such programs and plans, and the Banks normal practices and established policies regarding such programs and plans.
In addition to the other compensation and benefits described in this Agreement, the Bank shall :
(i) Provide Shaw with five weeks of paid vacation leave notwithstanding the policy for the Bank for all other employees. However, during the first three years of the term of this Agreement, Shaw agrees that he will only take two weeks of actual vacation leave and will be compensated, in cash, for the remaining three weeks of vacation leave. Such cash compensation shall be in addition to the cash compensation set forth in Paragraph 2 hereof. Additional leave may be taken with the approval of the Chairman or the Executive Committee.
(ii) The Bank shall assume payment of Shaws civic club and country club dues provided that Shaw shall be responsible for all personal expenses for use of such clubs;
(iii) The Bank shall reimburse Shaw for all reasonable expenses incurred by him in the performance of his duties under this Agreement and documented to the reasonable satisfaction of the Bank pursuant to established policies;
(iv) The Bank shall provide to Shaw and his spouse major medical insurance coverage, including health, term life ($500,000 coverage for Shaw), disability, and dental, at no cost to Shaw or his spouse which will be under policies at least equivalent to the insurance coverage generally provided to active full-time employees of the Bank from time to time. Such major medical insurance coverage for Shaw and his spouse remain in effect for the remainder of their natural lives;
(v) The Bank shall provide Shaw, for his personal and business use, with a late model automobile as determined by the Executive Committee or with a car allowance, in the discretion of Shaw. The automobile shall be replaced every two years by another automobile, the costs of which shall be assumed by the Bank as provided herein. The Bank shall assume the costs associated with ownership of such automobile, including, but not limited to, taxes, insurance, and maintenance, provided, however, that Shaw shall be responsible for fuel expenses incurred with his personal use of the automobile; and
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(vi) The Bank shall grant to Shaw options under the Banks 2000 Incentive Stock Option Plan equal to forty percent (40%) of the options reserved for allocation under such Plan.
4. Term . Unless sooner terminated as provided in this Agreement and subject to the right of either Shaw or the Bank to terminate Shaws employment at any time as provided herein, the initial term of this Agreement and Shaws employment with the Bank hereunder shall be for a period commencing on the date hereof and continuing for a period of five (5) years. At the end of each year during the term of this Agreement, the term of this Agreement shall automatically be extended for an additional one year period unless written notice from the Bank or Shaw is received thirty (30) days prior to such date notifying the other party that this Agreement shall not be further extended; provided further that the Board of Directors shall annually review Shaws performance and shall make a specific determination pursuant to such review to permit this Agreement to renew annually.
5. Confidentiality; Noncompetition . Shaw hereby acknowledges and agrees that (i) in the course of his service as an officer of the Bank, he will gain substantial knowledge of and familiarity with the Banks customers and its dealings with them, and other information concerning the Banks business, all of which constitutes valuable assets and privileged information that is particularly sensitive due to the fiduciary responsibilities inherent in the banking business; and, (ii) in order to protect the Banks interest in and to assure it the benefit of its business, it is reasonable and necessary to place certain restrictions on Shaws ability to compete against the Bank and on his disclosure of information about the Banks business and customers. For that purpose, and in consideration of the Banks agreements contained herein, Shaw covenants and agrees as provided below.
(a) Covenant Not to Compete . During a period of five (5) years following the effective date of termination of this Agreement or Shaws employment with the Bank for any reason, Shaw will not Compete (as defined below), directly or indirectly, with the Bank within a fifty (50) mile radius of Dunn, North Carolina (the Relevant Market).
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For the purposes of this Paragraph 5, the following terms shall have the meanings set forth below:
Compete . The term Compete means: (i) soliciting or securing deposits from any Person residing in the Relevant Market for any Financial Institution; (ii) soliciting any Person residing in the Relevant Market to become a borrower from any Financial Institution, or assisting (other than through the performance of ministerial or clerical duties) any Financial Institution in making loans to any such Person; (iii) including or attempting to induce any Person who was a Customer of the Bank on the date of termination of Shaws employment with the Bank, to change such Customers depository, loan and/or other banking relationship from the Bank to another Financial Institution; (iv) acting as a consultant, officer, director, independent contractor, or employee of any Financial Institution that has its main or principal office in the Relevant Market, or, in acting in any such capacity with any other Financial Institution, to maintain an office or be employed at or assigned to or to have any direct involvement in the management, business or operation of any office of such Financial Institution located in the Relevant Market; or (v) communicating to any Financial Institution the names or addresses or any financial information concerning any Person who was a Customer of the Bank at the date of Shaws termination of this Agreement.
Customer . The term Customer means any Person with whom, as of the effective date of termination of this Agreement or during Shaws employment with the Bank, the Bank has or has had a depository, loan and/or other banking relationship.
Financial Institution . The term Financial Institution means any federal or state chartered bank, savings bank, savings and loan association or credit union, or any holding company for or corporation that owns or controls any such entity, or any other Person engaged in the business of making loans of any type or receiving deposits, other than the Bank.
Person . The term Person means any natural person or any corporation, partnership, proprietorship, joint venture, limited liability company, trust, estate, governmental agency or instrumentality, fiduciary, unincorporated association or other entity.
(b) Confidentiality Covenant . Shaw covenants and agrees that any and all data, figures, projections, estimates, lists, files, records, documents, manuals or other such materials or information (financial or otherwise) relating to the Bank and its banking business, regulatory examinations, financial results and condition, lending and deposit operations, customers (including lists of the Banks customers and information regarding their accounts and
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business dealings with the Bank), policies and procedures, computer systems and software, shareholders, employees, officers and directors (herein referred to as Confidential Information) are proprietary to the Bank and are valuable, special and unique assets of the Banks business to which Shaw will have access during his employment with the Bank. Shaw agrees that (i) all such Confidential Information shall be considered and kept as the confidential, private and privileged records and information of the Bank, and (ii) at all times during the term of his employment with the Bank and following the termination of this Agreement or his employment for any reason, and except as shall be required in the course of the performance by Shaw of his duties on behalf of the Bank or otherwise pursuant to the direct, written authorization of the Bank, Shaw will not: divulge any such Confidential Information to any other Person or Financial Institution; remove any such Confidential Information in written or other recorded form from the Banks premises; or make any use of any Confidential Information for his own purposes or for the benefit of any Person or Financial Institution other than the Bank. However, following the termination of Shaws employment with the Bank, this subparagraph (b) shall not apply to any Confidential Information which then is in the public domain (provided that Shaw was not responsible, directly or indirectly, for permitting such Confidential Information to enter the public domain without the Banks consent), or which is obtained by Shaw from a third party which or who is not obligated under an agreement of confidentiality with respect to such information.
(c) Remedies for Breach . Shaw understands and agrees that a breach or violation by him of the covenants contained in Paragraph 5(a) and 5(b) of this Agreement will be deemed a material breach of this Agreement and will cause irreparable injury to the Bank, and that it would be difficult to ascertain the amount of monetary damages that would result from any such violation. In the event of Shaws actual or threatened breach or violation of the covenants contained in Paragraph 5(a) or 5(b), the Bank shall be entitled to bring a civil action seeking an injunction restraining Shaw from violating or continuing to violate those covenants or from any threatened violation thereof, or for any other legal or equitable relief relating to the breach or violation of such covenant. Shaw agrees that, if the Bank institutes any action or proceeding against Shaw seeking to enforce any of such covenants or to recover other relief relating to an actual or threatened breach or violation of any of such covenants, Shaw shall be deemed to have waived the claim or defense that the Bank has an adequate remedy at law and shall not urge in
6
any such action or proceeding the claim or defense that such a remedy at law exists. However, the exercise by the Bank of any such right, remedy, power or privilege shall not preclude the Bank or its successors or assigns from pursuing any other remedy or exercising any other right, power or privilege available to it for any such breach or violation, whether at law or in equity, including the recovery of damages, all of which shall be cumulative and in addition to all other rights, remedies, powers or privileges of the Bank.
Notwithstanding anything contained herein to the contrary, Shaw agrees that the provisions of Paragraph 5(a) and 5(b) above and the remedies provided in this Paragraph 5(c) for a breach by Shaw shall be in addition to, and shall not be deemed to supersede or to otherwise restrict, limit or impair the rights of the Bank under the Trade Secrets Protection Act contained in Article 24, Chapter 66 of the North Carolina General Statutes, or any other state or federal law or regulation dealing with or providing a remedy for the wrongful disclosure, misuse or misappropriation of trade secrets or other proprietary or confidential information.
(d) Survival of Covenants . Shaws covenants and agreements and the Banks rights and remedies provided for in this Paragraph 5 shall survive any termination of this Agreement or Shaws employment with the Bank.
6. Termination and Termination Pay .
(a) Shaws employment under this Agreement may be terminated at any time by Shaw upon ninety (90) days written notice to the Bank. Upon such termination, Shaw shall be entitled to receive compensation through the effective date of such termination; provided, however, that the Bank, in its sole discretion, may elect for Shaw not to serve out part or all of said notice period.
(b) Shaws employment under this Agreement shall be terminated upon the death of Shaw during the term of this Agreement. Upon any such termination, Shaws estate shall be entitled to receive any compensation due to Shaw computed through the last day of the calendar month in which his death shall have occurred but which remains unpaid.
(c) In the event Shaw becomes disabled during the term of his employment hereunder and it is determined by the Bank that Shaw is permanently unable to perform his duties under this Agreement, the Bank shall continue to compensate Shaw at the level of compensation described in Paragraph 2 above, and shall continue to provide Shaw each
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of the other benefits set forth or described in this Agreement, for the remaining term of this Agreement (or in the case of major medical insurance for Shaw and his spouse, for the remainder of their natural lives), less any other payments provided under any disability income plan of the Bank which is applicable to Shaw. In the event of any disagreement between Shaw and the Bank as to whether Shaw is physically or mentally incapacitated such as will result in the termination of Shaws employment pursuant to this Paragraph 6(c), the question of such incapacity shall be submitted to an impartial and reputable physician for determination, selected by mutual agreement of Shaw and the Bank or, failing such agreement, by two (2) physicians (one (1) of whom shall be selected by the Bank and the other by Shaw), and such determination of the question of such incapacity by such physician or physicians shall be final and binding on Shaw and the Bank. The Bank shall pay the reasonable fees and expenses of such physician or physicians in making any determination required under this Paragraph 6(c) .
(d) The Bank may terminate Shaws employment at any time for any reason with or without Cause (as defined below), but any termination by the Bank other than termination for Cause, (as defined below) shall not prejudice Shaws right to compensation or other benefits under this Agreement. Following any termination of Shaws employment by the Bank for Cause, Shaw shall have no further rights under this Agreement (including any right to receive compensation or other benefits for any period after such termination).
For purposes of this Paragraph 6(d), the Bank shall have Cause to terminate Shaws employment upon:
(i) A determination by the Bank, in good faith, that Shaw (A) has breached in any material respect any of the terms or conditions of this Agreement, or (B) is engaging or has engaged in willful misconduct or conduct which is detrimental to the business prospects of the Bank or which has had or likely will have a material adverse effect on the Banks business or reputation. Prior to any termination by the Bank of Shaws employment for a breach, failure to perform or conduct described in this subparagraph (i), the Bank shall give Shaw written notice which describes such breach, failure to perform or conduct and if during a period of five (5) business days following such notice Shaw cures or corrects the same to the reasonable satisfaction of the Bank, then this Agreement shall remain in full force and effect. However, notwithstanding the above, if the Bank has given written notice to Shaw on a previous occasion
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of the same or a substantially similar breach, failure to perform or conduct, or of a breach, failure to perform or conduct which the Bank determines in good faith to be of substantially similar import, or if the Bank determines in good faith that the then current breach, failure to perform or conduct is not reasonably curable, then termination under this subparagraph (i) shall be effective immediately and Shaw shall have no right to cure such breach, failure to perform or conduct.
(ii) The violation by Shaw of any applicable federal or state law, or any applicable rule, regulation, order or statement of policy promulgated by any governmental agency or authority having jurisdiction over the Bank or any of its affiliates or subsidiaries (a Regulatory Authority, including without limitation the Federal Deposit Insurance Corporation, the North Carolina Commissioner of Banks or any other banking regulator having legal jurisdiction over the Bank), which results from Shaws gross negligence, willful misconduct or intentional disregard of such law, rule, regulation, order or policy statement and results in any substantial damage, monetary or otherwise, to the Bank or any of its affiliates or subsidiaries or to the Banks reputation;
(iii) The commission in the course of Shaws employment with the Bank of an act of fraud, embezzlement, theft or proven personal dishonesty (whether or not resulting in criminal prosecution or conviction);
(iv) The conviction of Shaw of any felony or any criminal offense involving dishonesty or breach of trust, or the occurrence of any event described in Section 19 of the Federal Deposit Insurance Act or any other event or circumstance which disqualifies Shaw from serving as an employee or executive officer of, or a party affiliated with, the Bank or its bank holding company;
(v) Shaw becomes unacceptable to, or is removed, suspended or prohibited from participating in the conduct of the Banks affairs (or if proceedings for that purpose are commenced) by any Regulatory Authority; and,
(vi) The occurrence of any event believed by the Bank, in good faith, to have resulted in Shaw being excluded from coverage, or having coverage limited as to Shaw as compared to other covered officers or employees, under the Banks then current blanket bond or other fidelity bond or insurance policy covering its directors, officers or employees.
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7. Additional Regulatory Requirements . Notwithstanding anything contained in this Agreement to the contrary, it is understood and agreed that the Bank (or its successors in interest) shall not be required to make any payment or take any action under this Agreement if (a) the Bank is declared by any Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner, or if (b) in the opinion of counsel to the Bank such payment or action (i) would be prohibited by or would violate any provision of state or federal law applicable to the Bank, including without limitation the Federal Deposit Insurance Act and Chapter 53 of the North Carolina General Statutes as now in effect or hereafter amended, (ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any Regulatory Authority, or (iii) otherwise would be prohibited by any Regulatory Authority.
8. Change in Control
(a) In the event of a Change in Control (as defined in Subparagraph (d) below), of the Bank, Shaw shall be entitled to terminate this Agreement upon the occurrence within twenty-four (24) months following a change in control of any Termination Event as defined in Subparagraph (b) below.
(b) A Termination Event shall mean the occurrence of any of the following events:
(i) Shaw is assigned any duties and/or responsibilities that are inconsistent with his position, duties, responsibilities, or status at the time of the Change in Control or with his reporting responsibilities or titles with the Bank in effect at such time;
(ii) Shaws annual base salary is reduced below the amount in effect as of the effective date of a Change in Control or as the same shall have been increased from time to time following such effective date;
(iii) Shaws life insurance, major medical insurance, disability insurance, dental insurance, stock option plans, stock purchase plans, deferred compensation plans, management retention plans, retirement plans, or similar plans or benefits being provided by the Bank to Shaw as of the effective date of the Change in Control are reduced in their level, scope, or coverage, or any such insurance, plans, or benefits are eliminated, unless such reduction or elimination applies proportionately to all salaried employees of the Bank who participated in such benefits prior to such Change in Control; or
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(iv) Shaw is transferred to a location outside of Dunn, North Carolina, without Shaws express written consent.
A Termination Event shall be deemed to have occurred on the date such action or event is implemented or takes effect.
(c) In the event that Shaw terminates this Agreement or the Bank terminates this Agreement pursuant to this Paragraph 8, the Bank will be obligated to pay or cause to be paid to Shaw all amounts due and owing to the end of the term of this Agreement and an amount equal to two hundred ninety-nine percent (299%) of Shaws base amount as defined in Section 28OG(b) (3) (A) of the Internal Revenue Code of 1986, as amended (the Code) .
(d) For the purposes of this Agreement, the term Change in Control shall mean any of the following events:
(i) After the effective date of this Agreement, any person (as such term is defined in Section 7 (j) (8) (A) of the Change in Bank Control Act of 1978) , directly or indirectly, acquires beneficial ownership of voting stock, or acquires irrevocable proxies or any combination of voting stock and irrevocable proxies, representing twenty-five percent (25%) or more of any class of voting securities of the Bank, or acquires control of in any manner the election of a majority of the directors of the Bank;
(ii) The Bank consolidates or merges with or into another corporation, association, or entity, or is otherwise reorganized, where the Bank is not the surviving corporation in such transaction; or
(iii) All or substantially all of the assets of the Bank are sold or otherwise transferred to or are acquired by any other corporation, association, or other person, entity, or group.
Notwithstanding the other provisions of this Paragraph 8, a transaction or event shall not be considered a Change in Control if, prior to the consummation or occurrence of such transaction or event, Shaw and the Bank agree in writing that the same shall not be treated as a Change in Control for purposes of this Agreement.
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(e) Amounts payable pursuant to this Paragraph 8 shall be paid, at the option of Shaw either in one lump sum or in equal monthly payments over the remaining term of this Agreement.
(f) Following a Termination Event which gives rise to Shaws rights hereunder, Shaw shall have twenty-four (24) months from the date of occurrence of the Termination Event to terminate this Agreement pursuant to this Paragraph 8. Any such termination shall be deemed to have occurred only upon delivery to the Bank or any successor thereto, of written notice of termination which describes the Change in Control and Termination Event. If Shaw does not so terminate this Agreement within such twenty-four month period, Shaw shall thereafter have no further rights hereunder with respect to that Termination Event, but shall retain rights, if any, hereunder with respect to any other Termination Event as to which such period has not expired.
(g) It is the intent of the parties hereto that all payments made pursuant to this Agreement be deductible by the Bank for federal income tax purposes and not result in the imposition of an excise tax on Shaw. Notwithstanding anything contained in this Agreement to the contrary, any payments to be made to or for the benefit of Shaw which are deemed to be parachute payments as that term is defined in Section 28OG(b) (2) of the Code, shall be modified or reduced to the extent deemed to be necessary by the Banks Board of Directors to avoid the imposition of an excise tax on Shaw under Section 4999 of the Code or the disallowance of a deduction to the Bank under Section 28OG(a) of the Code.
(h) In the event any dispute shall arise between Shaw and the Bank as to the terms or interpretation of this Agreement, including this Paragraph 8, whether instituted by formal legal proceedings or otherwise, including any action taken by Shaw to enforce the terms of this Paragraph 8 or in defending against any action taken by the Bank, the Bank shall reimburse Shaw for all costs and expenses, proceedings or actions, in the event Shaw prevails in any such action.
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9. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and he binding upon any corporate or other successor of the Bank which shall acquire, directly or indirectly, by conversion, merger, consolidation, purchase or otherwise, all or substantially all of the assets of the Bank.
(b) The Bank is contracting for the unique and personal skills of Shaw. Therefore, Shaw shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Bank.
10. Modification; Waiver; Amendments . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties hereto. No waiver by either party hereto, at any time, of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided.
11. Applicable Law . This Agreement shall be governed in all respects whether as to validity, construction, capacity, performance or otherwise, by the laws of North Carolina, except to the extent that federal law shall be deemed to apply.
12. Severability . The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
13. Entire Agreement . This Agreement contains the entire agreement of the parties with respect to the transactions described herein and supersedes any and all other oral or written agreements heretofore made, and there are no representations or inducements by or to, or any agreements between, any of the parties hereto other than those contained herein in writing.
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IN WITNESS WHEREOF , the parties have executed this Agreement under seal and in such form as to be binding as of the day and year first hereinabove written.
NEW CENTURY BANK | ||
By: |
/s/ C. L. Tart, Jr. |
|
C. L. Tart, Jr., Chairman |
ATTEST: |
/s/ Brenda B. Bonner |
Brenda B. Bonner, Secretary |
/s/ John Q. Shaw, Jr. |
||
John Q. Shaw, Jr. |
14
E MPLOYMENT A GREEMENT A MENDMENT
This E MPLOYMENT A GREEMENT A MENDMENT (this Amendment) is entered into as of this 11 th day of March 2004 by and between New Century Bank (the Bank) and John Q. Shaw (Shaw).
W HEREAS , the Bank and Shaw entered into an Employment Agreement dated as of May 24, 2000,
W HEREAS , the Bank and Shaw entered into an Executive Supplemental Retirement Plan Agreement dated as of March 11, 2004, but was effective July 31, 2003. (Attached as Exhibit A)
W HEREAS , as the result of a holding company reorganization the Bank became a wholly- owned subsidiary of New Century Bancorp, Inc. effective as of September 19, 2003,
W HEREAS , consistent with paragraph 10 of the May 24, 2000 Employment Agreement, the Bank and Shaw desire to amend the May 24, 2000 Employment Agreement to more closely coordinate provisions of the Executive Supplemental Retirement Plan Agreement and the Employment Agreement and to make other changes made necessary by the holding company reorganization, and
W HEREAS , the changes made by this Amendment shall become effective immediately, but in all other respects the May 24, 2000 Employment Agreement shall remain in full force and effect, unaffected by this Amendment.
N OW T HEREFORE , in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
1. C OVENANT N OT TO C OMPETE S HALL N OT A PPLY A FTER A C HANGE IN C ONTROL . The Bank and Shaw have agreed that the covenant not to compete, which is contained in subparagraph (a) of paragraph 5 of the Employment Agreement, shall not apply after a Change in Control occurs, but the provision in clause (v) of the definition of Compete (prohibiting Shaw from communicating to any Financial Institution the names or addresses or any financial information concerning any Person who was a Customer of the Bank at the date of Shaws termination of this Agreement) shall apply even after a Change in Control occurs. Accordingly, the first sentence of subparagraph (a) of paragraph 5 of the Employment Agreement is hereby deleted in its entirety and replaced by the following, but the remainder of paragraph 5 shall not be affected by this Amendment
(a) Covenant Not to Compete . For five years after the effective date of termination of this Agreement or of Shaws employment with the Bank for any reason, Shaw shall not Compete (as defined below), directly or indirectly, with the Bank within a 50 mile radius of Dunn, North Carolina (the Relevant Market);
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provided, however , that anything in this Agreement to the contrary notwithstanding the covenant not to compete contained in this subparagraph (a) of paragraph 5 shall not apply if this Agreement is terminated under paragraph 8 after a Change in Control, except that the prohibition in clause (v) of the definition of Compete shall apply regardless of whether this Agreement is terminated under paragraph 8 after a Change in Control.
2. C LARIFICATION OF S EVERANCE P AYABLE A FTER A C HANGE IN C ONTROL . The Bank and Shaw have agreed to amend subparagraph (c) of paragraph 8 of the Employment Agreement to clarify that severance compensation for termination after a Change in Control shall be 299% of Shaws base amount, rather than 299% of Shaws base amount plus continued salary for the remaining term of the Employment Agreement. Accordingly, subparagraph (c) of paragraph 8 of the Employment Agreement is deleted in its entirety and replaced by the following:
(c) If Shaw or the Bank terminates this Agreement according to this Paragraph 8, the Bank shall pay or cause to be paid to Shaw an amount equal to 299% of Shaws base amount, as defined in Section 280G(b)(3)(A) of the Internal Revenue Code of 1986, as amended (the Code).
3. N EW D EFINITION OF C HANGE IN C ONTROL . The definition of the term Change in Control, contained in subparagraph (d) of paragraph 8 of the Employment Agreement, is hereby deleted in its entirety and replaced by the following:
(d) The term Change in Control means any of the following events occur:
(i) Merger : New Century Bancorp, Inc., a North Carolina corporation of which the Bank is a wholly owned subsidiary (the Company), merges into or consolidates with another corporation, or merges another corporation into the Company, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation,
(ii) Acquisition of Significant Share Ownership : after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of the Companys voting securities outstanding (but this clause (ii) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of
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voting shares held by an employee benefit plan of the Company or any subsidiary). For purposes of this Agreement, subsidiary means an entity in which the Company beneficially owns 50% or more of the outstanding voting securities, whether the Company owns the shares directly or owns the shares indirectly through an intermediate subsidiary,
(iii) Change in Board Composition: during any period of two consecutive years, individuals who constitute the Companys board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however , that (a) for purposes of this clause (iii) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (b) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or
(iv) Sale of Assets : The Company sells to a third party all or substantially all of the Companys assets. For this purpose, sale of all or substantially all of the Companys assets includes sale of the shares or assets of the Bank alone;
provided, however , that a transaction or event shall not be considered a Change in Control if, before consummation or occurrence of the transaction or event, the Bank and Shaw agree in writing that the transaction or event shall not be considered a Change in Control for purposes of this Agreement.
