SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[Amendment No. _____ ]
Filed by the Registrant: [X]
Filed by a Party other than the Registrant: [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CRESCENT FINANCIAL CORPORATION
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, If Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:___________
(2) Aggregate number of securities to which transaction applies:______________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was
determined):______________________________________________________________
(4) Proposed maximum aggregate value of transaction:__________________________
(5) Total fee paid:___________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: __________________________________________________
(2) Form, Schedule or Registration Statement no.: ____________________________
(3) Filing Party: ____________________________________________________________
(4) Date Filed: ______________________________________________________________
CRESCENT FINANCIAL CORPORATION
1005 High House Road
Cary, North Carolina 27513
(919) 460-7770
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
To Be Held
April 30, 2002
NOTICE is hereby given that the Annual Meeting of Shareholders of Crescent
Financial Corporation (the "Company") will be held as follows:
Place: MacGregor Downs Country Club
430 St. Andrews Lane
Cary, North Carolina
Date: Tuesday, April 30, 2002
Time: 3:00 p.m.
The purposes of the meeting are:
1. To elect four members of the Board of Directors for three year terms.
2. To ratify the appointment of Dixon Odom PLLC as the Company's independent
public accountants for 2002.
3. To approve an amendment to the 1999 Incentive Stock Option Plan increasing
the number of shares available under the plan.
4. To transact any other business that may properly come before the meeting.
You are cordially invited to attend the meeting in person. However, even if you
expect to attend the meeting, you are requested to complete, sign and date the
enclosed appointment of proxy and return it in the envelope provided for that
purpose to ensure that a quorum is present at the meeting. The giving of an
appointment of proxy will not affect your right to revoke it or to attend the
meeting and vote in person.
By Order of the Board of Directors
/s/ Michael G. Carlton
Michael G. Carlton
President and Chief Executive Officer
March 18, 2002
CRESCENT FINANCIAL CORPORATION
1005 High House Road
Cary, North Carolina 27513
(919) 460-7770
PROXY STATEMENT
Mailing Date: On or about March 18, 2002
ANNUAL MEETING OF SHAREHOLDERS
------------------------------
To Be Held
April 30, 2002
General
This Proxy Statement is furnished in connection with the solicitation
of the enclosed appointment of proxy by the Board of Directors of Crescent
Financial Corporation (the "Company") for the 2002 Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held at MacGregor Downs
Country Club, 430 St. Andrews Lane, Cary, North Carolina, at 3:00 p.m. on April
30, 2002, and any adjournments thereof.
Solicitation and Voting of Appointments of Proxy; Revocation
Persons named in the appointment of proxy as proxies to represent
shareholders at the Annual Meeting are Bruce W. Elder and Thomas E. Holder, Jr.
Shares represented by each appointment of proxy which is properly executed and
returned, and not revoked, will be voted in accordance with the directions
contained in the appointment of proxy. If no directions are given, each such
appointment of proxy will be voted FOR the election of each of the four nominees
---
for director named in Proposal 1 below and FOR Proposals 2 and 3. If, at or
---
before the time of the Annual Meeting, any nominee named in Proposal 1 has
become unavailable for any reason, the proxies will have the discretion to vote
for a substitute nominee. On such other matters as may come before the meeting,
the proxies will be authorized to vote shares represented by each appointment of
proxy in accordance with their best judgment on such matters. An appointment of
proxy may be revoked by the shareholder giving it at any time before it is
exercised by filing with Bruce W. Elder, Secretary of the Company, a written
instrument revoking it or a duly executed appointment of proxy bearing a later
date, or by attending the Annual Meeting and announcing his or her intention to
vote in person.
Expenses of Solicitation
The Company will pay the cost of preparing, assembling and mailing this
Proxy Statement and other proxy solicitation expenses. In addition to the use of
the mails, appointments of proxy may be solicited in person or by telephone by
the Company's officers, directors and employees
without additional compensation. The Company will reimburse banks, brokers and
other custodians, nominees and fiduciaries for their costs in sending the proxy
materials to the beneficial owners of the Company's common stock.
Record Date
The close of business on March 8, 2002, has been fixed as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting. Only those shareholders of record
on that date will be eligible to vote on the proposals described herein.
Voting Securities
The voting securities of the Company are the shares of its common
stock, par value $1.00 per share, of which 20,000,000 shares are authorized and
preferred stock, no par value, of which 5,000,000 shares are authorized. At
December 31, 2001, there were 1,289,527 shares of common stock and no shares of
preferred stock outstanding. There are approximately 1,100 holders of record of
the Company's common stock.
Voting Procedures; Votes Required for Approval
Each shareholder is entitled to one vote for each share held of record
on the Record Date on each director to be elected and on each other matter
submitted for voting. In accordance with North Carolina law, shareholders will
not be entitled to vote cumulatively in the election of directors at the Annual
Meeting.
In the case of Proposal 1 below, the four directors receiving the
greatest number of votes shall be elected.
In the case of Proposal 2 below, for such proposal to be approved, the
number of votes cast for approval must exceed the number of votes cast against
the proposal. Abstentions and broker non-votes will have no effect.
In the case of Proposal 3 below, for such proposal to be approved, a
majority of all