4. A MENDMENT OF S UBPARAGRAPH (G) OF P ARAGRAPH 8 TO A VOID C ONFLICT B ETWEEN THE E XECUTIVE S UPPLEMENTAL R ETIREMENT P LAN A GREEMENT AND THE E MPLOYMENT A GREEMENT . Subparagraph (g) of paragraph 8 provides that payments made under the Employment Agreement shall be modified or reduced as necessary to avoid imposition of excise taxes on Shaw under Internal Revenue Code section 4999 and to avoid disallowance of a deduction to the Bank under Internal Revenue Code section 280G, if the payments under the Employment Agreement constitute parachute payments as defined in Internal Revenue Code section 280G(b)(2). In contrast, paragraph IV(B) of the Executive Supplemental Retirement Plan Agreement provides that the benefits paid to Shaw shall be increased as necessary to compensate Shaw for excise taxes that may become payable after a Change in Control, the increased benefits being referred to in paragraph IV(B) of the Executive Supplemental Retirement Plan Agreement as the Gross-Up Payment Amount. As a result, during the period when accelerated benefits may be payable to Shaw under the Executive Supplemental Retirement Plan Agreement after a Change in Control the potential for conflict between that agreement and the Employment Agreement exists. To avoid this potential conflict between the two agreements, the Bank and Shaw have agreed that the requirement in subparagraph (g) of paragraph 8 that payments be reduced or modified to avoid application of Internal Revenue Code sections 280G and 4999 shall not apply if the gross-up provision in paragraph IV(B) of the Executive Supplemental Retirement Plan Agreement applies. Accordingly, subparagraph (g) of paragraph 8 of the Employment Agreement is deleted in its entirety and replaced with the following:
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(g) Notwithstanding anything contained in this Agreement to the contrary, any payments to be made to or for the benefit of Shaw that are deemed to be parachute payments, as that term is defined in Section 280G(b)(2) of the Code, shall be modified or reduced to the extent deemed by the Banks Board of Directors to be necessary to avoid imposition of an excise tax on Shaw under Section 4999 of the Code or disallowance of a deduction to the Bank under Section 280G(a) of the Code; provided, however , that this subparagraph (g) shall not apply and payments to be made to or for the benefit of Shaw shall not be reduced if benefits paid or payable to Shaw under the March 11, 2004 Executive Supplemental Retirement Plan Agreement between the Bank and Shaw are, by the terms of that agreement, increased to compensate Shaw for excise taxes imposed on Shaw after a Change in Control.
5. E XPANDED L EGAL E XPENSE R EIMBURSEMENT R IGHT . The Bank and Shaw have agreed to modify the legal expense reimbursement right currently contained in subparagraph (h) of paragraph 8 of the Employment Agreement. Accordingly, subparagraph (h) of paragraph 8 is deleted in its entirety and replaced by the following:
(h) The Bank is aware that upon the occurrence of a Change in Control, management of the Bank may cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Bank to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Shaw the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Bank that Shaw not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Shaw hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if after a Change in Control it appears to Shaw that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable or instituted any litigation or other legal action designed to deny, diminish or to recover from, Shaw the benefits intended to be provided to Shaw hereunder, the Bank irrevocably authorizes Shaw from time to time to retain counsel of his choice at the Banks expense as provided in this subparagraph (h), to represent Shaw in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder or other person affiliated with the Bank, in any jurisdiction. The fees and expenses of counsel selected from time to time by Shaw as herein above provided shall be paid or reimbursed to Shaw by the Bank on a regular, periodic
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basis upon presentation by Shaw of a statement or statements prepared by such counsel in accordance with such counsels customary practices, up to a maximum aggregate amount of $500,000. The Banks obligation to pay Shaws legal fees provided by this subparagraph (h) operates separately from, and in addition to, any legal fee reimbursement obligation the Bank or the Company may have with Shaw under any employment, severance, or other agreement.
6. Extension of Term of Agreement . The Bank and Shaw desire to amend the term of the Agreement to eliminate the automatically renewing five-year term. Accordingly, paragraph 4 of the Agreement is eliminated in its entirety and is replaced with the following:
4. Term . Unless sooner terminated as provided in this Agreement and subject to the right of either Shaw or the Bank to terminate Shaws employment at any time as provided herein, the term of this Agreement and Shaws employment with the Bank hereunder shall be for a period commencing May 24, 2000 and continuing until September 1, 2008.
7. R EMAINDER OF E MPLOYMENT A GREEMENT N OT A FFECTED . Except as amended by this Amendment, the May 24, 2000 Employment Agreement is not affected by this Amendment and remains in full force and effect.
I N W ITNESS W HEREOF , the Bank and Shaw have executed this Amendment as of the date first written above.
J OHN Q. S HAW | N EW C ENTURY B ANK | |||||||
/S/ John Q. Shaw |
By: |
/S/ C. L. Tart, Jr. |
||||||
Its: |
Chairman of the Board |
19
Exhibit 10(iv)
STATE OF NORTH CAROLINA
COUNTY OF HARNETT
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of Mach 1, 2002 by and between NEW CENTURY BANK (hereinafter referred to as the Bank) and Lisa F. Campbell (hereinafter referred to as Employee).
W I T N E S S E T H:
WHEREAS , the expertise and experience of Employee and his/her relationships and reputation in the financial institutions industry are extremely valuable to the Bank; and
WHEREAS , it is in the best interests of the Bank and its shareholders to maintain an experienced and sound management team to manage the Bank and to further the Banks overall strategies to protect and enhance the value of its shareholders investments; and
WHEREAS , the Bank and Employee desire to enter into this Agreement to establish the scope, terms and conditions of Employees employment by the Bank; and
WHEREAS , the Bank and Employee desire to enter into this Agreement also to provide Employee with security in the event of a change in control in the Bank and to insure the continued loyalty of Employee during any such change in control in order to maximize shareholder value as well as the continued safe and sound operation of the Bank.
NOW, THEREFORE , for and in consideration of the premises and mutual promises, covenants and conditions hereinafter set forth, and other good and valuable considerations, the receipt and sufficiency of which hereby are acknowledged, the Bank and Employee hereby agree as follows:
1. Employment . The Bank hereby agrees to employ Employee, and Employee hereby agrees to serve as an officer of the Bank, all upon the terms and conditions stated herein. As an officer of the Bank, Employee will (i) serve as Sr. Vice President of the Bank, and (ii) have such other duties and responsibilities, and render to the Bank such other management services, as are customary for persons in Employees position with the Bank or as shall otherwise be reasonably assigned to his/her from time to time by the Bank. Employee shall faithfully and diligently discharge his/her duties and responsibilities under this Agreement and
shall use his/her best efforts to implement the policies established by the Bank. Employee hereby agrees to devote such number of hours of his/her working time and endeavors to the employment granted hereunder as Employee and the Bank shall deem to be necessary to discharge his/her duties hereunder, and, for so long as employment hereunder shall exist, Employee shall not engage in any other occupation which requires a significant amount of Employees personal attention during the Banks regular business hours or which otherwise interferes with Employees attention to or performance of his/her duties and responsibilities as an officer of the Bank hereunder except with the prior written consent of the Bank. However, nothing herein contained shall restrict or prevent Employee from personally, and for Employees own account, trading in stocks, bonds, securities, real estate or other forms of investment for Employees own benefit so long as said activities do not interfere with Employees attention to or performance of his/her duties and responsibilities as an officer of the Bank hereunder.
2. Compensation . For all services rendered by Employee to the Bank under this Agreement, the Bank shall pay Employee a base salary at a rate of Eighty-Nine Thousand Dollars and 00/100s ($89,000.00) per annum; provided that the rate of such salary shall be reviewed by the Board of Directors not less often than annually. Salary paid under this Agreement shall be payable in cash not less frequently than monthly. All compensation hereunder shall be subject to customary withholding taxes and such other employment taxes as are required by law. In the event of a Change in Control (as defined in Paragraph 8), Employees base salary shall be increased not less than six percent (6%.) annually during the term of this Agreement.
In addition to the foregoing, Employee shall be entitled to receive cash bonuses on an annual basis during the term of this Agreement as may be determined by the Board of Directors of the Bank or its Compensation Committee.
3. Participation in Retirement and Employee Benefit Plans; Fringe Benefits . Subject to the terms and conditions of this Agreement, Employee shall be entitled to participate in any and all employee benefit programs and compensation plans from time to time maintained by the Bank and available to all employees of the Bank, all in accordance with the terms and conditions (including eligibility requirements) of such programs and plans of the Bank, resolutions of the Banks Board of Directors establishing such programs and plans, and the Banks normal practices and established policies regarding such programs and plans.
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In addition to the other compensation and benefits described in this Agreement, the Bank shall :
(i) Provide Employee with four weeks of paid vacation leave notwithstanding the policy for the Bank for all other employees.
(ii) The Bank shall assume payment of dues to a civic club of Employees choice provided that Employee shall be responsible for all personal expenses for use of such club;
(iii) The Bank shall grant to Employee options under the Banks 2000 Incentive Stock Option Plan equal to five percent (5%) of the options reserved for allocation under such Plan.
4. Term . Unless sooner terminated as provided in this Agreement and subject to the right of either Employee or the Bank to terminate Employees employment at any time as provided herein, the term of this Agreement and Employees employment with the Bank hereunder shall be for a period commencing on the date hereof and continuing for a period of three (3) years. At the end of each year of this Agreement, the term of this Agreement shall automatically be extended for an additional one year period unless written notice from the Bank or Employee is received thirty (30) days prior to such date notifying the other party that this Agreement shall not be further extended.
5. Confidentiality; Noncompetition . Employee hereby acknowledges and agrees that (i) in the course of his/her service as an officer of the Bank, she will gain substantial knowledge of and familiarity with the Banks customers and its dealings with them, and other information concerning the Banks business, all of which constitutes valuable assets and privileged information that is particularly sensitive due to the fiduciary responsibilities inherent in the banking business; and, (ii) in order to protect the Banks interest in and to assure it the benefit of its business, it is reasonable and necessary to place certain restrictions on Employees ability to compete against the Bank and on his/her disclosure of information about the Banks business and customers. For that purpose, and in consideration of the Banks agreements contained herein, Employee covenants and agrees as provided below.
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(a) Covenant Not to Compete . Employee will not Compete (as defined below), directly or indirectly, with the Bank within a twenty-five (25) mile radius of any full service office of the Bank as follows:
(i) if this Agreement is terminated by the Bank without cause (as defined in paragraph 6(d) hereof) Employee shall not Compete for a period of time equal to the greater of thirty-six (36) months or the period of time Employee is receiving compensation pursuant to the terms of this Agreement; or
(ii) if this Agreement is terminated by Employee for any reason, Employee shall not Compete for a period of thirty-six (36) months from the date of termination of this Agreement by Employee.
For the purposes of this Paragraph 5, the following terms shall have the meanings set forth below:
Compete . The term Compete means: (i) soliciting or securing deposits from any Person residing in the Relevant Market for any Financial Institution; (ii) soliciting any Person residing in the Relevant Market to become a borrower from any Financial Institution, or assisting (other than through the performance of ministerial or clerical duties) any Financial Institution in making loans to any such Person; (iii) including or attempting to induce any Person who was a Customer of the Bank on the date of termination of Employees employment with the Bank, to change such Customers depository, loan and/or other banking relationship from the Bank to another Financial Institution; (iv) acting as a consultant, officer, director, independent contractor, or employee of any Financial Institution that has its main or principal office in the Relevant Market, or, in acting in any such capacity with any other Financial Institution, to maintain an office or be employed at or assigned to or to have any direct involvement in the management, business or operation of any office of such Financial Institution located in the Relevant Market; or (v) communicating to any Financial Institution the names or addresses or any financial information concerning any Person who was a Customer of the Bank at the date of Employees termination of this Agreement.
Customer . The term Customer means any Person with whom, as of the effective date of termination of this Agreement or during Employees employment with the Bank, the Bank has or has had a depository, loan and/or other banking relationship.
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Financial Institution . The term Financial Institution means any federal or state chartered bank, savings bank, savings and loan association or credit union, any subsidiary thereof, or any holding company for or corporation that owns or controls any such entity, or any other Person engaged in the business of making loans of any type or receiving deposits, other than the Bank.
Person . The term Person means any natural person or any corporation, partnership, proprietorship, joint venture, limited liability company, trust, estate, governmental agency or instrumentality, fiduciary, unincorporated association or other entity.
(b) Confidentiality Covenant . Employee covenants and agrees that any and all data, figures, projections, estimates, lists, files, records, documents, manuals or other such materials or information (financial or otherwise) relating to the Bank and its banking business, regulatory examinations, financial results and condition, lending and deposit operations, customers (including lists of the Banks customers and information regarding their accounts and business dealings with the Bank), policies and procedures, computer systems and software, shareholders and employees (herein referred to as Confidential Information) are proprietary to the Bank and are valuable, special and unique assets of the Banks business to which Employee will have access during his/her employment with the Bank. Employee agrees that (i) all such Confidential Information shall be considered and kept as the confidential, private and privileged records and information of the Bank, and (ii) at all times during the term of his/her employment with the Bank and following the termination of this Agreement or his/her employment for any reason, and except as shall be required in the course of the performance by Employee of his/her duties on behalf of the Bank or otherwise pursuant to the direct, written authorization of the Bank, Employee will not: divulge any such Confidential Information to any other Person or Financial Institution; remove any such Confidential Information in written or other recorded form from the Banks premises; or make any use of any Confidential Information for his/her own purposes or for the benefit of any Person or Financial Institution other than the Bank. However, following the termination of Employees employment with the Bank, this subparagraph (b) shall not apply to any Confidential Information which then is in the public domain (provided that Employee was not responsible, directly or indirectly, for permitting such Confidential Information to enter the public domain without the Banks consent), or which is obtained by Employee from a third party which or who is not obligated under an agreement of confidentiality with respect to such information.
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(c) Remedies for Breach . Employee understands and agrees that a breach or violation by his/her of the covenants contained in Paragraph 5(a) and 5(b) of this Agreement will be deemed a material breach of this Agreement and will cause irreparable injury to the Bank, and that it would be difficult to ascertain the amount of monetary damages that would result from any such violation. In the event of Employees actual or threatened breach or violation of the covenants contained in Paragraph 5(a) or 5(b), the Bank shall be entitled to bring a civil action seeking an injunction restraining Employee from violating or continuing to violate those covenants or from any threatened violation thereof, or for any other legal or equitable relief relating to the breach or violation of such covenant. Employee agrees that, if the Bank institutes any action or proceeding against Employee seeking to enforce any of such covenants or to recover other relief relating to an actual or threatened breach or violation of any of such covenants, Employee shall be deemed to have waived the claim or defense that the Bank has an adequate remedy at law and shall not urge in any such action or proceeding the claim or defense that such a remedy at law exists. However, the exercise by the Bank of any such right, remedy, power or privilege shall not preclude the Bank or its successors or assigns from pursuing any other remedy or exercising any other right, power or privilege available to it for any such breach or violation, whether at law or in equity, including the recovery of damages, all of which shall be cumulative and in addition to all other rights, remedies, powers or privileges of the Bank.
Notwithstanding anything contained herein to the contrary, Employee agrees that the provisions of Paragraph 5(a) and 5(b) above and the remedies provided in this Paragraph 5(c) for a breach by Employee shall be in addition to, and shall not be deemed to supersede or to otherwise restrict, limit or impair the rights of the Bank under the Trade Secrets Protection Act contained in Article 24, Chapter 66 of the North Carolina General Statutes, or any other state or federal law or regulation dealing with or providing a remedy for the wrongful disclosure, misuse or misappropriation of trade secrets or other proprietary or confidential information.
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(d) Survival of Covenants . Employees covenants and agreements and the Banks rights and remedies provided for in this Paragraph 5 shall survive any termination of this Agreement or Employees employment with the Bank.
6. Termination and Termination Pay .
(a) Employees employment under this Agreement may be terminated at any time by Employee upon ninety (90) days written notice to the Bank. Upon such termination, Employee shall be entitled to receive compensation through the effective date of such termination; provided, however, that the Bank, in its sole discretion, may elect for Employee not to serve out part or all of said notice period.
(b) Employees employment under this Agreement shall be terminated upon the death of Employee during the term of this Agreement. Upon any such termination, Employees estate shall be entitled to receive any compensation due to Employee computed through the last day of the calendar month in which his/her death shall have occurred but which remains unpaid.
(c) In the event Employee becomes disabled during the term of his/her employment hereunder and it is determined by the Bank that Employee is permanently unable to perform his/her duties under this Agreement, the Bank shall continue to compensate Employee at the level of compensation described in Paragraph 2 above, and shall continue to provide Employee each of the other benefits set forth or described in this Agreement, for the remaining term of this Agreement, less any other payments provided under any disability income plan of the Bank which is applicable to Employee. In the event of any disagreement between Employee and the Bank as to whether Employee is physically or mentally incapacitated such as will result in the termination of Employees employment pursuant to this Paragraph 6(c), the question of such incapacity shall be submitted to an impartial and reputable physician for determination, selected by mutual agreement of Employee and the Bank or, failing such agreement, by two (2) physicians (one (1) of whom shall be selected by the Bank and the other by Employee), and such determination of the question of such incapacity by such physician or physicians shall be final and binding on Employee and the Bank. The Bank shall pay the reasonable fees and expenses of such physician or physicians in making any determination required under this Paragraph 6(c) .
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(d) The Bank may terminate Employees employment at any time for any reason with or without Cause (as defined below), but any termination by the Bank other than termination for Cause, (as defined below) shall not prejudice Employees right to compensation or other benefits under this Agreement for a period of time equal to the greater of thirty-six (36) months or the balance of the term of this Agreement. Following any termination of Employees employment by the Bank for Cause, Employee shall have no further rights under this Agreement (including any right to receive compensation or other benefits for any period after such termination).
For purposes of this Paragraph 6(d), the Bank shall have Cause to terminate Employees employment upon:
(i) A determination by the Bank, in good faith, that Employee (A) has breached in any material respect any of the terms or conditions of this Agreement, or (B) is engaging or has engaged in willful misconduct or conduct which is detrimental to the business prospects of the Bank or which has had or likely will have a material adverse effect on the Banks business or reputation. Prior to any termination by the Bank of Employees employment for a breach, failure to perform or conduct described in this subparagraph (i), the Bank shall give Employee written notice which describes such breach, failure to perform or conduct and if during a period of five (5) business days following such notice Employee cures or corrects the same to the reasonable satisfaction of the Bank, then this Agreement shall remain in full force and effect. However, notwithstanding the above, if the Bank has given written notice to Employee on a previous occasion of the same or a substantially similar breach, failure to perform or conduct, or of a breach, failure to perform or conduct which the Bank determines in good faith to be of substantially similar import, or if the Bank determines in good faith that the then current breach, failure to perform or conduct is not reasonably curable, then termination under this subparagraph (i) shall be effective immediately and Employee shall have no right to cure such breach, failure to perform or conduct.
(ii) The violation by Employee of any applicable federal or state law, or any applicable rule, regulation, order or statement of policy promulgated by any governmental agency or authority having jurisdiction over the Bank or any of its affiliates or subsidiaries (a Regulatory Authority, including without limitation the Federal Deposit
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Insurance Corporation, the North Carolina Commissioner of Banks or any other banking regulator having legal jurisdiction over the Bank), which results from Employees gross negligence, willful misconduct or intentional disregard of such law, rule, regulation, order or policy statement and results in any substantial damage, monetary or otherwise, to the Bank or any of its affiliates or subsidiaries or to the Banks reputation;
(iii) The commission in the course of Employees employment with the Bank of an act of fraud, embezzlement, theft or proven personal dishonesty (whether or not resulting in criminal prosecution or conviction);
(iv) The conviction of Employee of any felony or any criminal offense involving dishonesty or breach of trust, or the occurrence of any event described in Section 19 of the Federal Deposit Insurance Act or any other event or circumstance which disqualifies Employee from serving as an employee or officer of, or a party affiliated with, the Bank or any of its affiliates or subsidiaries;
(v) Employee becomes unacceptable to, or is removed, suspended or prohibited from participating in the conduct of the Banks affairs (or if proceedings for that purpose are commenced) by any Regulatory Authority; and,
(vi) The occurrence of any event believed by the Bank, in good faith, to have resulted in Employee being excluded from coverage, or having coverage limited as to Employee as compared to other covered officers or employees, under the Banks then current blanket bond or other fidelity bond or insurance policy covering its directors, officers or employees.
7. Additional Regulatory Requirements . Notwithstanding anything contained in this Agreement to the contrary, it is understood and agreed that the Bank (or its successors in interest) shall not be required to make any payment or take any action under this Agreement if (a) the Bank is declared by any Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner, or if (b) in the opinion of counsel to the Bank such payment or action (i) would be prohibited by or would violate any provision of state or federal law applicable to the Bank, including without limitation the Federal Deposit Insurance Act and Chapter 53 of the North Carolina General Statutes as now in effect or hereafter amended, (ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any Regulatory Authority, or (iii) otherwise would be prohibited by any Regulatory Authority.
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8. Change in Control
(a) In the event of a Change in Control (as defined in Subparagraph (d) below), of the Bank, Employee shall be entitled to terminate this Agreement upon the occurrence within twelve (12) months following a change in control of any Termination Event as defined in Subparagraph (b) below.
(b) A Termination Event shall mean the occurrence of any of the following events:
(i) Employee is assigned any duties and/or responsibilities that are inconsistent with his/her position, duties, responsibilities, or status at the time of the Change in Control or with his/her reporting responsibilities or titles with the Bank in effect at such time;
(ii) Employees annual base salary is reduced below the amount in effect as of the effective date of a Change in Control or as the same shall have been increased from time to time following such effective date;
(iii) Employees life insurance, major medical insurance, disability insurance, dental insurance, stock option plans, stock purchase plans, deferred compensation plans, management retention plans, retirement plans, or similar plans or benefits being provided by the Bank to Employee as of the effective date of the Change in Control are reduced in their level, scope, or coverage, or any such insurance, plans, or benefits are eliminated, unless such reduction or elimination applies proportionately to all salaried employees of the Bank who participated in such benefits prior to such Change in Control; or
(iv) Employee is transferred to a location outside of Harnett County, North Carolina, without Employees express written consent.
A Termination Event shall be deemed to have occurred on the date such action or event is implemented or takes effect.
(c) In the event that Employee terminates this Agreement or the Bank terminates this Agreement pursuant to this Paragraph 8, the Bank will be obligated to pay or cause to be paid to Employee all amounts due and owing to the end of the term of this Agreement and an amount equal to one hundred fifty percent (150%) of Employees base amount as defined in Section 28OG(b) (3) (A) of the Internal Revenue Code of 1986, as amended (the Code) .
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(d) For the purposes of this Agreement, the term Change in Control shall mean any of the following events:
(i) After the effective date of this Agreement, any person (as such term is defined in Section 7 (j) (8) (A) of the Change in Bank Control Act of 1978), directly or indirectly, acquires beneficial ownership of voting stock, or acquires irrevocable proxies or any combination of voting stock and irrevocable proxies, representing twenty-five percent (25%) or more of any class of voting securities of the Bank, or acquires control of in any manner the election of a majority of the directors of the Bank;
(ii) The Bank consolidates or merges with or into another corporation, association, or entity, or is otherwise reorganized, where the Bank is not the surviving corporation in such transaction; or
(iii) All or substantially all of the assets of the Bank are sold or otherwise transferred to or are acquired by any other corporation, association, or other person, entity, or group.
Notwithstanding the other provisions of this Paragraph 8, a transaction or event shall not be considered a Change in Control (i) if, prior to the consummation or occurrence of such transaction or event, Employee and the Bank agree in writing that the same shall not be treated as a Change in Control for purposes of this Agreement or (ii) if the Bank reorganizes itself into the bank holding company form of organization where the shareholders of the Bank are given an opportunity to exchange their shares of common stock in the Bank for shares of common stock in the holding company.
(e) Amounts payable pursuant to this Paragraph 8 shall be paid, at the option of Employee either in one lump sum or in equal monthly payments over the remaining term of this Agreement.
(f) Following a Termination Event which gives rise to Employees rights hereunder, Employee shall have twelve (12) months from the date of occurrence of the
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Termination Event to terminate this Agreement pursuant to this Paragraph 8. Any such termination shall be deemed to have occurred only upon delivery to the Bank or any successor thereto, of written notice of termination which describes the Change in Control and Termination Event. If Employee does not so terminate this Agreement within such twelve month period, Employee shall thereafter have no further rights hereunder with respect to that Termination Event, but shall retain rights, if any, hereunder with respect to any other Termination Event as to which such period has not expired.
(g) It is the intent of the parties hereto that all payments made pursuant to this Agreement be deductible by the Bank for federal income tax purposes and not result in the imposition of an excise tax on Employee. Notwithstanding anything contained in this Agreement to the contrary, any payments to be made to or for the benefit of Employee which are deemed to be parachute payments as that term is defined in Section 28OG(b) (2) of the Code, shall be modified or reduced to the extent deemed to be necessary by the Banks Board of Directors to avoid the imposition of an excise tax on Employee under Section 4999 of the Code or the disallowance of a deduction to the Bank under Section 28OG(a) of the Code.
(h) In the event any dispute shall arise between Employee and the Bank as to the terms or interpretation of this Agreement, including this Paragraph 8, whether instituted by formal legal proceedings or otherwise, including any action taken by Employee to enforce the terms of this Paragraph 8 or in defending against any action taken by the Bank, the Bank shall reimburse Employee for all costs and expenses, proceedings or actions, in the event Employee prevails in any such action.
9. Successors and Assigns .
(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Bank which shall acquire, directly or indirectly, by conversion, merger, share exchange, purchase or otherwise, all or substantially all of the assets of the Bank.
(b) The Bank is contracting for the unique and personal skills of Employee. Therefore, Employee shall be precluded from assigning or delegating his/her rights or duties hereunder without first obtaining the written consent of the Bank.
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10. Modification; Waiver; Amendments . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties hereto. No waiver by either party hereto, at any time, of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided.
11. Applicable Law . This Agreement shall be governed in all respects whether as to validity, construction, capacity, performance or otherwise, by the laws of North Carolina, except to the extent that federal law shall be deemed to apply.
12. Severability . The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
13. Entire Agreement . This Agreement contains the entire agreement of the parties with respect to the transactions described herein and supersedes any and all other oral or written agreements heretofore made, and there are no representations or inducements by or to, or any agreements between, any of the parties hereto other than those contained herein in writing.
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IN WITNESS WHEREOF , the parties have executed this Agreement under seal and in such form as to be binding as of the day and year first hereinabove written.
NEW CENTURY BANK | ||
By: |
/s/ John Q. Shaw, Jr. |
|
John Q. Shaw, Jr. |
||
President and Chief Executive Officer |
ATTEST: |
/s/ Brenda B. Bonner
|
, Secretary |
/s/ Lisa F. Campbell |
||
Lisa F. Campbell |
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Exhibit 10(v)
STATE OF NORTH CAROLINA
COUNTY OF HARNETT
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of May 24, 2001 by and between NEW CENTURY BANK (hereinafter referred to as the Bank) and Bobby Darrell Fowler (hereinafter referred to as Employee).
W I T N E S S E T H:
WHEREAS , the expertise and experience of Employee and his/her relationships and reputation in the financial institutions industry are extremely valuable to the Bank; and
WHEREAS , it is in the best interests of the Bank and its shareholders to maintain an experienced and sound management team to manage the Bank and to further the Banks overall strategies to protect and enhance the value of its shareholders investments; and
WHEREAS , the Bank and Employee desire to enter into this Agreement to establish the scope, terms and conditions of Employees employment by the Bank; and
WHEREAS , the Bank and Employee desire to enter into this Agreement also to provide Employee with security in the event of a change in control in the Bank and to insure the continued loyalty of Employee during any such change in control in order to maximize shareholder value as well as the continued safe and sound operation of the Bank.
NOW, THEREFORE , for and in consideration of the premises and mutual promises, covenants and conditions hereinafter set forth, and other good and valuable considerations, the receipt and sufficiency of which hereby are acknowledged, the Bank and Employee hereby agree as follows:
1. Employment . The Bank hereby agrees to employ Employee, and Employee hereby agrees to serve as an officer of the Bank, all upon the terms and conditions stated herein. As an officer of the Bank, Employee will (i) serve as Sr. Vice President of the Bank, and (ii) have such other duties and responsibilities, and render to the Bank such other management services, as are customary for persons in Employees position with the Bank or as shall otherwise be reasonably assigned to his/her from time to time by the Bank. Employee shall faithfully and diligently discharge his/her duties and responsibilities under this Agreement and
shall use his/her best efforts to implement the policies established by the Bank. Employee hereby agrees to devote such number of hours of his/her working time and endeavors to the employment granted hereunder as Employee and the Bank shall deem to be necessary to discharge his/her duties hereunder, and, for so long as employment hereunder shall exist, Employee shall not engage in any other occupation which requires a significant amount of Employees personal attention during the Banks regular business hours or which otherwise interferes with Employees attention to or performance of his/her duties and responsibilities as an officer of the Bank hereunder except with the prior written consent of the Bank. However, nothing herein contained shall restrict or prevent Employee from personally, and for Employees own account, trading in stocks, bonds, securities, real estate or other forms of investment for Employees own benefit so long as said activities do not interfere with Employees attention to or performance of his/her duties and responsibilities as an officer of the Bank hereunder.
2. Compensation . For all services rendered by Employee to the Bank under this Agreement, the Bank shall pay Employee a base salary at a rate of Eighty-Five thousand eight Dollars and 00/100s ($85,008.00) per annum; provided that the rate of such salary shall be reviewed by the Board of Directors not less often than annually. Salary paid under this Agreement shall be payable in cash not less frequently than monthly. All compensation hereunder shall be subject to customary withholding taxes and such other employment taxes as are required by law. In the event of a Change in Control (as defined in Paragraph 8), Employees base salary shall be increased not less than six percent (6%.) annually during the term of this Agreement.
In addition to the foregoing, Employee shall be entitled to receive cash bonuses on an annual basis during the term of this Agreement as may be determined by the Board of Directors of the Bank or its Compensation Committee.
3. Participation in Retirement and Employee Benefit Plans; Fringe Benefits . Subject to the terms and conditions of this Agreement, Employee shall be entitled to participate in any and all employee benefit programs and compensation plans from time to time maintained by the Bank and available to all employees of the Bank, all in accordance with the terms and conditions (including eligibility requirements) of such programs and plans of the Bank, resolutions of the Banks Board of Directors establishing such programs and plans, and the Banks normal practices and established policies regarding such programs and plans.
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In addition to the other compensation and benefits described in this Agreement, the Bank shall :
(i) Provide Employee with three weeks of paid vacation leave notwithstanding the policy for the Bank for all other employees.
(ii) The Bank shall assume payment of dues to a civic club of Employees choice provided that Employee shall be responsible for all personal expenses for use of such club;
(iii) The Bank shall grant to Employee options under the Banks 2000 Incentive Stock Option Plan equal to twenty percent (20%) of the options reserved for allocation under such Plan.
4. Term . Unless sooner terminated as provided in this Agreement and subject to the right of either Employee or the Bank to terminate Employees employment at any time as provided herein, the term of this Agreement and Employees employment with the Bank hereunder shall be for a period commencing on the date hereof and continuing for a period of three (3) years. At the end of each year of this Agreement, the term of this Agreement shall automatically be extended for an additional one year period unless written notice from the Bank or Employee is received thirty (30) days prior to such date notifying the other party that this Agreement shall not be further extended.
5. Confidentiality; Noncompetition . Employee hereby acknowledges and agrees that (i) in the course of his/her service as an officer of the Bank, she will gain substantial knowledge of and familiarity with the Banks customers and its dealings with them, and other information concerning the Banks business, all of which constitutes valuable assets and privileged information that is particularly sensitive due to the fiduciary responsibilities inherent in the banking business; and, (ii) in order to protect the Banks interest in and to assure it the benefit of its business, it is reasonable and necessary to place certain restrictions on Employees ability to compete against the Bank and on his/her disclosure of information about the Banks business and customers. For that purpose, and in consideration of the Banks agreements contained herein, Employee covenants and agrees as provided below.
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(a) Covenant Not to Compete . Employee will not Compete (as defined below), directly or indirectly, with the Bank within a twenty-five (25) mile radius of any full service office of the Bank as follows:
(i) if this Agreement is terminated by the Bank without cause (as defined in paragraph 6(d) hereof) Employee shall not Compete for a period of time equal to the greater of thirty-six (36) months or the period of time Employee is receiving compensation pursuant to the terms of this Agreement; or
(ii) if this Agreement is terminated by Employee for any reason, Employee shall not Compete for a period of thirty-six (36) months from the date of termination of this Agreement by Employee.
For the purposes of this Paragraph 5, the following terms shall have the meanings set forth below:
Compete . The term Compete means: (i) soliciting or securing deposits from any Person residing in the Relevant Market for any Financial Institution; (ii) soliciting any Person residing in the Relevant Market to become a borrower from any Financial Institution, or assisting (other than through the performance of ministerial or clerical duties) any Financial Institution in making loans to any such Person; (iii) including or attempting to induce any Person who was a Customer of the Bank on the date of termination of Employees employment with the Bank, to change such Customers depository, loan and/or other banking relationship from the Bank to another Financial Institution; (iv) acting as a consultant, officer, director, independent contractor, or employee of any Financial Institution that has its main or principal office in the Relevant Market, or, in acting in any such capacity with any other Financial Institution, to maintain an office or be employed at or assigned to or to have any direct involvement in the management, business or operation of any office of such Financial Institution located in the Relevant Market; or (v) communicating to any Financial Institution the names or addresses or any financial information concerning any Person who was a Customer of the Bank at the date of Employees termination of this Agreement.
Customer . The term Customer means any Person with whom, as of the effective date of termination of this Agreement or during Employees employment with the Bank, the Bank has or has had a depository, loan and/or other banking relationship.
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Financial Institution . The term Financial Institution means any federal or state chartered bank, savings bank, savings and loan association or credit union, any subsidiary thereof, or any holding company for or corporation that owns or controls any such entity, or any other Person engaged in the business of making loans of any type or receiving deposits, other than the Bank.
Person . The term Person means any natural person or any corporation, partnership, proprietorship, joint venture, limited liability company, trust, estate, governmental agency or instrumentality, fiduciary, unincorporated association or other entity.
(b) Confidentiality Covenant . Employee covenants and agrees that any and all data, figures, projections, estimates, lists, files, records, documents, manuals or other such materials or information (financial or otherwise) relating to the Bank and its banking business, regulatory examinations, financial results and condition, lending and deposit operations, customers (including lists of the Banks customers and information regarding their accounts and business dealings with the Bank), policies and procedures, computer systems and software, shareholders and employees (herein referred to as Confidential Information) are proprietary to the Bank and are valuable, special and unique assets of the Banks business to which Employee will have access during his/her employment with the Bank. Employee agrees that (i) all such Confidential Information shall be considered and kept as the confidential, private and privileged records and information of the Bank, and (ii) at all times during the term of his/her employment with the Bank and following the termination of this Agreement or his/her employment for any reason, and except as shall be required in the course of the performance by Employee of his/her duties on behalf of the Bank or otherwise pursuant to the direct, written authorization of the Bank, Employee will not: divulge any such Confidential Information to any other Person or Financial Institution; remove any such Confidential Information in written or other recorded form from the Banks premises; or make any use of any Confidential Information for his/her own purposes or for the benefit of any Person or Financial Institution other than the Bank. However, following the termination of Employees employment with the Bank, this subparagraph (b) shall not apply to any Confidential Information which then is in the public domain (provided that Employee was not responsible, directly or indirectly, for permitting such Confidential Information to enter the public domain without the Banks consent), or which is obtained by Employee from a third party which or who is not obligated under an agreement of confidentiality with respect to such information.
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(c) Remedies for Breach . Employee understands and agrees that a breach or violation by his/her of the covenants contained in Paragraph 5(a) and 5(b) of this Agreement will be deemed a material breach of this Agreement and will cause irreparable injury to the Bank, and that it would be difficult to ascertain the amount of monetary damages that would result from any such violation. In the event of Employees actual or threatened breach or violation of the covenants contained in Paragraph 5(a) or 5(b), the Bank shall be entitled to bring a civil action seeking an injunction restraining Employee from violating or continuing to violate those covenants or from any threatened violation thereof, or for any other legal or equitable relief relating to the breach or violation of such covenant. Employee agrees that, if the Bank institutes any action or proceeding against Employee seeking to enforce any of such covenants or to recover other relief relating to an actual or threatened breach or violation of any of such covenants, Employee shall be deemed to have waived the claim or defense that the Bank has an adequate remedy at law and shall not urge in any such action or proceeding the claim or defense that such a remedy at law exists. However, the exercise by the Bank of any such right, remedy, power or privilege shall not preclude the Bank or its successors or assigns from pursuing any other remedy or exercising any other right, power or privilege available to it for any such breach or violation, whether at law or in equity, including the recovery of damages, all of which shall be cumulative and in addition to all other rights, remedies, powers or privileges of the Bank.
Notwithstanding anything contained herein to the contrary, Employee agrees that the provisions of Paragraph 5(a) and 5(b) above and the remedies provided in this Paragraph 5(c) for a breach by Employee shall be in addition to, and shall not be deemed to supersede or to otherwise restrict, limit or impair the rights of the Bank under the Trade Secrets Protection Act contained in Article 24, Chapter 66 of the North Carolina General Statutes, or any other state or federal law or regulation dealing with or providing a remedy for the wrongful disclosure, misuse or misappropriation of trade secrets or other proprietary or confidential information.
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(d) Survival of Covenants . Employees covenants and agreements and the Banks rights and remedies provided for in this Paragraph 5 shall survive any termination of this Agreement or Employees employment with the Bank.
6. Termination and Termination Pay .
(a) Employees employment under this Agreement may be terminated at any time by Employee upon ninety (90) days written notice to the Bank. Upon such termination, Employee shall be entitled to receive compensation through the effective date of such termination; provided, however, that the Bank, in its sole discretion, may elect for Employee not to serve out part or all of said notice period.
(b) Employees employment under this Agreement shall be terminated upon the death of Employee during the term of this Agreement. Upon any such termination, Employees estate shall be entitled to receive any compensation due to Employee computed through the last day of the calendar month in which his/her death shall have occurred but which remains unpaid.
(c) In the event Employee becomes disabled during the term of his/her employment hereunder and it is determined by the Bank that Employee is permanently unable to perform his/her duties under this Agreement, the Bank shall continue to compensate Employee at the level of compensation described in Paragraph 2 above, and shall continue to provide Employee each of the other benefits set forth or described in this Agreement, for the remaining term of this Agreement, less any other payments provided under any disability income plan of the Bank which is applicable to Employee. In the event of any disagreement between Employee and the Bank as to whether Employee is physically or mentally incapacitated such as will result in the termination of Employees employment pursuant to this Paragraph 6(c), the question of such incapacity shall be submitted to an impartial and reputable physician for determination, selected by mutual agreement of Employee and the Bank or, failing such agreement, by two (2) physicians (one (1) of whom shall be selected by the Bank and the other by Employee), and such determination of the question of such incapacity by such physician or physicians shall be final and binding on Employee and the Bank. The Bank shall pay the reasonable fees and expenses of such physician or physicians in making any determination required under this Paragraph 6(c) .
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(d) The Bank may terminate Employees employment at any time for any reason with or without Cause (as defined below), but any termination by the Bank other than termination for Cause, (as defined below) shall not prejudice Employees right to compensation or other benefits under this Agreement for a period of time equal to the greater of thirty-six (36) months or the balance of the term of this Agreement. Following any termination of Employees employment by the Bank for Cause, Employee shall have no further rights under this Agreement (including any right to receive compensation or other benefits for any period after such termination).
For purposes of this Paragraph 6(d), the Bank shall have Cause to terminate Employees employment upon:
(i) A determination by the Bank, in good faith, that Employee (A) has breached in any material respect any of the terms or conditions of this Agreement, or (B) is engaging or has engaged in willful misconduct or conduct which is detrimental to the business prospects of the Bank or which has had or likely will have a material adverse effect on the Banks business or reputation. Prior to any termination by the Bank of Employees employment for a breach, failure to perform or conduct described in this subparagraph (i), the Bank shall give Employee written notice which describes such breach, failure to perform or conduct and if during a period of five (5) business days following such notice Employee cures or corrects the same to the reasonable satisfaction of the Bank, then this Agreement shall remain in full force and effect. However, notwithstanding the above, if the Bank has given written notice to Employee on a previous occasion of the same or a substantially similar breach, failure to perform or conduct, or of a breach, failure to perform or conduct which the Bank determines in good faith to be of substantially similar import, or if the Bank determines in good faith that the then current breach, failure to perform or conduct is not reasonably curable, then termination under this subparagraph (i) shall be effective immediately and Employee shall have no right to cure such breach, failure to perform or conduct.
(ii) The violation by Employee of any applicable federal or state law, or any applicable rule, regulation, order or statement of policy promulgated by any governmental agency or authority having jurisdiction over the Bank or any of its affiliates or subsidiaries (a Regulatory Authority, including without limitation the Federal Deposit
8
Insurance Corporation, the North Carolina Commissioner of Banks or any other banking regulator having legal jurisdiction over the Bank), which results from Employees gross negligence, willful misconduct or intentional disregard of such law, rule, regulation, order or policy statement and results in any substantial damage, monetary or otherwise, to the Bank or any of its affiliates or subsidiaries or to the Banks reputation;
(iii) The commission in the course of Employees employment with the Bank of an act of fraud, embezzlement, theft or proven personal dishonesty (whether or not resulting in criminal prosecution or conviction);
(iv) The conviction of Employee of any felony or any criminal offense involving dishonesty or breach of trust, or the occurrence of any event described in Section 19 of the Federal Deposit Insurance Act or any other event or circumstance which disqualifies Employee from serving as an employee or officer of, or a party affiliated with, the Bank or any of its affiliates or subsidiaries;
(v) Employee becomes unacceptable to, or is removed, suspended or prohibited from participating in the conduct of the Banks affairs (or if proceedings for that purpose are commenced) by any Regulatory Authority; and,
(vi) The occurrence of any event believed by the Bank, in good faith, to have resulted in Employee being excluded from coverage, or having coverage limited as to Employee as compared to other covered officers or employees, under the Banks then current blanket bond or other fidelity bond or insurance policy covering its directors, officers or employees.
7. Additional Regulatory Requirements . Notwithstanding anything contained in this Agreement to the contrary, it is understood and agreed that the Bank (or its successors in interest) shall not be required to make any payment or take any action under this Agreement if (a) the Bank is declared by any Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner, or if (b) in the opinion of counsel to the Bank such payment or action (i) would be prohibited by or would violate any provision of state or federal law applicable to the Bank, including without limitation the Federal Deposit Insurance Act and Chapter 53 of the North Carolina General Statutes as now in effect or hereafter amended, (ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any Regulatory Authority, or (iii) otherwise would be prohibited by any Regulatory Authority.
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8. Change in Control
(a) In the event of a Change in Control (as defined in Subparagraph (d) below), of the Bank, Employee shall be entitled to terminate this Agreement upon the occurrence within twelve (12) months following a change in control of any Termination Event as defined in Subparagraph (b) below.
(b) A Termination Event shall mean the occurrence of any of the following events:
(i) Employee is assigned any duties and/or responsibilities that are inconsistent with his/her position, duties, responsibilities, or status at the time of the Change in Control or with his/her reporting responsibilities or titles with the Bank in effect at such time;
(ii) Employees annual base salary is reduced below the amount in effect as of the effective date of a Change in Control or as the same shall have been increased from time to time following such effective date;
(iii) Employees life insurance, major medical insurance, disability insurance, dental insurance, stock option plans, stock purchase plans, deferred compensation plans, management retention plans, retirement plans, or similar plans or benefits being provided by the Bank to Employee as of the effective date of the Change in Control are reduced in their level, scope, or coverage, or any such insurance, plans, or benefits are eliminated, unless such reduction or elimination applies proportionately to all salaried employees of the Bank who participated in such benefits prior to such Change in Control; or
(iv) Employee is transferred to a location outside of Harnett County, North Carolina, without Employees express written consent.
A Termination Event shall be deemed to have occurred on the date such action or event is implemented or takes effect.
(c) In the event that Employee terminates this Agreement or the Bank terminates this Agreement pursuant to this Paragraph 8, the Bank will be obligated to pay or cause to be paid to Employee all amounts due and owing to the end of the term of this Agreement
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and an amount equal to one hundred-fifty percent (150%) of Employees base amount as defined in Section 28OG(b) (3) (A) of the Internal Revenue Code of 1986, as amended (the Code) .
(d) For the purposes of this Agreement, the term Change in Control shall mean any of the following events:
(i) After the effective date of this Agreement, any person (as such term is defined in Section 7 (j) (8) (A) of the Change in Bank Control Act of 1978), directly or indirectly, acquires beneficial ownership of voting stock, or acquires irrevocable proxies or any combination of voting stock and irrevocable proxies, representing twenty-five percent (25%) or more of any class of voting securities of the Bank, or acquires control of in any manner the election of a majority of the directors of the Bank;
(ii) The Bank consolidates or merges with or into another corporation, association, or entity, or is otherwise reorganized, where the Bank is not the surviving corporation in such transaction; or
(iii) All or substantially all of the assets of the Bank are sold or otherwise transferred to or are acquired by any other corporation, association, or other person, entity, or group.
Notwithstanding the other provisions of this Paragraph 8, a transaction or event shall not be considered a Change in Control (i) if, prior to the consummation or occurrence of such transaction or event, Employee and the Bank agree in writing that the same shall not be treated as a Change in Control for purposes of this Agreement or (ii) if the Bank reorganizes itself into the bank holding company form of organization where the shareholders of the Bank are given an opportunity to exchange their shares of common stock in the Bank for shares of common stock in the holding company.
(e) Amounts payable pursuant to this Paragraph 8 shall be paid, at the option of Employee either in one lump sum or in equal monthly payments over the remaining term of this Agreement.
(f) Following a Termination Event which gives rise to Employees rights hereunder, Employee shall have twelve (12) months from the date of occurrence of the
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Termination Event to terminate this Agreement pursuant to this Paragraph 8. Any such termination shall be deemed to have occurred only upon delivery to the Bank or any successor thereto, of written notice of termination which describes the Change in Control and Termination Event. If Employee does not so terminate this Agreement within such twelve month period, Employee shall thereafter have no further rights hereunder with respect to that Termination Event, but shall retain rights, if any, hereunder with respect to any other Termination Event as to which such period has not expired.
(g) It is the intent of the parties hereto that all payments made pursuant to this Agreement be deductible by the Bank for federal income tax purposes and not result in the imposition of an excise tax on Employee. Notwithstanding anything contained in this Agreement to the contrary, any payments to be made to or for the benefit of Employee which are deemed to be parachute payments as that term is defined in Section 28OG(b) (2) of the Code, shall be modified or reduced to the extent deemed to be necessary by the Banks Board of Directors to avoid the imposition of an excise tax on Employee under Section 4999 of the Code or the disallowance of a deduction to the Bank under Section 28OG(a) of the Code.
(h) In the event any dispute shall arise between Employee and the Bank as to the terms or interpretation of this Agreement, including this Paragraph 8, whether instituted by formal legal proceedings or otherwise, including any action taken by Employee to enforce the terms of this Paragraph 8 or in defending against any action taken by the Bank, the Bank shall reimburse Employee for all costs and expenses, proceedings or actions, in the event Employee prevails in any such action.
9. Successors and Assigns .
(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Bank which shall acquire, directly or indirectly, by conversion, merger, share exchange, purchase or otherwise, all or substantially all of the assets of the Bank.
(b) The Bank is contracting for the unique and personal skills of Employee. Therefore, Employee shall be precluded from assigning or delegating his/her rights or duties hereunder without first obtaining the written consent of the Bank.
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10. Modification; Waiver; Amendments . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties hereto. No waiver by either party hereto, at any time, of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided.
11. Applicable Law . This Agreement shall be governed in all respects whether as to validity, construction, capacity, performance or otherwise, by the laws of North Carolina, except to the extent that federal law shall be deemed to apply.
12. Severability . The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
13. Entire Agreement . This Agreement contains the entire agreement of the parties with respect to the transactions described herein and supersedes any and all other oral or written agreements heretofore made, and there are no representations or inducements by or to, or any agreements between, any of the parties hereto other than those contained herein in writing.
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IN WITNESS WHEREOF , the parties have executed this Agreement under seal and in such form as to be binding as of the day and year first hereinabove written.
NEW CENTURY BANK | ||
By: |
/s/ John Q. Shaw, Jr. |
|
John Q. Shaw, Jr. |
||
President and Chief Executive Officer |
ATTEST: |
/s/ Brenda B. Bonner
|
, Secretary |
/s/ Bobby Darrell Fowler |
||
Bobby Darrell Fowler |
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Exhibit 10(vi)
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
AGREEMENT
THIS AGREEMENT is made and entered into as of this 11 day of March, 2004 by and between the New Century Bank, a bank organized and existing under the laws of the State of North Carolina (the Bank), and John Q. Shaw, Jr., President and Chief Executive Officer of the Bank (the Executive).
WHEREAS , the Executive is an executive officer of the Bank and has for many years faithfully served the Bank. It is the consensus of the Banks Board of Directors (the Board) that the Executives services have been of exceptional merit, in excess of the compensation paid, and an invaluable contribution to the profits and position of the Bank. The Board further believes that the Executives experience, knowledge of corporate affairs, reputation, and industry contacts are of such value, and the Executives continued services so essential to the Banks future growth and profits, that it would suffer severe financial loss if the Executives service were terminated;
ACCORDINGLY , the Board has adopted the New Century Bank Executive Supplemental Retirement Plan (the Executive Plan), and the Bank and the Executive desire to enter into this Agreement under which the Bank agrees to make certain payments to the Executive after the Executives retirement or to the Executives beneficiary(ies) after the Executives death;
FURTHERMORE , the Bank and the Executive intend that this Executive Plan be considered an unfunded arrangement maintained primarily to provide supplemental retirement benefits for the Executive, and be considered a non-qualified benefit plan for purposes of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Executive is fully advised of the Banks financial status and has had substantial input in the design and operation of this benefit plan, and
NOW THEREFORE , in consideration of services the Executive has performed in the past and those to be performed in the future, and based upon the mutual promises and covenants herein contained, the Bank and the Executive agree as follows:
I. | DEFINITIONS |
[A] | Effective Date : |
The Effective Date of the Executive Plan is July 31, 2003.
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[B] | Plan Year : |
Plan Year means a calendar year from January 1st to December 31st. In the year of implementation, the term Plan Year shall mean the period from July 31, 2003 through December 31, 2003.
[C] | Retirement Date : |
Retirement Date means retirement from service with the Bank that becomes effective on the first day of the calendar month following the month in which the Executive reaches the Normal Retirement Age (Subparagraph I [I]) or such later date as the Executive actually retires.
[D] | Termination of Service : |
Termination of Service means the Executives voluntary resignation of service or the Banks discharge of the Executive without cause before the Normal Retirement Age (Subparagraph I [I]). If there is a dispute about the employment status of the Executive or the date of the Executives Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.
[E] | Index Retirement Benefit : |
The Index Retirement Benefit for a Plan Year equals the excess (if any) of the Index (Subparagraph I [F]) for that Plan Year over the Cost of Funds Expense (Subparagraph I [G]) for that Plan Year, divided by a factor equal to 1.36 minus the marginal tax rate.
[F] | Index : |
The Index for any Plan Year is the aggregate annual after-tax income from the life insurance contract(s) described hereinafter, as defined by FASB Technical Bulletin 85-4. This Index shall be applied as if such insurance contract(s) were purchased on the Effective Date of the Executive Plan.
Insurance Company: | Massachusetts Mutual Life Insurance Company | |
Policy Form: | Flexible Premium Adjustable Life Insurance | |
Policy Name: | SL11B - 9900 | |
Insureds Age and Sex: | 62 / Male | |
Riders: | None | |
Ratings: | None | |
Option: | Level Death Benefit | |
Face Amount: | $1,783,600 | |
Premiums Paid: | $980,000 | |
Number of Premium Payments: | Single Premium Payment |
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Assumed Purchase Date: | July 28, 2003 | |
Insurance Company: | Jefferson Pilot Life Insurance Company | |
Policy Form: | Flexible Premium Adjustable Life Insurance | |
Policy Name: | ESP100 | |
Insureds Age and Sex: | 62 / Male | |
Riders: | None | |
Ratings: | None | |
Option: | Level Death Benefit | |
Face Amount: | $807,000 | |
Premiums Paid: | $430,000 | |
Number of Premium Payments: | Single Premium Payment | |
Assumed Purchase Date: | July 28, 2003 |
If the contract or contracts of life insurance are actually purchased by the Bank, the actual policies as of the dates they were actually purchased shall be used in calculations under this Executive Plan. If the contract or contracts of life insurance are not purchased or subsequently are surrendered or lapse, the Bank shall receive annual policy illustrations that assume the above-described policies were purchased or had not subsequently surrendered or lapsed. The illustration shall be received from the respective insurance companies and will indicate the increase in policy values for purposes of calculating the amount of the Index.
In either case, references to the life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to purchase life insurance and, if purchased, the Executive and the Executives beneficiary(ies) shall have no ownership interests in such policy or policies and shall always have no greater interest in the benefits under this Executive Plan than that of an unsecured creditor of the Bank.
[G] | Cost of Funds Expense : |
The Cost of Funds Expense for any Plan Year is calculated by taking the sum of the amount of premiums for the life insurance policies described in the definition of Index plus the amount of any after-tax benefits paid to the Executive under the Executive Plan (Paragraph II hereinafter) plus the amount of all previous years after-tax Costs of Funds Expense, and multiplying that sum by the Average After-Tax Cost of Funds (Subparagraph I [K]).
[H] | Change in Control : |
The term Change in Control shall have the same meaning specified in any severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Bank. If the Executive is not a party to a severance or
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employment agreement containing a definition of Change in Control, Change in Control means any of the following events occur:
[i] Merger : New Century Bancorp, Inc., a North Carolina corporation of which the Bank is a wholly owned subsidiary (the Company), merges into or consolidates with another corporation, or merges another corporation into the Company, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation,
[ii] Acquisition of Significant Share Ownership : After the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of twenty-five percent (25%) or more of the combined voting power of the Companys voting securities outstanding (but this clause [ii] shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of the Company or any subsidiary[ies]). For purposes of this Agreement, subsidiary means an entity in which the Company beneficially owns fifty percent (50%) or more of the outstanding voting securities, whether the Company owns the shares directly or owns the shares indirectly through an intermediate subsidiary,
[iii] Change in Board Composition . During any period of two consecutive years, individuals who constitute the Companys board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that - for purposes of this clause [iii] - each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds ( 2 / 3 ) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or
[iv] Sale of Assets : The Company sells to a third party all or substantially all of the Companys assets. For this purpose, sale of all or substantially all of the Companys assets includes sale of the shares or assets of the Bank alone.
[I] | Normal Retirement Age : |
Normal Retirement Age means age sixty-seven (67).
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[J] | Benefit Accounting : |
The Bank shall account for the benefit provided herein using the regulatory accounting principles of the Banks primary federal regulator. The Bank shall establish an accrued liability retirement account for the Executive into which appropriate reserves shall be accrued.
[K] | Average After-Tax Cost of Funds : |
Average After-Tax Cost of Funds means, at any particular time, a ratio, the numerator of which is the total interest expense, as set forth on Schedule RI-Income Statement of the Banks most recently filed Consolidated Report of Condition and Income (the Call Report), and the denominator of which is an amount equal to: (i) the amount of deposits in domestic offices, from Schedule RC-K of the Call Report, plus (ii) the amount of Federal funds purchased and securities sold under agreements to repurchase and borrow, as set forth on Schedule RC-Balance Sheet of the Call Report, times the inverse of the Bank s combined marginal income tax rate (or times the inverse of the highest personal federal and state, in the State where the Bank is located, income tax rate as determined by law, if the Bank is taxed as an S-Corporation).
[L] | Disability : |
Disability means the Executive suffers a sickness, accident or injury determined by the carrier of any individual or group disability insurance policy covering the Executive, or by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. The Executive must submit proof to the plan administrator (Paragraph VI) of the carriers or Social Security Administrations determination upon the request of the plan administrator.
II. | INDEX BENEFITS |
[A] | Normal Retirement Age Benefits : |
Subject to Subparagraph II [D] hereinafter, an Executive who remains in the employ of the Bank until the Normal Retirement Age (Subparagraph I [I]) shall be entitled to receive an annual benefit amount equal to the amount set forth in Exhibit A-1. Said payments shall be made monthly (1/12th of the annual benefit) beginning thirty (30) days after the Executives retirement and shall continue until the Executive attains age seventy-nine (79). Subject to Subparagraph II [A] [i], after attaining age seventy-nine (79) the Index Retirement Benefit (Subparagraph I [E]) for each Plan Year after the Plan Year in which the Executive attains seventy-nine (79), and for the portion of the Plan
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Year after which the Executive attains seventy-nine (79), shall be paid to the Executive until the Executives death.
[i] | The Index Retirement Benefit Adjustment : |
The Index Retirement Benefit payment for the first Plan Year after the Executive attains seventy-nine (79) shall be adjusted according to a number equal to the aggregate of the Index Retirement Benefit (Subparagraph I [E]) for each Plan Year from the Effective Date of this Agreement until the Plan Year after the Executive attains seventy-nine (79) over the aggregate of the benefit payments the Executive actually received under the terms of this Executive Plan through that date. As an illustration, if the Executive retires at age sixty-seven (67) and the aggregate annual benefits received by the Executive until the Plan Year the Executive attains seventy-nine (79) is $900,000, and the aggregate Index Retirement Benefits for each Plan Year from the Effective Date of this Agreement to the Plan Year the Executive attains seventy-nine (79) is $1,000,000, then the Executives Index Retirement Benefit in the first Plan Year said payment is payable to the Executive would be increased by $100,000. If said number is a deficit, then the Index Retirement Benefit for the Plan Year when the Executive attains seventy-nine (79) and each subsequent Plan Years benefit (if necessary) shall be reduced until the entire deficit has been recovered by the Bank. For each year thereafter, the Index Retirement Benefit payment shall be paid as set forth in Subparagraph I [E]. For example, if the Executive retires at age sixty-seven (67) and the aggregate annual benefits received by the Executive until the Plan Year the Executive attains seventy-nine (79) is $1,000,000, but the aggregate Index Retirement Benefits for each Plan Year from the Effective Date of this Agreement to the Plan Year the Executive attains seventy-nine (79) is $900,000 and the Executives Index Retirement Benefit was $90,000 in the first year, then the Executive would not receive any Index Retirement Benefit in the first year, and the second years Index Retirement benefit would be reduced by $10,000.
[B] | Benefits for Termination of Service Before Normal Retirement Age : |
If the Executive suffers a Termination of Service, the Executive shall be entitled to receive an annual benefit amount, or a percentage (indicated below) of that annual benefit amount if the Executive has not had four (4) full years of employment with the Bank, based on the accrued liability retirement account balance at the end of the Plan Year preceding the date on which Termination of Service occurred. Payment of benefits under this Subparagraph II [B] shall commence thirty (30) days after the Executives Normal Retirement Age (Subparagraph I [I]) and shall continue until the Executive attains seventy-nine (79). Subject to Subparagraph II [A] [i], the following percentage of the Index Retirement Benefit for each Plan Year after the Plan Year in which the Executive attains seventy-nine (79), and for the portion of the Plan Year after which the
6
Executive attains seventy-nine (79), shall be paid to the Executive until the Executives death.
Number of Full Years
|
Vested Percentage
(to a maximum of 100%) |
|
Less than 1 |
0% | |
1 |
25% | |
2 |
50% | |
3 |
75% | |
4 |
100% |
[C] | Death : |
If the Executive dies while there is a balance in the Executives accrued liability retirement account, then the unpaid balance shall be paid in a single lump sum to the individual or individuals designated in writing by the Executive filed with the Bank. In the absence of or a failure to designate a beneficiary, the unpaid balance shall be paid in a lump sum to the personal representative of the Executives estate. If, upon death, the Executive shall have received the total balance of the Executives accrued liability retirement account, then no further benefit shall be due hereunder. In any event, upon the death of the Executive, the Executives beneficiary shall not be entitled to receive any Index Retirement Benefit.
[D] | Discharge for Cause : |
Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement and this Agreement shall terminate if Termination of Service is a result of discharge for Cause. The term Cause means:
[i] A determination by the Bank, in good faith, that the Executive [a] has breached in any material respect any of the terms or conditions of this Agreement, or [b] is engaging or has engaged in willful misconduct or conduct which is detrimental to the business prospects of the Bank or which has had or likely will have a material adverse effect on the Banks business or reputation. The Executive shall not be deemed to have been discharged for Cause for purposes of this Subparagraph II [D] [i] unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of at least three-fourths (¾) of the directors of the Bank then in office at a meeting of the board of directors called and held for such purpose, which resolution shall (a) contain findings that, in the good faith opinion of the board, the Executive has committed an act constituting Cause and (b) specify the particulars thereof. Notice of that meeting and the proposed termination for
7
Cause shall be given to the Executive a reasonable amount of time before the boards meeting. The Executive and his counsel (if the Executive chooses to have counsel present) shall have a reasonable opportunity to be heard by the board at the meeting. Nothing in this Agreement limits the Executives or his beneficiaries right to contest the validity or propriety of the boards determination of Cause, and they shall have the right to contest the validity or propriety of the boards determination of Cause even if that right does not exist under any employment agreement of the Executive,
[ii] The violation by the Executive of any applicable federal or state law, or any applicable rule, regulation, order or statement of policy promulgated by any governmental agency or authority having jurisdiction over the Bank or any of its affiliates or subsidiaries (a Regulatory Authority, including without limitation the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks), which results from the Executives gross negligence, willful misconduct, or intentional disregard of such law, rule, regulation, order, or policy statement and results in any substantial damage, monetary or otherwise, to the Bank or any of its affiliates or subsidiaries or to the Banks reputation,
[iii] The commission in the course of the Executives employment with the Bank of an act of fraud, embezzlement, or theft or proven personal dishonesty (whether or not resulting in criminal prosecution or conviction),
[iv] The conviction of the Executive of any felony or any criminal offense involving dishonesty or breach of trust, or the occurrence of any event described in Section 19 of the Federal Deposit Insurance Act or any other event or circumstance which disqualifies the Executive from serving as an employee or executive officer of, or a party affiliated with, the Bank or its bank holding company,
[v] The Executive becomes unacceptable to, or is removed, suspended or prohibited from participating in the conduct of the Banks affairs (or if proceedings for that purpose are commenced) by any Regulatory Authority, and,
[vi] The occurrence of any event believed by the Bank, in good faith, to have resulted in the Executive being excluded from coverage, or having coverage limited as to the Executive as compared to other covered officers or employees, under the Banks then current blanket bond or other fidelity bond or insurance policy covering its directors, officers or employees.
8
[E] | Death Benefit : |
Except as set forth above, there is no death benefit provided under this Agreement.
[F] | Disability Benefit : |
If the Executives employment is terminated because of Disability before Normal Retirement Age, the Executive shall be one hundred percent (100%) vested in the accrued liability retirement account balance on the date of said Disability upon submission to the Bank of written documentation and verification of Disability. The accrued liability retirement account shall be credited with interest annually at a rate of two percent (2%) plus the prime interest rate each Plan Year. The annual benefit under this Subparagraph II [F] shall be calculated based on the accrued liability retirement account balance on the date of Disability. Payment of the annual benefit shall be made monthly (1/12th of the annual benefit) beginning thirty (30) days after the Executives Termination of Service and shall continue until the Executive attains seventy-nine (79). Subject to Subparagraph II [A] [i] of this Agreement, the following percentage of the Index Retirement Benefit for each Plan Year after the Plan Year in which the Executive attains seventy-nine (79), and for the portion of the Plan Year after which the Executive attains seventy-nine (79), shall be paid to the Executive until the Executives death.
Number of Full Years
|
Vested Percentage
(to a maximum of 100%) |
|
Less than 1 |
0% | |
1 |
25% | |
2 |
50% | |
3 |
75% | |
4 |
100% |
III. | RESTRICTIONS UPON FUNDING |
The Bank shall have no obligation to set aside, earmark, or entrust any fund or money with which to pay its obligations under this Executive Plan. The Executive, the Executives beneficiary(ies), or any successor in interest shall be and remain simply a general creditor of the Bank in the same manner as any other creditor having a general claim for matured and unpaid compensation.
The Bank reserves the absolute right, in its sole discretion, to fund the obligations undertaken by this Executive Plan or to refrain from funding the same and to determine the extent, nature, and method of such funding. If the Bank elects to fund this Executive Plan in whole or in part through the purchase of life insurance, mutual funds, disability policies, or annuities, the Bank reserves the absolute right, in its sole discretion, to terminate such funding at
9
any time in whole or in part. At no time shall any Executive be deemed to have any lien, nor right, title, or interest in or to any specific funding investment or to any assets of the Bank.
If the Bank elects to invest in a life insurance, disability, or annuity policy upon the life of the Executive, the Executive shall assist the Bank by freely submitting to a physical exam and supplying such additional information necessary to obtain such insurance or annuities.
IV. | CHANGE IN CONTROL |
[A] | Accelerated Payment of Normal Retirement Age Accrued Liability Retirement Account Balance if Termination of Service Occurs Within 12 Months : |
If a Change in Control (Subparagraph I [H]) occurs and if Termination of Service (Subparagraph I [D]) occurs within twelve (12) months thereafter other than for Cause, the Executive shall receive the Normal Retirement Age accrued liability retirement account balance Four Hundred Sixty Four Thousand One Hundred Ninety Nine and 00/100 th Dollars ($464,199.00) without reduction for the time value of money or other discount. The Bank shall pay the Change in Control benefit under this Subparagraph IV [A] to the Executive in one lump sum within three days after the Executives Termination of Service.
[B] | Gross Up for Taxes : |
[i] | Additional Payment to Account for Excise Taxes : |
If as a result of a Change in Control the Executive becomes entitled to acceleration of benefits under this Agreement or under any other plan or agreement of or with the Bank or its affiliates (together, the Total Benefits), and if any of the Total Benefits will be subject to the Excise Tax as set forth in sections 280G and 4999 of the Internal Revenue Code of 1986 (the Excise Tax), the Bank shall pay to the Executive the following additional amounts, consisting of (1) a payment equal to the Excise Tax payable by the Executive on the Total Benefits under section 4999 of the Internal Revenue Code (the Excise Tax Payment), and (2) a payment equal to the amount necessary to provide the Excise Tax Payment net of all income, payroll and excise taxes. Together, the additional amounts described in clauses (1) and (2) are referred to in this Agreement as the Gross-Up Payment Amount.
[a] Calculating the Excise Tax . For purposes of determining whether any of the Total Benefits will be subject to the Excise Tax and for purposes of determining the amount of the Excise Tax,
10
[1] Determination of Parachute Payments Subject to the Excise Tax : any other payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executives Termination of Employment (whether under the terms of this Agreement or any other agreement or any other benefit plan or arrangement with the Bank, any person whose actions result in a Change in Control, or any person affiliated with the Bank or such person) shall be treated as parachute payments within the meaning of section 280G(b)(2) of the Internal Revenue Code, and all excess parachute payments within the meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of the certified public accounting firm that is retained by the Bank as of the date immediately before the Change in Control (the Accounting Firm) such other payments or benefits do not constitute (in whole or in part) parachute payments, or such excess parachute payments represent (in whole or in part) reasonable compensation for services actually rendered within the meaning of section 280G(b)(4) of the Internal Revenue Code in excess (as defined in section 280G(b)(3) of the Internal Revenue Code), or are otherwise not subject to the Excise Tax,
[2] Calculation of Benefits Subject to Excise Tax : the amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to the lesser of (a) the total amount of the Total Benefits reduced by the amount of such Total Benefits that in the opinion of the Accounting Firm are not parachute payments, or (b) the amount of excess parachute payments within the meaning of section 280G(b)(1) (after applying clause (1), above), and
[3] Value of Noncash Benefits and Deferred Payments : the value of any noncash benefits or any deferred payment or benefit shall be determined by the Accounting Firm in accordance with the principles of sections 280G(d)(3) and (4) of the Internal Revenue Code.
[b] Assumed Marginal Income Tax Rate . For purposes of determining the amount of the Gross-Up Payment Amount, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar years in which the Gross-Up Payment Amount is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executives residence on the date of termination of employment, net of the reduction in federal income taxes that can be obtained from deduction of such state and
11
local taxes (calculated by assuming that any reduction under Section 68 of the Internal Revenue Code in the amount of itemized deductions allowable to the Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive, and applicable federal FICA and Medicare withholding taxes).
[c] Return of Reduced Excise Tax Payment or Payment of Additional Excise Tax . If the Excise Tax is later determined to be less than the amount taken into account hereunder when the Executives employment terminated, the Executive shall repay to the Bank - when the amount of the reduction in Excise Tax is finally determined - the portion of the Gross-Up Payment Amount attributable to the reduction (plus that portion of the Gross-Up Payment Amount attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment Amount being repaid by the Executive to the extent that the repayment results in a reduction in Excise Tax, FICA, and Medicare withholding taxes and/or a federal, state, or local income tax deduction).
If the Excise Tax is later determined to be more than the amount taken into account hereunder when the Executives employment terminated (due, for example, to a payment whose existence or amount cannot be determined at the time of the Gross-Up Payment Amount), the Bank shall make an additional Gross-Up Payment Amount to the Executive for that excess (plus any interest, penalties, or additions payable by the Executive for the excess) when the amount of the excess is finally determined.
[ii] | Responsibilities of the Accounting Firm and the Bank : |
[a] Determinations Shall Be Made by the Accounting Firm . Subject to the provisions of Subparagraph IV [B] [i], all determinations required to be made under this Subparagraph IV [B] [ii] B including whether and when a Gross-Up Payment Amount is required, the amount of the Gross-Up Payment Amount and the assumptions to be used to arrive at the determination (collectively, the Determination) shall be made by the Accounting Firm, which shall provide detailed supporting calculations both to the Bank and the Executive within fifteen (15) business days after receipt of notice from the Bank or the Executive that there has been a Gross-Up Payment Amount, or such earlier time as is requested by the Bank.
12
[b] Fees and Expenses of the Accounting Firm and Agreement with the Accounting Firm . All fees and expenses of the Accounting Firm shall be borne solely by the Bank. The Bank shall enter into any agreement requested by the Accounting Firm in connection with the performance of its services hereunder.
[c] Accounting Firms Opinion . If the Accounting Firm determines that no Excise Tax is payable by the Executive, the Accounting Firm shall furnish the Executive with a written opinion to that effect, and to the effect that failure to report Excise Tax, if any, on the Executives applicable federal income tax return will not result in the imposition of a negligence or similar penalty.
[d] Accounting Firms Determination Is Binding; Underpayment and Overpayment . The Determination by the Accounting Firm shall be binding on the Bank and the Executive. Because of the uncertainty in determining whether any of the Total Benefits will be subject to the Excise Tax at the time of the Determination, it is possible that a Gross-Up Payment Amount that should have been made will not have been made by the Bank (Underpayment), or that a Gross-Up Payment Amount will be made that should not have been made by the Bank (Overpayment). If, after a Determination by the Accounting Firm, the Executive is required to make a payment of additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred. The Underpayment [together with interest at the rate provided in section 1274(d)(2)(B) of the Internal Revenue Code] shall be paid promptly by the Bank to or for the benefit of the Executive. If the Gross-Up Payment Amount exceeds the amount necessary to reimburse the Executive for his Excise Tax according to Subparagraph IV [B] [i], the Accounting Firm shall determine the amount of the Overpayment that has been made. The Overpayment [together with interest at the rate provided in section 1274(d)(2)(B) of the Internal Revenue Code] shall be paid promptly by the Executive to or for the benefit of the Bank. Provided that his expenses are reimbursed by the Bank, the Executive shall cooperate with any reasonable requests by the Bank in any contests or disputes with the Internal Revenue Service relating to the Excise Tax.
[e] Accounting Firm Conflict of Interest . If the Accounting Firm is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control, the Executive may appoint another nationally recognized public accounting firm to make the Determinations required hereunder (in which case the term Accounting Firm as used in
13
this Agreement shall be deemed to refer to the accounting firm appointed by the Executive under this paragraph).
V. | MISCELLANEOUS |
[A] | Alienability and Assignment Prohibition : |
Neither the Executive, nor the Executives surviving spouse, nor any other beneficiary(ies) under this Executive Plan shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder, nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony, or separate maintenance owed by the Executive or the Executives beneficiary(ies), nor be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise. If the Executive or any beneficiary attempts assignment, commutation, hypothecation, transfer, or disposal of the benefits hereunder, the Banks liabilities shall forthwith cease and terminate.
[B] | Binding Obligation of the Bank and any Successor in Interest : |
No sale, merger, or consolidation of the Company or the Bank shall occur unless the new or surviving entity expressly acknowledges the obligations under this Executive Plan and agrees in writing to assume and discharge the duties and obligations of the Bank under this Executive Plan. This Executive Plan shall be binding upon the parties hereto, their successors, beneficiaries, heirs, and personal representatives.
[C] | Amendment or Revocation : |
Subject to Paragraph VII, it is agreed by and between the parties hereto that, during the lifetime of the Executive, this Executive Plan may be amended or revoked at any time or times, in whole or in part, by the mutual written consent of the Executive and the Bank.
[D] | Gender : |
Whenever in this Executive Plan words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine, or neuter gender, whenever they should so apply.
14
[E] | Effect on Other Bank Benefit Plans : |
Nothing contained in this Executive Plan shall affect the right of the Executive to participate in or be covered by any qualified or non-qualified pension, profit-sharing, group, bonus or other supplemental compensation or fringe benefit plan constituting a part of the Banks existing or future compensation structure.
[F] | Headings : |
Headings and subheadings in this Executive Plan are inserted for reference and convenience only and shall not be deemed a part of this Executive Plan.
[G] | Applicable Law : |
The laws of the State of North Carolina shall govern the validity and interpretation of this Agreement.
[H] | 12 U.S.C. section 1828(k) : |
Any payments made to the Executive under this Executive Plan or otherwise are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) or any regulations promulgated thereunder.
[I] | Partial Invalidity : |
If any term, provision, covenant, or condition of this Executive Plan is determined by an arbitrator or a court, as the case may be, to be invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant, or condition invalid, void, or unenforceable, and the Executive Plan shall remain in full force and effect notwithstanding such partial invalidity.
[J] | Employment : |
No provision of this Executive Plan shall be deemed to restrict or limit any existing employment agreement by and between the Bank and the Executive, nor shall any conditions herein create specific employment rights to the Executive nor limit the right of the Employer to discharge the Executive with or without cause. In a similar fashion, no provision shall limit the Executives right to voluntarily sever employment at any time.
15
[K] | Legal Expenses After a Change in Control : |
The Bank is aware that upon the occurrence of a Change in Control, management of the Bank may cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Bank to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Bank that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if after a Change in Control it appears to Executive that: (a) the Bank has failed to comply with any of its obligations under this Agreement; or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable or instituted any litigation or other legal action designed to deny, diminish or to recover from, Executive the benefits intended to be provided to Executive hereunder, the Bank irrevocably authorizes Executive from time to time to retain counsel of his choice at the Banks expense as provided in this Subparagraph V [K], to represent Executive in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder or other person affiliated with the Bank, in any jurisdiction. The fees and expenses of counsel selected from time to time by Executive as herein above provided shall be paid or reimbursed to Executive by the Bank on a regular, periodic basis upon presentation by Executive of a statement or statements prepared by such counsel in accordance with such counsels customary practices, up to a maximum aggregate amount of Five Hundred Thousand and 00/100 th Dollars ($500,000.00). The Banks obligation to pay the Executives legal fees provided by this Subparagraph V [K] operates separately from, and in addition to, any legal fee reimbursement obligation the Bank or the Company may have with the Executive under any employment, severance, or other agreement with the Executive.
VI. | ERISA PROVISION |
[A] | Named Fiduciary and Plan Administrator : |
The Named Fiduciary and Plan Administrator of this Executive Plan shall be New Century Bank until its resignation or removal by the Board. As Named Fiduciary and Plan Administrator, the Bank shall be responsible for the management, control and administration of the Executive Plan. The Named Fiduciary may delegate to others certain aspects of the management and operation responsibilities of the Executive Plan including the employment of advisors and the delegation of ministerial duties to qualified individuals.
16
[B] | Claims Procedure : |
If a dispute arises over benefits under this Executive Plan and benefits are not paid to the Executive (or to the Executives beneficiary(ies) in the case of the Executives death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Named Fiduciary and Plan Administrator named above within 90 days from the date payments are refused. The Named Fiduciary and Plan Administrator shall review the written claim and if the claim is denied, in whole or in part, they shall provide in writing within 90 days of receipt of such claim the specific reasons for such denial, reference to the provisions of this Executive Plan upon which the denial is based and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional steps to be taken by claimants if a further review of the claim denial is desired. A claim shall be deemed denied if the Named Fiduciary and Plan Administrator fail to take any action within the 90-day period.
If claimants desire a second review they shall notify the Named Fiduciary and Plan Administrator in writing within 90 days of the first claim denial. Claimants may review this Executive Plan or any documents relating thereto and submit any written issues and comments they may feel appropriate. In its sole discretion, the Named Fiduciary and Plan Administrator shall then review the second claim and provide a written decision within 90 days of receipt of such claim. This decision shall likewise state the specific reasons for the decision and shall include reference to specific provisions of the Plan Agreement upon which the decision is based.
VII. | TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF CHANGES IN THE LAW, RULES OR REGULATIONS |
The Bank is entering into this Agreement upon the assumption that certain existing tax laws, rules and regulations will continue in effect in their current form. If any said assumptions should change and said change has a detrimental effect on this Executive Plan, then the Bank reserves the right to terminate or modify this Agreement accordingly. Upon a Change in Control (Subparagraph I [H]), this paragraph shall become null and void effective immediately upon the Change in Control.
17
IN WITNESS WHEREOF , the parties hereto acknowledge that each has carefully read this Agreement and executed the original thereof as of date first set forth above, and that upon execution each has received a conforming copy.
NEW CENTURY BANK Dunn, North Carolina |
||||||||
/s/ Brenda B. Bonner | By: |
/s/ C L. Tart, |
||||||
|
|
|||||||
Witness |
Its: |
Chairman |
||||||
EXECUTIVE | ||||||||
/s/ John Q. Shaw, Jr |
||||||||
|
||||||||
John Q. Shaw, Jr. |
18
BENEFICIARY DESIGNATION FORM FOR THE EXECUTIVE SUPPLEMENTAL
RETIREMENT PLAN AGREEMENT
I. | PRIMARY DESIGNATION |
(You may refer to the beneficiary designation information prior to completion of this form.)
A. | Person(s) as a Primary Designation : |
(Please indicate the percentage for each beneficiary.)
Name: Relationship: / %
Address:
(Street) (City) (State) (Zip)
Name: Relationship: / %
Address:
(Street) (City) (State) (Zip)
Name: Relationship: / %
Address:
(Street) (City) (State) (Zip)
Name: Relationship: / %
Address:
(Street) (City) (State) (Zip)
B. | Estate as a Primary Designation : |
My Primary Beneficiary is The Estate of as set forth in the last will and testament dated the day of , and any codicils thereto.
C. | Trust as a Primary Designation : |
Name of the Trust:
Execution Date of the Trust: / /
Name of the Trustee:
Beneficiary(ies) of the Trust (please indicate the percentage for each beneficiary):
_____________________________________________________________________________________________
_____________________________________________________________________________________________
Is this an Irrevocable Life Insurance Trust? Yes No
(If yes and this designation is for a Split Dollar Agreement, an Assignment of Rights form should be completed.)
19
II. | SECONDARY (CONTINGENT) DESIGNATION |
A. | Person(s) as a Secondary (Contingent) Designation : |
(Please indicate the percentage for each beneficiary.)
Name: Relationship: / %
Address:
(Street) (City) (State) (Zip)
Name: Relationship: / %
Address:
(Street) (City) (State) (Zip)
Name: Relationship: / %
Address:
(Street) (City) (State) (Zip)
Name: Relationship: / %
Address:
(Street) (City) (State) (Zip)
B. | Estate as a Secondary (Contingent) Designation : |
My Secondary Beneficiary is The Estate of as set forth in the last will and testament dated the day of ,
C. | Trust as a Secondary (Contingent) Designation : |
Name of the Trust:
Execution Date of the Trust: / /
Name of the Trustee:
Beneficiary(ies) of the Trust (please indicate the percentage for each beneficiary):
_____________________________________________________________________________________________
_____________________________________________________________________________________________
All sums payable under the Executive Supplemental Retirement Plan Agreement by reason of my death shall be paid to the Primary Beneficiary(ies), if he or she survives me, and if no Primary Beneficiary(ies) shall survive me, then to the Secondary (Contingent) Beneficiary(ies). This beneficiary designation is valid until the Executive notifies the Bank in writing.
|
|
|||
John Q. Shaw, Jr. |
Date |
20
EXHIBIT A-1
For
John Q. Shaw, Jr.
End of
Year Age: |
Benefit
Amount |
|||
John Q. Shaw, Jr. |
67 | $17,149 | ||
68 | $53,133 | |||
69 | $54,134 | |||
70 | $55,174 | |||
71 | $56,118 | |||
72 | $57,198 | |||
73 | $58,457 | |||
74 | $59,779 | |||
75 | $61,057 | |||
76 | $62,159 | |||
77 | $63,358 | |||
78 | $64,249 |
21
Exhibit 13
NEW CENTURY BANCORP, INC.
2003 Annual Report
New Century Bancorp, Inc.
TABLE OF CONTENTS
Page No.
|
||
Report of Management |
1 | |
Selected Financial and Other Data |
3 | |
Managements Discussion and Analysis |
4 | |
Independent Auditors Report |
14 | |
Financial Statements |
||
Consolidated Balance Sheets |
15 | |
Consolidated Statements of Operations |
16 | |
Consolidated Statements of Comprehensive Income |
17 | |
Consolidated Statements of Changes in Shareholders Equity |
18 | |
Consolidated Statements of Cash Flows |
19 | |
Notes to Financial Statements |
20 | |
Directors and Executive Officers |
39 | |
General Corporate Information |
40 |
New Century Bancorp, Inc.
Report of Management
March 18, 2004
To our Shareholders, Customers and Friends:
The year 2003 was an exciting one for New Century Bancorp, and we are pleased to report our results of operation.
New Century Bancorp (the Company), the holding company for New Century Bank and New Century Bank of Fayetteville, reported net income for the year ended December 31, 2003 of $906,000 compared to $858,000 for the same period in 2002. We are especially pleased with these results considering that both years included expenses related to expansion into new markets. As of December 31, 2003, the Company had total deposits of $152 million and total loans of $151.9 million, compared to total deposits of $105.5 million and total loans of $100.0 million as of December 31, 2002, increases of 44% and 52%, respectively.
Total assets for the Company as of December 31, 2003 were $191.8 million, compared to $126.4 million at December 31, 2002, an increase of 52%.
Highlights for 2003 include:
| We took an important step in the history of our organization by gaining shareholder and regulatory approval for the formation of New Century Bancorp, which became the holding company for New Century Bank and New Century Bank of Fayetteville. The holding company gives us greater flexibility in how we conduct business and how we continue to grow our company. |
| Early in 2003, we announced plans to participate in the opening of a new community bank in Fayetteville, NC. After a successful stock offering, New Century Bank opened a new banking office in Fayetteville on June 24, 2003. With shareholder and regulatory approvals in place, this office became New Century Bank of Fayetteville on January 2, 2004. A stellar staff is serving customers there and the future looks bright for their continued success. |
| During the year, we began a relationship with UVEST , a registered broker/dealer, in order to offer investment services. As a full-service, financial services provider, it is important that we offer these products to our customers, working with them to meet their short- and long-term financial goals. Going forward, we will focus even more on this important area of our business which is a good source of noninterest income for the Company. |
| In May, we celebrated our third full year in operation. In recognition of this three-year-milestone, we offered a 3-Month CD yielding 3%. The campaign was a success, bringing in $16.8 million in new deposits, much of which has stayed with our Bank. |
- 1 -
New Century Bancorp, Inc.
Report of Management
| In October, we enacted our second eleven-for-ten stock split in the form of a 10% stock dividend, at the same time we converted our shares from New Century Bank to New Century Bancorp. We were pleased to be able to reward our shareholders in this way, in recognition of their support and belief in us and our ability to bring them a positive return on their investment. |
| New Century Bank achieved the number one ranking in deposit share in Dunn, NC, as of June 30, 2003, according to data provided by the FDIC. To have achieved this ranking in only a little more than three years was indeed gratifying. We appreciate the support of our customers and this community in helping us to attain this goal. |
| As 2003 came to a close, we announced plans for a new office of New Century Bank in Goldsboro, NC. Glenn Chitty, senior vice president and city executive, pulled together an exceptional staff of experienced bankers to serve customers in that market. To say they hit the ground running would be an understatement. The office opened early in the first quarter of 2004, and is already experiencing great success in attracting customers. |
Key interest rates stayed at historic lows for most of the year, making it a great year for mortgage loans and refinancings. Our mortgage department worked tirelessly to meet the mortgage needs of our customers, helping them to either purchase new homes, or to lower their payments or shorten the term of their loan or both on an existing home. Attractive interest rates have continued into early 2004, and could continue through much of the year. If you have not already taken advantage of this interest rate environment, please give us the opportunity to serve you.
With New Century Bank of Fayetteville fully operational as an independent bank, the New Century Bank office in Goldsboro open and gaining customers each day, and our first two offices of New Century Bankin Dunn and Clintoncontinuing to attract new customers, we are looking forward to another year of positive financial results in 2004. We still offer neighbor helping neighbor service at all of our offices, and believe that our customers benefit from that philosophy of doing business. If you are not banking with us, please give us the opportunity to serve you. You will not be disappointed.
Our country has been at war for more than a year nowwith troops serving overseas and here in the United States, fighting the war on terrorism. We appreciate all that they do, and always keep them in our thoughts and prayers. May God continue to bless America.
Your comments and suggestions on improving our performance are always welcome. Thank you for investing with us, banking with us, and for your overall support of our Company.
Sincerely,
/s/ John Q. Shaw |
/s/ C. L. Bozie Tart |
|||
|
|
|||
John Q. Shaw President and CEO |
C. L. Bozie Tart Chairman of the Board |
- 2 -
New Century Bancorp, Inc.
Selected Financial and Other Data
At or for the year ended December 31,
|
||||||||||||
2003
|
2002
|
2001
|
||||||||||
(Dollars in thousands, except per
share data) |
||||||||||||
Operating Data: |
||||||||||||
Total interest income |
$ | 9,272 | $ | 7,124 | $ | 5,193 | ||||||
Total interest expense |
3,217 | 2,760 | 2,375 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Net interest income |
6,055 | 4,364 | 2,818 | |||||||||
Provision for loan losses |
1,042 | 872 | 564 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Net interest income after provision for loan losses |
5,013 | 3,492 | 2,254 | |||||||||
Total non-interest income |
1,239 | 731 | 502 | |||||||||
Total non-interest expense |
4,850 | 2,869 | 2,027 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
1,402 | 1,354 | 729 | |||||||||
Provision for income taxes |
496 | 496 | 136 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Net income |
$ | 906 | $ | 858 | $ | 593 | ||||||
|
|
|
|
|
|
|
|
|
||||
Per Common Share Data: (1) |
||||||||||||
Earnings per share - basic |
$ | .43 | $ | .51 | $ | .48 | ||||||
Earnings per share - diluted |
.42 | .50 | .47 | |||||||||
Market Price |
||||||||||||
High |
18.18 | 18.18 | 10.54 | |||||||||
Low |
13.64 | 9.92 | 9.00 | |||||||||
Close |
16.23 | 15.45 | 10.02 | |||||||||
Book value |
10.73 | 9.81 | 9.08 | |||||||||
Selected Year-End Balance Sheet Data: |
||||||||||||
Loans |
$ | 151,930 | $ | 100,008 | $ | 63,563 | ||||||
Allowance for loan losses |
2,355 | 1,546 | 984 | |||||||||
Other interest-earning assets |
31,059 | 19,917 | 16,595 | |||||||||
Total assets |
191,813 | 126,391 | 84,375 | |||||||||
Deposits |
151,971 | 105,482 | 68,874 | |||||||||
Borrowings |
11,714 | 2,131 | 2,009 | |||||||||
Shareholders equity |
27,266 | 17,343 | 12,671 | |||||||||
Selected Average Balances: |
||||||||||||
Total assets |
$ | 159,360 | $ | 109,956 | $ | 67,126 | ||||||
Loans |
119,724 | 81,058 | 46,289 | |||||||||
Total interest-earning assets |
150,227 | 104,551 | 63,287 | |||||||||
Deposits |
131,852 | 91,459 | 54,305 | |||||||||
Total interest-bearing liabilities |
118,726 | 80,338 | 47,192 | |||||||||
Shareholders equity |
21,807 | 15,868 | 10,853 | |||||||||
Selected Performance Ratios: |
||||||||||||
Return on average assets |
.57 | % | .78 | % | .88 | % | ||||||
Return on average equity |
4.15 | % | 5.41 | % | 5.46 | % | ||||||
Net interest margin |
4.03 | % | 4.17 | % | 4.45 | % | ||||||
Non-interest expense to average assets |
3.04 | % | 2.61 | % | 3.03 | % | ||||||
Asset Quality Ratios: |
||||||||||||
Nonperforming loans to period-end loans |
.36 | % | .27 | % | .04 | % | ||||||
Allowance for loan losses to period-end loans |
1.55 | % | 1.55 | % | 1.55 | % | ||||||
Net loan charge-offs to average loans |
.19 | % | .38 | % | .16 | % | ||||||
Capital Ratios: |
||||||||||||
Total risk-based capital |
18.61 | % | 18.24 | % | 20.56 | % | ||||||
Tier 1 risk-based capital |
17.36 | % | 16.99 | % | 19.30 | % | ||||||
Leverage ratio |
14.64 | % | 13.99 | % | 15.49 | % | ||||||
Equity to assets ratio |
14.21 | % | 13.72 | % | 15.02 | % | ||||||
Other Data: |
||||||||||||
Number of banking offices |
3 | 2 | 1 | |||||||||
Number of full time equivalent employees |
55 | 33 | 22 |
(1) | Adjusted for the effect of the 11-for-10 stock splits in 2003 and 2002. |
- 3 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
The following discussion and analysis is presented to assist in understanding New Century Bancorp, Inc.s financial condition and results of operations for the years ended December 31, 2003 and 2002. You should read this discussion and the related financial data in conjunction with the audited financial statements and the related footnotes, which are included elsewhere in this Annual Report. All references in this Annual Report to net income per share, price per share, book value per share and weighted average common and common equivalent shares outstanding have been adjusted to reflect two eleven-for-ten stock splits effected in the form of 10% stock dividends, one declared in June 2002 and the other in September 2003.
DESCRIPTION OF BUSINESS
New Century Bancorp (the Bancorp), was incorporated on May 14, 2003. Effective September 19, 2003, New Century Bank (the Bank) became a wholly owned subsidiary of the Bancorp. The shareholders of New Century Bank received one share of $1 par value common stock of New Century Bancorp, Inc. for each share of $5 par value common stock of New Century Bank owned in a share exchange that accomplished the Banks holding company reorganization. All outstanding options to purchase common shares of New Century Bank were converted into options to purchase common shares of New Century Bancorp.
The Bank opened for business on May 24, 2000 as a North Carolina-chartered banking corporation. The Banks lending activities are oriented to the consumer/retail customer as well as to the small-to-medium sized business located in Harnett, Cumberland, Johnston, and Sampson counties. The Bank offers the standard complement of commercial, consumer, and mortgage lending products, as well as the ability to structure products to fit specialized needs. The deposit services offered by the Bank include small business and personal checking, savings accounts and certificates of deposit. The Bank concentrates on customer relationships in building its customer deposit base and competes aggressively in the area of transaction accounts.
On June 17, 2003, the Bank opened an office in Fayetteville, which operated as a branch of the Bank until January 2, 2004, when the Fayetteville office was sold to New Century Bank of Fayetteville, a de novo banking corporation, which will operate as a wholly owned subsidiary of the Bancorp. Also, in the fourth quarter of 2003, the Bank received approval to open a full service banking facility in Goldsboro, North Carolina. This branch opened in January 2004.
FINANCIAL CONDITION
December 31, 2003 and 2002
Total assets at December 31, 2003 were $191.8 million, which represents an increase of $65.4 million or 52% from December 31, 2002. Cash, interest-bearing deposits and federal funds sold increased $11.2 million to $22 million at December 31, 2003. Investment securities decreased to $12.6 million from $13.6 million at December 31, 2002.
Loans receivable increased by $51.9 million to $151.9 million as of December 31, 2003. The loan portfolio is comprised of $89.7 million in real estate loans, $50.3 million in commercial and industrial loans, and $11.2 million in loans to individuals. At December 31, 2003, there were sixteen loans with an aggregate principal balance of $311,000 that were more than 30 days past due. Four of these loans with a combined balance of $180,000 were in non-accrual status. There was one loan with a principal balance of $10,000 that was not past due but was in nonaccrual status. The allowance for loan losses of $2.4 million represented 1.55% of gross loans outstanding as of December 31, 2003.
- 4 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
The Bancorps investment portfolio at December 31, 2003, which consisted of U.S. government agency securities, mortgage-backed securities and bank-qualified municipal securities, aggregated $12.6 million as of December 31, 2003 with a weighted average yield of 4.26%. The Bancorp also holds an investment of $450,000 in the form of Federal Home Loan Bank Stock with a dividend yield of 3.81%. The investment portfolio decreased $1 million in 2003, the result of $4.9 million in purchases, $5.7 million of maturities and prepayments and a decrease of $122,000 in the market value of securities held available for sale. There were no sales of investment securities during 2003.
Total deposits at December 31, 2003 were $152 million, an increase of $46.5 million from $105.5 million at December 31, 2002. At December 31, 2003, deposits were comprised of 16% demand deposits, 24% savings, NOW and money market accounts, and 60% time deposits. Time deposits of $100,000 or more totaled $27.1 million or 18% of total deposits as of December 31, 2003. Brokered deposits totaled $495,000 or less than 1% of year-end deposits. Securities sold under agreements to repurchase increased slightly to $2.7 million at December 31, 2003 and were collateralized by U.S. government agency securities, mortgage backed securities and municipal securities.
In February 2003, the Bank took a $4 million advance with an interest rate of 2.65% on its line of credit with the FHLB to help fund loan growth. In December 2003, the Bank took a $5 million advance with an interest rate of 2.00%, for the same purpose. The advances are collateralized by a lien on 1-4 family first mortgage loans. The $5 million advance matures in June 2005, while the $4 million advance matures in February 2006.
Shareholders equity increased nearly $10 million during 2003. The increase was due to common stock issued in connection with the offering of stock to the Fayetteville market of $8.9 million and net income of $906,000, which were partially offset by a net unrealized loss of $75,000 in securities held available for sale.
RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
Overview. During 2003, New Century Bancorp generated net income of $906,000 compared with net income of $858,000 for the year ended December 31, 2002. Net income per share in 2003 was $.43 basic and $.42 diluted compared with net income per share of $.51 basic and $.50 diluted in 2002. This increase is primarily due to the growth in interest-earning assets during 2002 and the resulting increase in net interest income, and also to the strong growth in non-interest income. These increases were partially offset by increases in the provision for loan losses and non-interest expenses.
Net Interest Income. Net interest income increased $1.7 million to $6.1 million for the year ended December 31, 2003. The Bancorps total interest income benefited from strong growth in interest-earning assets, which was partially offset by lower interest-earning asset yields caused by the continued low interest rate environment during 2003 and 2002. Average total interest-earning assets were $150.2 million in 2003 compared with $104.6 million during 2002, while the yield on those assets dropped 64 basis points from 6.81% to 6.17%. The Bancorps average interest-bearing liabilities grew by $38.4 million to $118.7 million in 2003, while the cost of those funds dropped from 3.44% to 2.71%, or 73 basis points. For the year ended December 31, 2003, our net interest margin was 4.03% and our net interest spread was 3.46%. For the year ended December 31, 2002, net interest margin was 4.17% and net interest spread was 3.38%.
- 5 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
Provision for Loan Losses. The Bancorp recorded a provision of approximately $1.0 million for loan losses in 2003, representing an increase of $170,000 over the $872,000 provision made in 2002. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. In evaluating the allowance for loan losses, management considers factors that include growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrowers ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other relevant factors. In both 2003 and 2002, the provision for loan losses was made principally in response to growth in loans, as total loans outstanding increased by $51.9 million in 2003 and by $36.4 million in 2002. In addition, net loan charge-offs decreased to $233,000 in 2003 as compared to $310,000 in 2002. At December 31, the allowance for loan losses was $2.4 million for 2003 and $1.5 million for 2002, representing 1.55% and 1.55%, respectively, of loans outstanding. There were $180,000 and $263,000 of nonaccrual loans at December 31, 2003 and 2002, respectively.
Non-Interest Income. Non-interest income for the year ended December 31, 2003 was $1.2 million, an increase of $508,000 over the year ended December 31, 2002. This increase is primarily due to increases in service fees and charges of $267,000 and fees from presold mortgages of $211,000. The growth in service fees and charges is directly related to the growth in transaction accounts during 2003 and to the introduction in the first quarter of 2003 of an overdraft protection product tied to qualifying demand deposit accounts. The increase in fees from presold mortgages is attributable to continued high volume of new mortgage loan requests and mortgage refinancings during the year.
Non-Interest Expense. Non-interest expense increased by $2 million to $4.9 million for the year ended December 31, 2003, from $2.9 million for the year ended December 31, 2002. The Bancorps ratio of non-interest expense to average total assets has increased from 2.61% in 2002 to 3.04% in 2003, due to the opening of a branch in Fayetteville and start-up expenses incurred related to the branch in Goldsboro, which opened in January 2004. Salaries and employee benefits increased to $2.9 million from $1.6 million in 2002 due to the increase of Bancorp personnel from 33 to 55 full time equivalent employees. Also the expansion into two new markets has resulted in an increase of $94,000 in occupancy and equipment expenses to a total of $349,000 for the year ended December 31, 2003. Because of the growth of our franchise, other non-interest expense, which includes postage, printing and office supplies, advertising and promotion, data processing and other outsourced services, professional services, and other operating expenses, increased to $1.6 million in 2003 compared with $976,000 for the year ended December 31, 2002.
Provision for Income Taxes. The Bancorps effective tax rate was 35% in 2003 and 37% in 2002.
- 6 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
NET INTEREST INCOME
Like most financial institutions, the primary component of earnings for the Bancorp is net interest income. Net interest income is the difference between interest income, principally from loan and investment securities portfolios, and interest expense, principally on customer deposits and borrowings. Changes in net interest income result from changes in volume, spread and margin. For this purpose, volume refers to the average dollar level of interest-earning assets and interest-bearing liabilities, spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities, and margin refers to net interest income divided by average interest-earning assets and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities, as well as levels of noninterest-bearing liabilities. The following table sets forth, for the periods indicated, information with regard to average balances of assets and liabilities, as well as the total dollar amounts of interest income from interest-earning assets and interest expense on interest-bearing liabilities, resultant yields or costs, net interest income, net interest spread, net interest margin and ratio of average interest-earning assets to average interest-bearing liabilities. Nonaccrual loans have been included in determining average loans.
Year Ended December 31, 2003
|
Year Ended December 31, 2002
|
|||||||||||||||||||
Average
balance |
Interest
|
Average
Rate |
Average
balance |
Interest
|
Average
Rate |
|||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||
Loans |
$ | 119,724 | $ | 8,540 | 7.13 | % | $ | 81,058 | $ | 6,344 | 7.83 | % | ||||||||
Investment securities |
13,963 | 564 | 4.04 | % | 12,495 | 606 | 4.85 | % | ||||||||||||
Other interest-earning assets |
16,540 | 168 | 1.02 | % | 10,998 | 175 | 1.59 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total interest-earning assets |
150,227 | 9,272 | 6.17 | % | 104,551 | 7,125 | 6.81 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other assets |
9,133 | 5,405 | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 159,360 | $ | 109,956 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||
Deposits: |
||||||||||||||||||||
Savings, NOW and money market |
$ | 31,064 | 440 | 1.42 | % | $ | 21,955 | 440 | 2.00 | % | ||||||||||
Time deposits over $100,000 |
28,376 | 946 | 3.33 | % | 18,484 | 792 | 4.28 | % | ||||||||||||
Other time deposits |
53,958 | 1,713 | 3.17 | % | 37,909 | 1,489 | 3.93 | % | ||||||||||||
Borrowings |
5,328 | 118 | 2.21 | % | 1,990 | 39 | 1.96 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total interest-bearing liabilities |
118,726 | 3,217 | 2.71 | % | 80,338 | 2,760 | 3.44 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Noninterest-bearing deposits |
18,455 | 13,111 | ||||||||||||||||||
Other liabilities |
371 | 639 | ||||||||||||||||||
Shareholders equity |
21,808 | 15,868 | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total liabilities and shareholders equity |
$ | 159,360 | $ | 109,956 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net interest income/interest rate spread |
$ | 6,055 | 3.46 | % | $ | 4,365 | 3.38 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net interest margin |
4.03 | % | 4.17 | % | ||||||||||||||||
|
|
|
|
|||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities |
128.79 | % | 130.14 | % | ||||||||||||||||
|
|
|
|
|
|
- 7 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
RATE/VOLUME ANALYSIS
The following table analyzes the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. The table distinguishes between (i) changes attributable to volume (changes in volume multiplied by the prior periods rate), (ii) changes attributable to rate (changes in rate multiplied by the prior periods volume), and (iii) net change (the sum of the previous columns). The change attributable to both rate and volume (changes in rate multiplied by changes in volume) has been allocated equally to both the changes attributable to volume and the changes attributable to rate.
Years ended December 31, 2003 vs. 2002 |
|||||||||||
Increase (Decrease) Due to
|
|||||||||||
Volume
|
Rate
|
Total
|
|||||||||
(Dollars in thousands) | |||||||||||
Interest income: |
|||||||||||
Loans |
$ | 2,892 | $ | (696 | ) | $ | 2,196 | ||||
Investment securities |
65 | (107 | ) | (42 | ) | ||||||
Other interest-earning assets |
72 | (79 | ) | (7 | ) | ||||||
|
|
|
|
|
|
|
|
||||
Total interest income |
3,029 | (882 | ) | 2,147 | |||||||
|
|
|
|
|
|
|
|
||||
Interest expense: |
|||||||||||
Deposits |
|||||||||||
Savings, NOW and money market |
156 | (156 | ) | | |||||||
Time deposits over $100,000 |
377 | (223 | ) | 154 | |||||||
Other time deposits |
570 | (346 | ) | 224 | |||||||
Borrowings |
70 | 9 | 79 | ||||||||
|
|
|
|
|
|
|
|
||||
Total interest expense |
1,173 | (716 | ) | 457 | |||||||
|
|
|
|
|
|
|
|
||||
Net interest income increase (decrease) |
$ | 1,856 | $ | (166 | ) | $ | 1,690 | ||||
|
|
|
|
|
|
|
|
LIQUIDITY
The Bancorps liquidity is a measure of its ability to fund loans, withdrawals and maturities of deposits, and other cash outflows in a cost effective manner. The Bancorps principal sources of liquidity are deposits, scheduled payments and prepayments of loan principal, maturities of investment securities, access to liquid deposits, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.
Liquid assets (consisting of cash and due from banks, interest-earning deposits with other banks, federal funds sold and investment securities classified as available for sale) comprised 18% and 19% of total assets at December 31, 2003 and 2002, respectively.
The Bancorp has been a net seller of federal funds, maintaining liquidity sufficient to fund new loan demand. Should the need arise, the Bancorp would have the capability to sell securities classified as available for sale, sell loan participations to other banks, or to borrow funds as necessary. The Bancorp has established credit lines with other financial institutions to purchase up to $6.0 million in federal funds. Also, as a member of the Federal Home Loan Bank of Atlanta (FHLB), the Bancorp may obtain advances of up to 30% of our assets, subject to our available collateral. A floating lien of $10.2 million on qualifying loans is pledged to FHLB to secure borrowings. As another source of short-term borrowings, the Bancorp also
- 8 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
utilizes securities sold under agreements to repurchase. At December 31, 2003, borrowings consisted of securities sold under agreements to repurchase of $2.7 million and FHLB advances totaling $9 million.
Total deposits were $151.9 million and $105.5 million at December 31, 2003 and 2002, respectively. Time deposits, which are the only deposit accounts that have stated maturity dates, are generally considered to be rate sensitive. Time deposits represented 60% and 63% of total deposits at December 31, 2003 and 2002, respectively. Time deposits of $100,000 or more represented 18% and 23%, respectively, of the total deposits at December 31, 2003 and 2002. At December 31, 2003, the Bancorp had $495,000 in brokered time deposits. Management believes most other time deposits are relationship-oriented. While the competitive rates will need to be paid to retain these deposits at their maturities, there are other subjective factors that will determine their continued retention. Based upon prior experience, management anticipates that a substantial portion of outstanding certificates of deposit will renew upon maturity.
Management believes that current sources of funds provide adequate liquidity for our current cash flow needs.
CAPITAL
A significant measure of the strength of a financial institution is its capital base. Federal regulations have classified and defined capital into the following components: (1) Tier I capital, which includes common shareholders equity and qualifying preferred equity, and (2) Tier II capital, which includes a portion of the allowance for loan losses, certain qualifying long-term debt and preferred stock which does not qualify as Tier I capital. Minimum capital levels are regulated by risk-based capital adequacy guidelines which require a financial institution to maintain capital as a percent of its assets and certain off-balance sheet items adjusted for predefined credit risk factors (risk-adjusted assets). A financial institution is required to maintain, at a minimum, Tier I capital as a percentage of risk-adjusted assets of 4.0% and combined Tier I and Tier II capital as a percentage of risk-adjusted assets of 8.0%. In addition to the risk-based guidelines, federal regulations require that we maintain a minimum leverage ratio (Tier I capital as a percentage of tangible assets) of 4.0%. The Bancorps equity to assets ratio was 14.21% at December 31, 2003. As the following table indicates, at December 31, 2003, the Bank exceeded regulatory capital requirements.
At December 31, 2003
|
|||||||||
Actual
Ratio |
Minimum
Requirement |
Well-Capitalized
Requirement |
|||||||
Total risk-based capital ratio |
18.61 | % | 8.00 | % | 10.00 | % | |||
Tier 1 risk-based capital ratio |
17.36 | % | 4.00 | % | 6.00 | % | |||
Leverage ratio |
14.64 | % | 4.00 | % | 5.00 | % |
Management expects that the Bancorp will remain well-capitalized for regulatory purposes, although there can be no assurance that additional capital will not be required in the near future due to greater-than-expected growth, or otherwise.
- 9 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
ASSET/LIABILITY MANAGEMENT
The Bancorps results of operations depend substantially on its net interest income. Like most financial institutions, the Bancorps interest income and cost of funds are affected by general economic conditions and by competition in the market place.
The purpose of asset/liability management is to provide stable net interest income growth by protecting the Bancorps earnings from undue interest rate risk, which arises from volatile interest rates and changes in the balance sheet mix, and by managing the risk/return relationships between liquidity, interest rate risk, market risk, and capital adequacy. The Bancorp maintains, and has complied with, a Board approved asset/liability management policy that provides guidelines for controlling exposure to interest rate risk by utilizing the following ratios and trend analysis: liquidity, equity, volatile liability dependence, portfolio maturities, maturing assets and maturing liabilities. The Bancorps policy is to control the exposure of its earnings to changing interest rates by generally endeavoring to maintain a position within a narrow range around an earnings neutral position, which is defined as the mix of assets and liabilities that generate a net interest margin that is least affected by interest rate changes.
When suitable lending opportunities are not sufficient to utilize available funds, the Bancorp has generally invested such funds in securities, primarily U.S. Treasury securities, securities issued by governmental agencies, mortgage-backed securities and corporate obligations. The securities portfolio contributes to the Bancorps profits and plays an important part in the overall interest rate management. However, management of the securities portfolio alone cannot balance overall interest rate risk. The securities portfolio must be used in combination with other asset/liability techniques to actively manage the balance sheet. The primary objectives in the overall management of the securities portfolio are safety, liquidity, yield, asset/liability management (interest rate risk), and investing in securities that can be pledged for public deposits.
In reviewing the needs of the Bancorp with regard to proper management of its asset/liability program, the Bancorps management estimates its future needs, taking into consideration historical periods of high loan demand and low deposit balances, estimated loan and deposit increases (due to increased demand through marketing), and forecasted interest rate changes.
The analysis of an institutions interest rate gap (the difference between the repricing of interest-earning assets and interest-bearing liabilities during a given period of time) is a standard tool for the measurement of exposure to interest rate risk. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at December 31, 2003, which are projected to reprice or mature in each of the future time periods shown. Except as stated below, the amounts of assets and liabilities shown which reprice or mature within a particular period were determined in accordance with the contractual terms of the assets or liabilities. Loans with adjustable rates are shown as being due at the end of the next upcoming adjustment period. Money market deposit accounts and negotiable order of withdrawal or other transaction accounts are assumed to be subject to immediate repricing and depositor availability and have been placed in the shortest period. In making the gap computations, none of the assumptions sometimes made regarding prepayment rates and deposit decay rates have been used for any interest-earning assets or interest-bearing liabilities. In addition, the table does not reflect scheduled principal payments which will be received throughout the lives of the loans. The interest rate sensitivity of the Bancorps assets and liabilities illustrated in the following table would vary substantially if different assumptions were used or if actual experience differs from that indicated by such assumptions.
- 10 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
Terms to Repricing at December 31, 2003
|
||||||||||||||||||||
1 Year
or Less |
More Than
1 Year to 3 Years |
More Than
3 Years to 5 Years |
More Than
5 Years |
Total
|
||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||
Loans: |
||||||||||||||||||||
Adjustable rate |
$ | 38,825 | $ | | $ | | $ | | $ | 38,825 | ||||||||||
Fixed rate |
32,737 | 24,173 | 50,084 | 6,111 | 113,105 | |||||||||||||||
Securities available for sale |
1,307 | 5,613 | 2,032 | 3,685 | 12,637 | |||||||||||||||
Interest-earning deposits in other banks |
1,821 | | | | 1,821 | |||||||||||||||
Federal funds sold |
16,102 | | | | 16,102 | |||||||||||||||
Stock in FHLB of Atlanta |
| | | 450 | 450 | |||||||||||||||
Stock in The Bankers Bank |
| | | 49 | 49 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total interest-earning assets |
$ | 90,792 | $ | 29,786 | $ | 52,116 | $ | 10,295 | $ | 182,989 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing liabilities: |
||||||||||||||||||||
Deposits: |
||||||||||||||||||||
Savings, NOW and money market |
$ | 36,140 | $ | | $ | | $ | | $ | 36,140 | ||||||||||
Time over $100,000 |
49,998 | 11,588 | 2,921 | | 64,507 | |||||||||||||||
Time |
17,084 | 3,136 | 6,839 | | 27,059 | |||||||||||||||
Borrowings |
2,714 | 9,000 | | | 11,714 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total interest-bearing liabilities |
$ | 105,936 | $ | 23,724 | $ | 9,760 | $ | | $ | 139,420 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest sensitivity gap per period |
$ | (15,144 | ) | $ | 6,062 | $ | 42,356 | $ | 10,295 | $ | 43,569 | |||||||||
Cumulative interest sensitivity gap |
$ | (15,144 | ) | $ | (9,082 | ) | $ | 33,274 | $ | 43,569 | $ | 43,569 | ||||||||
Cumulative gap as a percentage of total interest-earning assets |
(8.28 | )% | (4.96 | )% | 18.18 | % | 23.81 | % | 23.81 | % | ||||||||||
Cumulative interest-earning assets as a percentage of interest-bearing liabilities |
85.70 | % | 93.00 | % | 123.87 | % | 131.25 | % | 131.25 | % |
Loans maturing or repricing after December 31, 2004 are comprised of $80.4 million of fixed rate loans.
CRITICAL ACCOUNTING POLICY
The Bancorps most significant critical accounting policy is the determination of its allowance for loan losses. A critical accounting policy is one that is both very important to the portrayal of the Bancorps financial condition and results, and requires managements most difficult, subjective or complex judgments. What makes these judgments difficult, subjective and/or complex is the need to make estimates about the effects of matters that are inherently uncertain.
- 11 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
ASSET QUALITY AND THE ALLOWANCE FOR LOAN LOSSES
The Financial Statements are prepared on the accrual basis of accounting, including the recognition of interest income on its loan portfolio, unless a loan is placed on a nonaccrual basis. Loans are placed on a nonaccrual basis when there are serious doubts about the collectibility of principal or interest. Amounts received on non-accrual loans generally are applied first to principal and then to interest only after all principal has been collected. Restructured loans are those for which concessions, including the reduction of interest rates below a rate otherwise available to that borrower or the deferral of interest or principal, have been granted due to the borrowers weakened financial condition. Interest on restructured loans is accrued at the restructured rates when it is anticipated that no loss of original principal will occur. The Bancorps impaired loans at December 31, 2003 were comprised of $180,000 of non-accrual loans.
The allowance for loan losses is maintained at a level considered adequate by management to provide for anticipated loan losses based on managements assessment of various factors affecting the loan portfolio, including a review of problem loans, business conditions and loss experience and an overall evaluation of the quality of the underlying collateral. The allowance is increased by provisions charged to operations and reduced by loans charged off, net of recoveries. While management believes that it uses the best information available to determine the allowance for loan losses, unforeseen market conditions could result in adjustments to the allowance for loan losses, and net income could be significantly affected, if circumstances differ substantially from the assumptions used in making the final determination. Additional information regarding the Bancorps allowance for loan losses and loan loss experience are presented in Note D to the accompanying financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
Information about the Bancorps off-balance sheet risk exposure is presented in Note L to the accompanying financial statements. As part of its ongoing business, the Bancorp does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as special purpose entities (SPEs), which generally are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2003, the Bancorp is not involved in any unconsolidated SPE transactions.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note B to the financial statements for a full description of recent accounting pronouncements including the respective expected dates of adoption and effects on results of operations and financial condition.
IMPACT OF INFLATION AND CHANGING PRICES
A commercial bank has an asset and liability make-up that is distinctly different from that of a company with substantial investments in plant and inventory because the major portions of a commercial banks assets are monetary in nature. As a result, a banks performance may be significantly influenced by changes in interest rates. Although the banking industry is more affected by changes in interest rates than by inflation in the prices of goods and services, inflation is a factor that may influence interest rates. However, the frequency and magnitude of interest rate fluctuations do not necessarily coincide with changes in the general inflation rate. Inflation does affect operating expenses in that personnel expenses and the cost of supplies and outside services tend to increase more during periods of high inflation.
- 12 -
New Century Bancorp, Inc.
Managements Discussion and Analysis
FORWARD-LOOKING INFORMATION
Statements contained in this annual report, which are not historical facts, are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Amounts herein could vary as a result of market and other factors. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Bancorp with the U.S. Securities and Exchange Commission from time to time. Such forward-looking statements may be identified by the use of such words as believe, expect, anticipate, should, might, planned, estimated, and potential. Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, expected or anticipated revenue, results of operations and business of the Bank that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principals, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Bancorps operations, pricing, products and services.
- 13 -
[GRAPHIC]
INDEPENDENT AUDITORS REPORT
To the Shareholders and the Board of Directors
New Century Bancorp, Inc.
Dunn, North Carolina
We have audited the accompanying consolidated balance sheets of New Century Bancorp, Inc. and Subsidiary as of December 31, 2003 and 2002, and the related consolidated statements of operations, comprehensive income, changes in shareholders equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Bancorps management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New Century Bancorp, Inc. and Subsidiary at December 31, 2003 and 2002 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Dixon Hughes PLLC |
Sanford, North Carolina January 16, 2004 |
- 14 -
NEW CENTURY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2003 and 2002
2003
|
2002
|
|||||||
(In thousands, except share and per share data) |
||||||||
ASSETS |
||||||||
Cash and due from banks |
$ | 4,074 | $ | 4,688 | ||||
Interest-earning deposits in other banks |
1,821 | 1,144 | ||||||
Federal funds sold |
16,102 | 4,955 | ||||||
Investment securities available for sale, at fair value (Note C) |
12,637 | 13,584 | ||||||
Loans (Note D) |
151,930 | 100,008 | ||||||
Allowance for loan losses (Note D) |
(2,355 | ) | (1,546 | ) | ||||
|
|
|
|
|
|
|||
NET LOANS |
149,575 | 98,462 | ||||||
Accrued interest receivable |
791 | 711 | ||||||
Stock in Federal Home Loan Bank of Atlanta, at cost |
450 | 185 | ||||||
Stock in The Bankers Bank |
49 | 49 | ||||||
Foreclosed real estate |
218 | | ||||||
Premises and equipment (Note E) |
3,285 | 2,244 | ||||||
Bank Owned Life Insurance |
2,118 | | ||||||
Other assets |
693 | 369 | ||||||
|
|
|
|
|
|
|||
TOTAL ASSETS |
$ | 191,813 | $ | 126,391 | ||||
|
|
|
|
|
|
|||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Deposits: |
||||||||
Demand |
$ | 24,265 | $ | 16,604 | ||||
Savings |
1,808 | 1,251 | ||||||
Money market and NOW |
34,332 | 20,970 | ||||||
Time (Note F) |
91,566 | 66,657 | ||||||
|
|
|
|
|
|
|||
TOTAL DEPOSITS |
151,971 | 105,482 | ||||||
Securities sold under agreements to repurchase (Note G) |
2,714 | 2,131 | ||||||
Advances from Federal Home Loan Bank (Note H) |
9,000 | | ||||||
Accrued interest payable |
156 | 136 | ||||||
Accrued expenses and other liabilities |
706 | 1,299 | ||||||
|
|
|
|
|
|
|||
TOTAL LIABILITIES |
164,547 | 109,048 | ||||||
|
|
|
|
|
|
|||
Commitments (Note L) |
||||||||
Shareholders equity (Note K): |
||||||||
Common stock, $1 par value, 10,000,000 shares authorized; 2,541,655 shares issued and outstanding at December 31, 2003 |
2,542 | | ||||||
Common stock, $5 par value, 10,000,000 shares authorized; 1,607,442 shares issued and outstanding at December 31, 2002 |
| 8,037 | ||||||
Additional paid-in capital |
22,481 | 7,894 | ||||||
Retained earnings |
2,100 | 1,194 | ||||||
Accumulated other comprehensive income |
143 | 218 | ||||||
|
|
|
|
|
|
|||
TOTAL SHAREHOLDERS EQUITY |
27,266 | 17,343 | ||||||
|
|
|
|
|
|
|||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
$ | 191,813 | $ | 126,391 | ||||
|
|
|
|
|
|
See accompanying notes.
- 15 -
NEW CENTURY BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2003 and 2002
2003
|
2002
|
|||||
(In thousands, except share
and per share data) |
||||||
INTEREST INCOME |
||||||
Loans |
$ | 8,540 | $ | 6,344 | ||
Investments |
564 | 606 | ||||
Federal funds sold and interest-earning deposits |
168 | 175 | ||||
|
|
|
|
|||
TOTAL INTEREST INCOME |
9,272 | 7,125 | ||||
|
|
|
|
|||
INTEREST EXPENSE |
||||||
Money market, NOW and savings deposits |
440 | 440 | ||||
Time deposits |
2,659 | 2,281 | ||||
Federal Home Loan Bank advances |
91 | | ||||
Securities sold under agreements to repurchase |
27 | 39 | ||||
|
|
|
|
|||
TOTAL INTEREST EXPENSE |
3,217 | 2,760 | ||||
|
|
|
|
|||
NET INTEREST INCOME |
6,055 | 4,365 | ||||
PROVISION FOR LOAN LOSSES (Note D) |
1,042 | 872 | ||||
|
|
|
|
|||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |
5,013 | 3,493 | ||||
|
|
|
|
|||
NON-INTEREST INCOME |
||||||
Service fees and charges |
746 | 479 | ||||
Fees from presold mortgages |
440 | 229 | ||||
Other |
53 | 23 | ||||
|
|
|
|
|||
TOTAL NON-INTEREST INCOME |
1,239 | 731 | ||||
|
|
|
|
|||
NON-INTEREST EXPENSE |
||||||
Salaries and employee benefits (Note N) |
2,911 | 1,638 | ||||
Occupancy and equipment (Note E) |
349 | 255 | ||||
Other (Note J) |
1,590 | 976 | ||||
|
|
|
|
|||
TOTAL NON-INTEREST EXPENSE |
4,850 | 2,869 | ||||
|
|
|
|
|||
INCOME BEFORE INCOME TAXES |
1,402 | 1,355 | ||||
INCOME TAXES (Note I) |
496 | 497 | ||||
|
|
|
|
|||
NET INCOME |
$ | 906 | $ | 858 | ||
|
|
|
|
|||
NET INCOME PER COMMON SHARE |
||||||
Basic |
$ | .43 | $ | .51 | ||
|
|
|
|
|||
Diluted |
$ | .42 | $ | .50 | ||
|
|
|
|
|||
WEIGHTED AVERAGE SHARES OUTSTANDING |
||||||
Basic |
2,094,493 | 1,686,555 | ||||
|
|
|
|
|||
Diluted |
2,179,088 | 1,728,386 | ||||
|
|
|
|
See accompanying notes.
- 16 -
NEW CENTURY BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31, 2003 and 2002
2003
|
2002
|
|||||||
(Amounts in thousands) |
||||||||
NET INCOME |
$ | 906 | $ | 858 | ||||
|
|
|
|
|
|
|||
OTHER COMPREHENSIVE INCOME |
||||||||
Unrealized gain (loss) on investment securities available for sale arising during the year |
(122 | ) | 198 | |||||
Tax (expense) benefit |
47 | (85 | ) | |||||
|
|
|
|
|
|
|||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) |
(75 | ) | 113 | |||||
|
|
|
|
|
|
|||
COMPREHENSIVE INCOME |
$ | 831 | $ | 971 | ||||
|
|
|
|
|
|
See accompanying notes.
- 17 -
NEW CENTURY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
Years Ended December 31, 2003 and 2002
Common stock
|
Additional
paid-in capital |
Retained
earnings |
Accumulated
other com- prehensive income |
Total
shareholders equity |
|||||||||||||||||
Shares
|
Amount
|
||||||||||||||||||||
(Amounts in thousands, except share data) | |||||||||||||||||||||
Balance at December 31, 2001 |
1,152,747 | $ | 5,764 | $ | 6,465 | $ | 336 | $ | 105 | $ | 12,670 | ||||||||||
Net income |
| | | 858 | | 858 | |||||||||||||||
Other comprehensive income |
| | | | 113 | 113 | |||||||||||||||
Issuance of common stock |
308,564 | 1,543 | 2,159 | | | 3,702 | |||||||||||||||
Eleven-for-ten stock split |
146,131 | 730 | (730 | ) | | | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance at December 31, 2002 |
1,607,442 | 8,037 | 7,894 | 1,194 | 218 | 17,343 | |||||||||||||||
Net income |
| | | 906 | | 906 | |||||||||||||||
Other comprehensive loss |
| | | | (75 | ) | (75 | ) | |||||||||||||
Issuance of common stock |
703,346 | 3,517 | 5,575 | | | 9,092 | |||||||||||||||
Formation of holding company |
| (9,243 | ) | 9,243 | | | | ||||||||||||||
Eleven-for-ten stock split |
230,867 | 231 | (231 | ) | | | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance at December 31, 2003 |
2,541,655 | $ | 2,542 | $ | 22,481 | $ | 2,100 | $ | 143 | $ | 27,266 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
- 18 -
NEW CENTURY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2003 and 2002
2003
|
2002
|
|||||||
(Amounts in thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net income |
$ | 906 | $ | 858 | ||||
Adjustments to reconcile net income to net cash provided (used) by operating activities: |
||||||||
Depreciation and amortization |
290 | 240 | ||||||
Provision for loan losses |
1,042 | 872 | ||||||
Net increase in loans held for sale |
(1,730 | ) | (465 | ) | ||||
Deferred income taxes |
(241 | ) | (75 | ) | ||||
(Gain) loss on sale of bank premises and equipment |
| (2 | ) | |||||
Change in assets and liabilities: |
||||||||
Increase in accrued interest receivable |
(80 | ) | (230 | ) | ||||
Increase in other assets |
(36 | ) | (40 | ) | ||||
Increase in accrued interest payable |
20 | 18 | ||||||
Increase (decrease) in accrued expenses and other liabilities |
(593 | ) | 575 | |||||
|
|
|
|
|
|
|||
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES |
(422 | ) | 1,751 | |||||
|
|
|
|
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Purchase of investment securities |
(4,898 | ) | (7,838 | ) | ||||
Maturities and prepayments of investment securities |
5,651 | 5,179 | ||||||
Net increase in gross loans outstanding |
(50,643 | ) | (36,290 | ) | ||||
Purchase of Bank Owned Life Insurance |
(2,118 | ) | | |||||
Purchase of Federal Home Loan Bank stock |
(265 | ) | (93 | ) | ||||
Purchase of The Bankers Bank stock |
| (49 | ) | |||||
Proceeds from sale of premises and equipment |
| 19 | ||||||
Purchases of premises and equipment |
(1,259 | ) | (264 | ) | ||||
|
|
|
|
|
|
|||
NET CASH USED BY INVESTING ACTIVITIES |
(53,532 | ) | (39,336 | ) | ||||
|
|
|
|
|
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Increase in deposits |
46,489 | 36,609 | ||||||
Net change in securities sold under agreements to repurchase |
583 | 121 | ||||||
Proceeds from Federal Home Loan Bank advances |
9,000 | | ||||||
Net proceeds from issuance of common stock |
9,092 | 3,702 | ||||||
|
|
|
|
|
|
|||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
65,164 | 40,432 | ||||||
|
|
|
|
|
|
|||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
11,210 | 2,847 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING |
10,787 | 7,940 | ||||||
|
|
|
|
|
|
|||
CASH AND CASH EQUIVALENTS, ENDING |
$ | 21,997 | $ | 10,787 | ||||
|
|
|
|
|
|
|||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
||||||||
Interest paid |
$ | 3,197 | $ | 2,742 | ||||
Income tax paid |
1,018 | 563 | ||||||
Net unrealized gain (loss) on investments available for sale, net of tax |
(75 | ) | 113 | |||||
Transfer from loans to foreclosed real estate |
218 | |
See accompanying notes.
- 19 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE A - ORGANIZATION AND OPERATIONS
On September 19, 2003, New Century Bancorp (the Bancorp) was formed as a holding company for New Century Bank (the Bank). Upon formation, one share of the Bancorps $1 par value common stock was exchanged for each of the outstanding shares of the Banks $5 par value common stock. The Bancorp currently has no operations and conducts no business on its own other than owning the Bank. The Bancorp is subject to the rules and regulations of the Federal Reserve Bank and the North Carolina Commissioner of Banks.
The Bank was incorporated May 15, 2000 and began banking operations on May 24, 2000. The Bank is engaged in general commercial and retail banking in central North Carolina, principally Wake County, operating under the banking laws of North Carolina and the rules and regulations of the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks. The Bank undergoes periodic examinations by those regulatory authorities.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses.
Cash Equivalents
For the purpose of presentation in the statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet captions Cash and due from banks, Interest-earning deposits in other banks, and Federal funds sold.
Investment Securities Available for Sale
Investment securities available for sale are reported at fair value and consist of debt instruments that are not classified as either trading securities or as held to maturity securities. Unrealized holding gains and losses, net of deferred income tax, on available for sale securities are reported as a net amount in other comprehensive income. Gains and losses on the sale of investment securities available for sale are determined using the specific-identification method. Declines in the fair value of individual held to maturity and investment securities available for sale below their cost that are other than temporary would result in write-downs of the individual securities to their fair value. Such write-downs would be included in earnings as realized losses. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.
- 20 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan. The accrual of interest on impaired loans is discontinued when, in managements opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received.
Allowance for Loan Losses
The provision for loan losses is based upon managements estimate of the amount needed to maintain the allowance for loan losses at an adequate level. In making the evaluation of the adequacy of the allowance for loan losses, management gives consideration to current economic conditions, statutory examinations of the loan portfolio by regulatory agencies, delinquency information and managements internal review of the loan portfolio. Loans are considered impaired when it is probable that all amounts due under the contractual terms of the loan will not be collected. The measurement of impaired loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate, or upon the fair value of the collateral if readily determinable. If the recorded investment in the loan exceeds the measure of fair value, a valuation allowance is established as a component of the allowance for loan losses. While management uses the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the assumptions used in making the evaluations. In addition, regulatory examiners may require the Bancorp to recognize changes to the allowance for loan losses based on their judgments about information available to them at the time of their examination.
Foreclosed Real Estate
Real estate acquired through, or in lieu of, loan foreclosure is initially recorded at fair value at the date of foreclosure establishing a new cost basis. After foreclosure, valuations of the property are periodically performed by management and the real estate is carried at the lower of cost or fair value minus estimated cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in other non-interest expense.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Estimated useful lives are 40 years for buildings, 5 to 10 years for furniture, fixtures and equipment and 3 years for computers and related equipment. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Repairs and maintenance costs are charged to operations as incurred and additions and improvements to premises and equipment are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any gains or losses are reflected in current operations.
- 21 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock in Federal Home Loan Bank of Atlanta
As a requirement for membership, the Bancorp invests in stock of the Federal Home Loan Bank of Atlanta (FHLB). This investment is carried at cost.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are also recognized for operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized.
Comprehensive Income
The Bancorp reports as comprehensive income all changes in shareholders equity during the year from sources other than shareholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Bancorps only component of other comprehensive income is unrealized gains and losses on investment securities available for sale.
Stock Compensation Plans
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation , encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Bancorps stock option plans have no intrinsic value at the grant date and, under Opinion No. 25, no compensation cost is recognized for them. The Bancorp has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, has provided pro forma disclosures of net income and earnings per share and other disclosures as if the fair value based method of accounting had been applied.
- 22 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock Compensation Plans (Continued)
2003
|
2002
|
|||||||
(Amounts in thousands,
except per share data) |
||||||||
Net income: |
||||||||
As reported |
$ | 906 | $ | 858 | ||||
Deduct: Stock-based compensation expense determined under fair value method, net of tax |
(51 | ) | (73 | ) | ||||
|
|
|
|
|
|
|||
Pro forma |
$ | 855 | $ | 785 | ||||
|
|
|
|
|
|
|||
Basic net income per share: |
||||||||
As reported |
$ | 0.43 | $ | 0.51 | ||||
Pro forma |
0.41 | 0.47 | ||||||
Diluted net income per share: |
||||||||
As reported |
$ | 0.42 | $ | 0.50 | ||||
Pro forma |
0.39 | 0.45 |
Net Income Per Common Share and Common Shares Outstanding
Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Bancorp relate to outstanding stock options.
Basic and diluted net income per share have been computed based upon net income as presented in the accompanying statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below:
2003
|
2002
|
|||
Weighted average number of common shares used in computing basic net income per share |
2,094,493 | 1,686,555 | ||
Effect of dilutive stock options |
84,595 | 41,831 | ||
|
|
|||
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per share |
2,179,088 | 1,728,386 | ||
|
|
All references in these financial statements to net income per share and weighted average common and common equivalent shares outstanding have been adjusted to reflect two eleven-for-ten stock splits effected in the form of 10% stock dividends, the first in 2002 and the second in 2003.
- 23 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
In April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities . SFAS No. 149 improves financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. In particular, SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, clarifies when a derivative contains a financing component, amends the definition of an underlying to conform it to language used in FIN 45 and amends certain other existing pronouncements. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. In addition, with some exceptions, all provisions of SFAS No. 149 should be applied prospectively. The adoption of SFAS No. 149 did not have a material impact on the consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity . This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified by the Bancorp after May 31, 2003, and is effective at the beginning of the first interim period beginning after June 15, 2003. However, the FASB has deferred indefinitely the classification and measurement provisions as they related to certain mandatorily redeemable noncontrolling interests. The adoption of SFAS No. 150 did not have a material impact on the consolidated financial statements.
In November 2003, the Emerging Issues Task Force (EITF) reached a partial consensus on Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments . Issue 03-1 requires certain quantitative and qualitative disclosures for investments subject to SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities , that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The Bancorp adopted the partial consensus on Issue 03-1 during 2003 and has provided the new disclosures in Note C. The EITF is expected to continue deliberating other aspects of Issue 03-1, including when to recognize other-than-temporary impairment.
Reclassifications
Certain amounts in the 2002 consolidated financial statements have been reclassified to conform to the presentation adopted for 2003. These reclassifications had no effect on net income or shareholders equity as previously reported.
- 24 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE C - INVESTMENT SECURITIES
The amortized cost and fair value of securities available for sale, with gross unrealized gains and losses, follow:
December 31, 2003
|
||||||||||||
Amortized
cost |
Gross
unrealized gains |
Gross
unrealized losses |
Fair
value |
|||||||||
(In thousands) | ||||||||||||
Securities available for sale: |
||||||||||||
U.S. government securities and obligations of U.S. government agencies |
$ | 5,247 | $ | 52 | $ | | $ | 5,299 | ||||
Mortgage-backed securities |
4,648 | 130 | 31 | 4,747 | ||||||||
Municipal bonds |
2,508 | 83 | | 2,591 | ||||||||
|
|
|
|
|
|
|
|
|||||
$ | 12,403 | $ | 265 | $ | 31 | $ | 12,637 | |||||
|
|
|
|
|
|
|
|
|||||
December 31, 2002
|
||||||||||||
Amortized
cost |
Gross
unrealized gains |
Gross
unrealized losses |
Fair
value |
|||||||||
(In thousands) | ||||||||||||
Securities available for sale: |
||||||||||||
U.S. government securities and obligations of U.S. government agencies |
$ | 5,935 | $ | 109 | $ | 3 | $ | 6,041 | ||||
Mortgage-backed securities |
4,733 | 213 | | 4,946 | ||||||||
Municipal bonds |
2,560 | 41 | 4 | 2,597 | ||||||||
|
|
|
|
|
|
|
|
|||||
$ | 13,228 | $ | 363 | $ | 7 | $ | 13,584 | |||||
|
|
|
|
|
|
|
|
Securities with a carrying value of $3.4 million and $2.8 million at December 31, 2003 and 2002, respectively, were pledged to secure public monies on deposit as required by law.
The following table shows gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position for the four investment securities with unrealized losses at December 31, 2003. These investment securities are considered to be temporarily impaired because of their credit ratings and the short durations of the unrealized losses.
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||
Fair
value |
Unrealized
losses |
Fair
value |
Unrealized
losses |
Fair
value |
Unrealized
losses |
|||||||||||||
(In thousands) | ||||||||||||||||||
Securities available for sale: |
||||||||||||||||||
Mortgage-backed securities |
$ | 1,921 | $ | 31 | $ | | $ | | $ | 1,921 | $ | 31 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total temporarily impaired securities |
$ | 1,921 | $ | 31 | $ | | $ | | $ | 1,921 | $ | 31 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
- 25 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE C - INVESTMENT SECURITIES (Continued)
The following table sets forth certain information regarding the amortized costs, carrying values, weighted average yields and contractual maturities of the Bancorps investment portfolio at December 31, 2003.
Amortized
Cost |
Fair
Value |
Weighted
Average/ Yield |
|||||||
(Dollars in thousands) | |||||||||
Securities available for sale: |
|||||||||
U.S. government agency securities |
|||||||||
Due within one year |
$ | 1,001 | $ | 1,012 | 3.76 | % | |||
Due after one but within five years |
3,744 | 3,785 | 3.70 | % | |||||
Due after five but within ten years |
502 | 502 | 5.13 | % | |||||
|
|
|
|
||||||
5,247 | 5,299 | 3.85 | % | ||||||
|
|
|
|
||||||
Mortgage-backed securities |
|||||||||
Due within one year |
288 | 295 | 6.12 | % | |||||
Due after one but within five years |
1,746 | 1,828 | 5.81 | % | |||||
Due after five but within ten years |
392 | 419 | 6.73 | % | |||||
Due after ten years |
2,222 | 2,205 | 3.95 | % | |||||
|
|
|
|
||||||
4,648 | 4,747 | 5.05 | % | ||||||
|
|
|
|
||||||
Municipal bonds |
|||||||||
Due after five but within ten years |
1,066 | 1,111 | 4.08 | % | |||||
Due after ten years |
1,442 | 1,480 | 3.31 | % | |||||
|
|
|
|
||||||
2,508 | 2,591 | 3.64 | % | ||||||
|
|
|
|
||||||
Total securities available for sale |
|||||||||
Due within one year |
1,289 | 1,307 | 4.29 | % | |||||
Due after one but within five years |
5,490 | 5,613 | 4.39 | % | |||||
Due after five but within ten years |
1,960 | 2,032 | 4.89 | % | |||||
Due after ten years |
3,664 | 3,685 | 3.69 | % | |||||
|
|
|
|
||||||
$ | 12,403 | $ | 12,637 | 4.26 | % | ||||
|
|
|
|
For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average contractual maturities of underlying collateral. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.
- 26 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE D - LOANS
Following is a summary of loans at December 31, 2003 and 2002:
2003
|
2002
|
|||||||||||||
Amount
|
Percent
of total |
Amount
|
Percent
of total |
|||||||||||
(Dollars in thousands) | ||||||||||||||
Real estate loans: |
||||||||||||||
One to four family residential |
$ | 24,805 | 16.31 | % | $ | 18,219 | 18.20 | % | ||||||
Multi-family residential and commercial |
38,228 | 25.14 | % | 23,986 | 23.96 | % | ||||||||
Construction |
19,403 | 12.76 | % | 12,666 | 12.65 | % | ||||||||
Home equity lines of credit |
5,161 | 3.38 | % | 3,815 | 3.81 | % | ||||||||
Real estate loans held for sale |
2,107 | 1.39 | % | 630 | .63 | % | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||
Total real estate loans |
89,704 | 58.98 | % | 59,316 | 59.25 | % | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||
Other loans: |
||||||||||||||
Commercial and industrial |
50,260 | 33.05 | % | 31,281 | 31.24 | % | ||||||||
Loans to individuals |
11,189 | 7.35 | % | 8,836 | 8.83 | % | ||||||||
Other loans held for sale |
937 | 0.62 | % | 685 | .68 | % | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||
Total other loans |
62,386 | 41.02 | % | 40,802 | 40.75 | % | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||
Total loans |
152,090 | 100.00 | % | 100,118 | 100.00 | % | ||||||||
|
|
|
|
|||||||||||
Less: |
||||||||||||||
Deferred loan origination (fees) costs, net |
(160 | ) | (110 | ) | ||||||||||
Allowance for loan losses |
(2,355 | ) | (1,546 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Total loans, net |
$ | 149,575 | $ | 98,462 | ||||||||||
|
|
|
|
|
|
Loans are primarily made in Harnett, Sampson, Johnston and Cumberland Counties, North Carolina. Real estate loans can be affected by the condition of the local real estate market. Commercial and installment loans can be affected by the local economic conditions.
Impaired loans at December 31, 2003 and 2002 consisted of nonaccrual loans of approximately $180,000 and $263,000 respectively. The average recorded investment in impaired loans was approximately $219,000 and $160,000 for the years ended December 31, 2003 and 2002, respectively. Nonaccrual loans did not materially affect interest income for the years ended December 31, 2003 and 2002.
- 27 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE D - LOANS (Continued)
Following is a summary of allocation of the allowance for loan losses to the indicated categories of loans and the percentage that all loans in each category bears to total loans outstanding:
At December 31,
|
||||||||||||
2003
|
2002
|
|||||||||||
Amount
|
% of
Total Loans |
Amount
|
% of
Total Loans |
|||||||||
(Dollars in thousands) | ||||||||||||
One to four family residential |
$ | 185 | 16.31 | % | $ | 138 | 18.20 | % | ||||
Multi-family residential and commercial |
573 | 25.14 | % | 364 | 23.96 | % | ||||||
Construction |
340 | 12.75 | % | 224 | 12.65 | % | ||||||
Home equity lines of credit |
39 | 3.38 | % | 29 | 3.81 | % | ||||||
Commercial and industrial |
880 | 33.05 | % | 559 | 31.24 | % | ||||||
Loans to individuals |
280 | 7.36 | % | 221 | 8.83 | % | ||||||
Loans held for sale |
| 2.01 | % | | 1.31 | % | ||||||
|
|
|
|
|
|
|
|
|||||
Total allocated |
2,297 | 100.00 | % | 1,535 | 100.00 | % | ||||||
|
|
|
|
|||||||||
Unallocated |
58 | 11 | ||||||||||
|
|
|
|
|||||||||
Total |
$ | 2,355 | $ | 1,546 | ||||||||
|
|
|
|
Following is a summary of activity in the allowance for loan losses for the years indicated:
At December 31,
|
||||||||
2003
|
2002
|
|||||||
(In thousands) | ||||||||
Allowance for loan losses at beginning of period |
$ | 1,546 | $ | 984 | ||||
Provision for loan losses |
1,042 | 872 | ||||||
|
|
|
|
|
|
|||
2,588 | 1,856 | |||||||
|
|
|
|
|
|
|||
Loans charged-off: |
||||||||
Commercial and industrial |
(97 | ) | (280 | ) | ||||
Loans to individuals |
(136 | ) | (30 | ) | ||||
|
|
|
|
|
|
|||
Total charge-offs |
(233 | ) | (310 | ) | ||||
|
|
|
|
|
|
|||
Allowance for loan losses at end of year |
$ | 2,355 | $ | 1,546 | ||||
|
|
|
|
|
|
At December 31, 2003, the Bancorp had loan commitments outstanding of $5.9 million and pre-approved but unused lines of credit totaling $36.1 million. In managements opinion, these commitments, and undisbursed proceeds on construction loans in process reflected above, represent no more than normal lending risk to the Bancorp and will be funded from normal sources of liquidity.
- 28 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE D - LOANS (Continued)
The Bancorp has had loan transactions with its directors and executive officers. Such loans were made in the ordinary course of business and on substantially the same terms and collateral as those for comparable transactions prevailing at the time and did not involve more than the normal risk of collectibility or present other unfavorable features. A summary of related party loan transactions, in thousands, is as follows:
Balance at January 1, 2003 |
$ | 6,414 | ||
Borrowings |
9,280 | |||
Loan repayments |
(6,531 | ) | ||
|
|
|
||
Balance at December 31, 2003 |
$ | 9,163 | ||
|
|
|
NOTE E - BANK PREMISES AND EQUIPMENT
Following is a summary of bank premises and equipment at December 31, 2003 and 2002:
2003
|
2002
|
|||||
(In thousands) | ||||||
Land |
$ | 1,241 | $ | 365 | ||
Buildings |
1,440 | 1,438 | ||||
Furniture and equipment |
1,011 | 744 | ||||
Construction in progress |
115 | | ||||
|
|
|
|
|||
3,807 | 2,547 | |||||
Less accumulated depreciation |
522 | 303 | ||||
|
|
|
|
|||
Total |
$ | 3,285 | $ | 2,244 | ||
|
|
|
|
Depreciation amounting to $218,642 and $200,850 for the years ended December 31, 2003 and 2002, respectively, is included in occupancy and equipment expense, data processing and other outsourced services expense and other expenses.
NOTE F - DEPOSITS
At December 31, 2003, the scheduled maturities of time deposits are as follows:
Less
than $100,000 |
$100,000
or more |
Total
|
|||||||
(In thousands) | |||||||||
Year ending December 31: |
|||||||||
Three months or less |
$ | 18,913 | $ | 6,790 | $ | 25,703 | |||
Over three months through twelve months |
31,086 | 10,297 | 41,383 | ||||||
Over one year through three years |
11,588 | 3,136 | 14,724 | ||||||
Over three years |
2,920 | 6,836 | 9,756 | ||||||
|
|
|
|
|
|
||||
$ | 64,507 | $ | 27,059 | $ | 91,566 | ||||
|
|
|
|
|
|
- 29 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE G - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. These repurchase agreements amounted to $2.7 million and $2.1 million at December 31, 2003 and 2002, respectively, and are collateralized by U. S. Government agency obligations and mortgage-backed securities.
NOTE H - ADVANCES FROM FEDERAL HOME LOAN BANK AND OTHER BORROWINGS
At December 31, 2003, the Bancorp had available lines of credit totaling approximately $6 million with various financial institutions for borrowing on a short-term basis. These lines are subject to annual renewals with varying interest rates. Also, as a member of the Federal Home Loan Bank of Atlanta, the Bancorp may obtain advances of up to 30% of our assets, subject to our available collateral.
Advances from the Federal Home Loan Bank of Atlanta consisted of the following at December 31, 2003 and 2002:
Maturity |
Interest Rate |
2003
|
2002
|
||||||
(In thousands) | |||||||||
June 29, 2005 |
2.00 | % | $ | 5,000 | $ | | |||
February 24, 2006 |
2.65 | % | 4,000 | | |||||
|
|
|
|
||||||
$ | 9,000 | $ | | ||||||
|
|
|
|
Pursuant to collateral agreements with the Federal Home Loan Bank, at December 31, 2003 advances are secured by loans with a carrying amount of $10.2 million, which approximates market value.
NOTE I - INCOME TAXES
The significant components of the provision for income taxes for the years ended December 31, 2003 and 2002 are as follows:
2003
|
2002
|
|||||||
(In thousands) | ||||||||
Current tax provision: |
||||||||
Federal |
$ | 624 | $ | 481 | ||||
State |
113 | 90 | ||||||
|
|
|
|
|
|
|||
Total current tax provision |
737 | 571 | ||||||
|
|
|
|
|
|
|||
Deferred tax provision: |
||||||||
Federal |
(195 | ) | (60 | ) | ||||
State |
(46 | ) | (14 | ) | ||||
|
|
|
|
|
|
|||
Total deferred tax provision |
(241 | ) | (74 | ) | ||||
|
|
|
|
|
|
|||
Net provision for income taxes |
$ | 496 | $ | 497 | ||||
|
|
|
|
|
|
- 30 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE I - INCOME TAXES (Continued)
The difference between the provision for income taxes and the amounts computed by applying the statutory federal income tax rate of 34% to income before income taxes is summarized below:
2003
|
2002
|
|||||||
(In thousands) | ||||||||
Expected income tax expense |
$ | 477 | $ | 460 | ||||
Increase (decrease) resulting from: |
||||||||
State income taxes, net of federal tax effect |
44 | 51 | ||||||
Tax-exempt interest income |
(44 | ) | (30 | ) | ||||
Other permanent differences |
19 | 16 | ||||||
|
|
|
|
|
|
|||
Provision for income taxes |
$ | 496 | $ | 497 | ||||
|
|
|
|
|
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred taxes at December 31, 2003 and 2002 are as follows:
2003
|
2002
|
|||||||
(In thousands) | ||||||||
Deferred tax assets relating to: |
||||||||
Allowance for loan losses |
$ | 692 | $ | 382 | ||||
Pre-opening costs and expenses |
46 | 64 | ||||||
|
|
|
|
|
|
|||
Total deferred tax assets |
738 | 446 | ||||||
|
|
|
|
|
|
|||
Deferred tax liabilities relating to: |
||||||||
Property and equipment |
(98 | ) | (47 | ) | ||||
Unrealized gain on available-for-sale securities |
(90 | ) | (137 | ) | ||||
|
|
|
|
|
|
|||
Total deferred tax liabilities |
(188 | ) | (184 | ) | ||||
|
|
|
|
|
|
|||
Net recorded deferred tax asset, included in other assets |
$ | 550 | $ | 262 | ||||
|
|
|
|
|
|
NOTE J - OTHER NON-INTEREST EXPENSE
The major components of other non-interest expense for the years ended December 31, 2003 and 2002 are as follows:
2003
|
2002
|
|||||
(In thousands) | ||||||
Postage, printing and office supplies |
$ | 162 | $ | 112 | ||
Advertising and promotion |
126 | 71 | ||||
Data processing and other outsourced services |
452 | 274 | ||||
Professional services |
250 | 147 | ||||
Other |
600 | 372 | ||||
|
|
|
|
|||
Total |
$ | 1,590 | $ | 976 | ||
|
|
|
|
- 31 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE K - REGULATORY MATTERS
The Bancorp is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bancorps consolidated financial statements. Quantitative measures established by regulation to ensure capital adequacy require the Bancorp to maintain minimum amounts and ratios, as set forth in the table below. Management believes, as of December 31, 2003, that the Bancorp meets all capital adequacy requirements to which it is subject. The Bancorps only significant asset is its investment in New Century Bank. Consequently, the information concerning capital ratios is essentially the same for the Bancorp and the Bank.
As of December 31, 2003 and 2002, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum amounts and ratios, as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Banks category.
The Bank may not declare or pay a cash dividend, or repurchase any of its capital stock, if the effect would cause the regulatory net worth of the Bank to fall below the amount required for the liquidation account established in connection with the conversion, or to an amount which is less than the minimum required by the FDIC and the North Carolina Office of the Commissioner of Banks.
The Banks actual capital amounts and ratios are presented in the table below as of December 31:
Actual
|
Minimum for
capital adequacy purposes |
Minimum to be
well capitalized under prompt corrective action provisions |
||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||
(Dollars in thousands) | ||||||||||||||||||
December 31, 2003: |
||||||||||||||||||
Total Capital (to Risk-Weighted Assets) |
$ | 29,081 | 18.61 | % | $ | 12,500 | 8.00 | % | $ | 15,625 | 10.00 | % | ||||||
Tier I Capital (to Risk-Weighted Assets) |
27,123 | 17.36 | % | 6,250 | 4.00 | % | 9,375 | 6.00 | % | |||||||||
Tier I Capital (to Average Assets) |
27,123 | 14.64 | % | 7,413 | 4.00 | % | 9,266 | 5.00 | % | |||||||||
December 31, 2002: |
||||||||||||||||||
Total Capital (to Risk-Weighted Assets) |
$ | 18,389 | 18.24 | % | $ | 8,066 | 8.00 | % | $ | 10,082 | 10.00 | % | ||||||
Tier I Capital (to Risk-Weighted Assets) |
17,125 | 16.99 | % | 4,033 | 4.00 | % | 6,049 | 6.00 | % | |||||||||
Tier I Capital (to Average Assets) |
17,125 | 13.99 | % | 4,896 | 4.00 | % | 6,119 | 5.00 | % |
NOTE L - OFF-BALANCE SHEET RISK
The Bancorp is a party to financial instruments with off-balance sheet credit risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Bancorp has in particular classes of financial instruments. The Bancorp uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
- 32 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE L - OFF-BALANCE SHEET RISK (Continued)
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bancorp evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bancorp, upon extension of credit is based on managements credit evaluation of the borrower. Collateral obtained varies but may include real estate, stocks, bonds, and certificates of deposit.
A summary of the contract amount of the Bancorps exposure to off-balance sheet credit risk as of December 31, 2003 is as follows:
Financial instruments whose contract amounts represent credit risk: |
|||
Commitments to extend credit |
$ | 5,868 | |
Undisbursed lines of credit |
36,057 | ||
Letters of credit |
2,054 |
NOTE M - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial instruments include cash and due from banks, interest-bearing deposits with banks, investments, loans, deposit accounts and borrowings. Fair value estimates are made at a specific moment in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bancorps entire holdings of a particular financial instrument. Because no active market readily exists for a portion of the Bancorps financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Due from Banks, Interest-Earning Deposits With Banks and Federal Funds Sold
The carrying amounts for cash and due from banks, interest-earning deposits with banks and federal funds sold approximate fair value because of the short maturities of those instruments.
Investment Securities Available for Sale
Fair value for investment securities available for sale equals quoted market price if such information is available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.
- 33 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE M - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
Loans
For certain homogenous categories of loans, such as residential mortgages, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Stock in Federal Home Loan Bank of Atlanta and The Bankers Bank
The fair value for FHLB stock approximates carrying value, based on the redemption provisions of the Federal Home Loan Bank. The fair value of stock in the Bankers Bank is assumed to approximate carrying value.
Investment in Life Insurance
The carrying value of life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the insurer.
Deposits
The fair value of demand deposits is the amount payable on demand at the reporting date. The fair value of time deposits and borrowings is estimated using the rates currently offered for instruments of similar remaining maturities.
Borrowings
The fair values of borrowings, which include securities sold under agreements to repurchase, are based on discounting expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements.
Financial Instruments with Off-Balance Sheet Risk
With regard to financial instruments with off-balance sheet risk discussed in Note L, it is not practicable to estimate the fair value of future financing commitments.
- 34 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE M - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
The following table presents the carrying values and estimated fair values of the Bancorps financial instruments at December 31, 2003 and 2002.
2003
|
2002
|
|||||||||||
Carrying
Amount |
Estimated
Fair Value |
Carrying
Amount |
Estimated
Fair Value |
|||||||||
(In thousands) | ||||||||||||
Financial assets: |
||||||||||||
Cash and due from banks |
$ | 4,074 | $ | 4,074 | $ | 4,383 | $ | 4,383 | ||||
Interest-earning deposits in other banks |
1,821 | 1,821 | 1,144 | 1,144 | ||||||||
Federal funds sold |
16,102 | 16,102 | 4,955 | 4,955 | ||||||||
Investment securities available for sale |
12,637 | 12,637 | 13,584 | 13,584 | ||||||||
Loans, net |
149,575 | 152,336 | 98,462 | 99,616 | ||||||||
Stock in the Federal Home Loan Bank |
450 | 450 | 185,000 | 185,000 | ||||||||
Stock in The Bankers Bank |
49 | 49 | 49 | 49 | ||||||||
Investment in life insurance |
2,118 | 2,118 | | | ||||||||
Financial liabilities: |
||||||||||||
Deposits |
$ | 151,971 | $ | 152,248 | $ | 105,482 | $ | 106,522 | ||||
Securities sold under agreement to repurchase |
2,714 | 2,714 | 2,131 | 2,131 | ||||||||
FHLB advances |
9,000 | 9,000 | | |
NOTE N - EMPLOYEE AND DIRECTOR BENEFIT PLANS
401(k) Plan
The Bancorp has a 401(k) Plan whereby substantially all employees participate in the Plan. The Bancorp makes matching contributions equal to 50 percent of the first 6 percent of an employees compensation contributed to the Plan. Matching contributions vest to the employee equally over a four-year period. Expenses attributable to the Plan amounted to $48,919 and $32,112 for the years ended December 31, 2003 and 2002, respectively.
Employment Agreements
The Bancorp has entered into employment agreements with its four executive officers and two of its senior officers to ensure a stable and competent management base. The agreements provide for benefits as spelled out in the contracts and cannot be terminated by the Board of Directors, except for cause, without prejudicing the officers right to receive certain vested rights, including compensation. In the event of a change in control of the Bancorp, as outlined in the agreements, the acquirer will be bound to the terms of those contracts.
- 35 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE N - EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)
Officers Deferred Compensation
The Bancorp implemented a non-qualifying deferred compensation plan for the Chief Executive Officer during 2003. Benefits will accrue and vest during the period of employment, and will be paid in monthly benefit payments over the officers life after retirement. During 2003, a provision of $38,000 was expensed for future benefits to be provided under this plan. As part of this plan, the Bancorp has purchased life insurance on certain key officers to provide future funding of benefit payments. The plan also provides for payment of a death benefit in the event an insured officer dies prior to attainment of retirement age.
Stock Option Plans
During 2000 the Bancorp adopted, with shareholder approval, an Employee Stock Option Plan (the Employee Plan) and a Director Stock Option Plan (the Director Plan). Each plan makes available options to purchase 117,499 shares of the Bancorps common stock for an aggregate number of common shares reserved for options of 234,998. The options granted under the Director Plan vested immediately at the time of grant, while options granted under the Employee Plan vest over a three-year period with none vesting at the time of the grant. All unexercised options expire ten years after the date of grant. A summary of the Bancorps option plans as of and for the years ended December 31, 2003 and 2002 is as follows:
Shares
Available for Future Grants |
Outstanding Options
|
Exercisable Options
|
|||||||||||||
Number
Outstanding |
Weighted
Average Exercise Price |
Number
Outstanding |
Weighted
Average Exercise Price |
||||||||||||
At December 31, 2001 |
6,821 | 228,177 | $ | 9.10 | 153,582 | $ | 9.99 | ||||||||
Options granted/vesting |
| | | 36,894 | 9.11 | ||||||||||
Options exercised |
| | | | | ||||||||||
Options forfeited |
4,896 | (4,896 | ) | 9.09 | (4,896 | ) | 9.09 | ||||||||
|
|
|
|
|
|
|
|
|
|
||||||
At December 31, 2002 |
11,717 | 223,281 | 9.10 | 185,580 | 9.09 | ||||||||||
Options granted/vesting |
(6,204 | ) | 6,204 | 11.82 | 43,099 | 9.50 | |||||||||
|
|
|
|
|
|
|
|
|
|
||||||
At December 31, 2003 |
5,513 | 229,485 | $ | 9.17 | 228,679 | $ | 9.17 | ||||||||
|
|
|
|
|
|
|
|
|
|
The weighted average remaining life of options outstanding and options exercisable as of December 31, 2003 is 6.6 years. The range of exercise prices of options outstanding at December 31, 2003 is from $9.09 to $11.82. The fair value of each option granted in 2003 was $2.28, and was determined as of the date of grant using the Black-Scholes option pricing model, assuming a risk-free interest rate of 2%, a dividend yield of 0%, volatility of 12%, and an expected life of six years.
- 36 -
NEW CENTURY BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE O - PARENT COMPANY FINANCIAL DATA
Following are the condensed financial statements of New Century Bancorp as of and for the year ended December 31, 2003 (amounts in thousands):
Condensed Balance Sheet December 31, 2003 |
|
|||
2003
|
||||
Assets |
||||
Investment in New Century Bank |
$ | 27,266 | ||
|
|
|
||
Liabilities and Shareholders Equity |
||||
Shareholders equity: |
||||
Common stock |
$ | 2,542 | ||
Additional paid-in capital |
22,481 | |||
Retained earnings |
2,100 | |||
Accumulated other comprehensive income |
143 | |||
|
|
|
||
Total liabilities and shareholders equity |
$ | 27,266 | ||
|
|
|
||
Condensed Statement of Operations Year Ended December 31, 2003 |
|
|||
2003
|
||||
Equity in earnings of subsidiary |
$ | 906 | ||
|
|
|
||
Net income |
$ | 906 | ||
|
|
|
||
Condensed Statement of Cash Flows Year Ended December 31, 2003 |
|
|||
2003
|
||||
Net income |
$ | 906 | ||
Adjustments to reconcile net income to net change in cash and cash equivalents |
||||
Equity in earnings of New Century Bank |
(906 | ) | ||
|
|
|
||
Net change in cash and cash equivalents |
| |||
Cash and cash equivalents, beginning |
| |||
|
|
|
||
Cash and cash equivalents, ending |
$ | | ||
|
|
|
- 37 -
Directors
DIRECTORS - NEW CENTURY BANCORP
Oscar N. Harris Senior Partner President Oscar N. Harris & Associates, P.A. Vice Chairman of the Board New Century Bancorp Former North Carolina State Senator |
Gerald W. Hayes Attorney & President Hayes, Williams, Turner & Daughtry, P.A. |
C. L. Tart, Jr. President Tart & Tart, Inc. Chairman of the Board of Directors New Century Bancorp |
||
Carlie C. McLamb President Carlie Cs IGA Carlie Cs Operation |
T. C. Godwin, Jr. President T-Mart Food Stores, Inc. |
Anthony E. Rand President Rand & Gregory PA North Carolina Senate Majority Leader |
||
J. Gary Ciccone Partner at Nimocks, Ciccone, & Townsend |
John W. McCauley President McCauley-McDonald Investments |
John Q. Shaw, Jr. President and Chief Executive Officer |
DIRECTORS - NEW CENTURY BANK
Shelton Barefoot President Barefoots Auto Mart, Inc. |
Oscar N. Harris Senior Partner President Oscar N. Harris & Associates, P.A. Vice Chairman of the Board New Century Bank Former North Carolina State Senator |
Paul Perry President Perry Brothers Tire Service, Inc. |
||
Dr. Barbara Bethea President Harnett Internal Medicine Associates |
Gerald W. Hayes Attorney & President Hayes, Williams & Turner, P.A. |
Lester Phillips Retired President Lester Phillips, Inc. |
||
Bobby Bryant Bobby Bryant CPA, P.A. Certified Public Accountant |
Ronald V. Jackson President Clinton Truck and Tractor |
John Q. Shaw, Jr. President and CEO New Century Bank |
||
Robert B. Carr President Carr Precast Concrete, Inc. |
Tracy L. Johnson President Ace Services, Inc. |
C. L. Tart, Jr. President Tart & Tart, Inc. Chairman of the Board of Directors New Century Bank |
||
Dallas L. Dafford President Dafford Funeral Home, Inc. |
Donnie R. Lewis President Lewis Farms, Inc. |
Lehmon Tart President Lehmon Tart Enterprises, Inc. |
||
Michael E. Denning President Dixie Denning Supply Company |
Carlie C. McLamb President Carlie Cs IGA Carlie Cs Operation |
Ann H. Thornton Owner Brightleaf Warehouse |
||
Joyce S. Draughon Partner Secretary DTH Management Group, Ltd. |
Michael S. McLamb K&M Maintenance Services, Inc. |
Irvin Warren President Warren Oil Company, Inc. |
||
T. C. Godwin, Jr. President T-Mart Food Stores, Inc. |
Raymond L. Mulkey, Jr. President Ray Mulkey Insurance, Inc. Ray Mulkey Realty, Inc. |
George D. Wise President Wise Mid-State, Inc. |
||
E. Dale Parker President E. D. Parker Corporation |
- 38 -
Directors and Executive Officers
PROPOSED DIRECTORS - NEW CENTURY BANK FAYETTEVILLE
Watson G. Caviness President Caviness-Cates Land Development Co. |
Wrathel Mitchell President Santita Trucking Company |
C. Lee Tart III Vice-President Tart & Tart, Inc. |
||
J. Gary Ciccone Partner Nimocks, Ciccone, & Townsend |
T. Dickson Dickens President Valley Motors, Inc. |
Lyndo W. Tippett Secretary of State of NC Department of Transportation Partner Tippett, Padrick & Bryan |
||
Dr. Andrea K. Dickerson Physician Fayetteville Womans Care |
Richard L. Player III President Player, Inc. |
Dr. Sidney E. Thompson Physician/Medical Director Ravenhill Dermatology Medical Clinic Ravenhill Medical Spa |
||
D. Ralph Huff III President H&H Constructors |
Anthony E. Rand President Rand & Gregory, P.A. |
Sharlene Riddle Williams President C&S Commercial Properties |
||
Dr. Joseph M. Jenkins Past President & CEO Prime Medical Services, Inc. |
James H. Smith Partner President Southeastern Insurance Services Highland Development Partners, LLC Springer, Inc. |
Kevin Bunn President New Century Bank |
||
John W. McCauley President McDonald Investments |
William L. Hedgepeth Chief Executive Officer New Century Bank |
EXECUTIVE OFFICERS - NEW CENTURY BANK
John Q. Shaw, Jr. President and Chief Executive Officer |
Lisa F. Campbell Senior Vice President and Chief Financial Officer |
B. Darrell Fowler Senior Vice President and Branch Administrator |
||
Joan I. Patterson Senior Vice President and Operations Officer |
Peter J. Siemion Senior Vice President and Chief Credit Officer |
- 39 -
New Century Bancorp, Inc.
General Corporate Information
Office Locations
Main Office 700 West Cumberland Street Dunn, North Carolina 28334-2633 |
Clinton Office 506 South East Boulevard Clinton, North Carolina 28329 |
|
Fayetteville Office 2818 Raeford Road Fayetteville, North Carolina 28304 |
Goldsboro Office 425 North Spence Avenue Goldsboro, North Carolina 27534 |
Stock Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016-3572
Regulatory and Securities Counsel
Gaeta & Associates, P.A.
8305 Falls of the Neuse Road, Suite 203
Raleigh, North Carolina 27615
Independent Auditors
Dixon Hughes PLLC
P. O. Box 70
Sanford, NC 27331-0070
The table below presents the trading prices for the Banks stock for 2003 and 2002 (adjusted for the effect of the 11-for-10 stock splits):
High
|
Low
|
|||||
2003 |
||||||
First quarter |
$ | 18.18 | $ | 15.45 | ||
Second quarter |
13.64 | 13.64 | ||||
Third quarter |
16.12 | 13.64 | ||||
Fourth quarter |
16.23 | 15.91 | ||||
2002 |
||||||
First quarter |
$ | 10.75 | $ | 10.33 | ||
Second quarter |
12.73 | 9.92 | ||||
Third quarter |
18.18 | 11.82 | ||||
Fourth quarter |
15.45 | 10.91 |
Market for Common Stock
The Common Stock of the Bancorp is quoted on the Nasdaq Over-the-Counter Bulletin Board under the trading symbol NCBC. Trident Securities, a division of McDonald Investments, Inc., Atlanta, Georgia provides bid and ask quotes for the Common Stock. At December 31, 2003, there were 2,541,655 shares of common stock outstanding, which were held by 1,267 shareholders.
Annual Shareholders Meeting
The annual meeting of shareholders of the Bancorp will be held on May 26, 2004 at 10 a.m. at the Dunn Community Center location at 205 Jackson Road, Dunn, North Carolina.
Form 10-KSB
A copy of New Century Bancorp, Inc.s 2003 Annual Report on Form 10-KSB, as filed with the Securities and Exchange Commission, is available without charge to shareholders upon written request to Lisa Campbell, Senior Vice President/Chief Financial Officer, New Century Bancorp, Inc., 700 West Cumberland Street, Dunn, NC 28334.
This Annual Report serves as the annual financial disclosure statement furnished pursuant to the Federal Deposit Insurance Corporations rules and regulations. This statement has not been reviewed or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation.
- 40 -
EXHIBIT 21
Subsidiaries
New Century Bank
New Century Bank of Fayetteville
Exhibit 31(i)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, John Q. Shaw, Jr., certify that:
1. | I have reviewed this annual report on Form 10-KSB of New Century Bancorp, Inc. (the registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designated such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that all material information relating to the registrant, is made known to us by others within those entities, particularly during the period which this report is being prepared; |
b. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, and of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based upon our most recent evaluation of internal control over financial reporting, to the registrants auditor and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 30, 2004 |
By: |
/s/ John Q. Shaw, Jr. |
||||||
|
||||||||
John Q. Shaw, Jr. President and Chief Executive Officer |
Exhibit 31(ii)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Lisa F. Campbell, certify that:
1. | I have reviewed this annual report on Form 10-KSB of New Century Bancorp, Inc. (the registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designated such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that all material information relating to the registrant, is made known to us by others within those entities, particularly during the period which this report is being prepared; |
b. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, and of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based upon our most recent evaluation of internal control over financial reporting, to the registrants auditor and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 30, 2004 |
By: |
/s/ Lisa F. Campbell |
||||||
|
||||||||
Lisa F. Campbell Vice President (Principal Financial Officer) |
Exhibit 32(i)
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned hereby certifies that, to his knowledge, (i) the Form 10-KSB filed by New Century Bancorp, Inc. (the Issuer) for the year ended December 31, 2003, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.
New Century Bancorp, Inc. | ||||||||
Date: March 30, 2004 |
By: |
/s/ John Q. Shaw, Jr. |
||||||
|
||||||||
John Q. Shaw, Jr. Principal Executive Officer |
Exhibit 32(ii)
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned hereby certifies that, to his knowledge, (i) the Form 10-KSB filed by New Century Bancorp, Inc. (the Issuer) for the year ended December 31, 2003, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.
New Century Bancorp, Inc. | ||||||||
Date: March 30, 2004 |
By: |
/s/ Lisa F. Campbell |
||||||
|
||||||||
Lisa F. Campbell Principal Financial Officer |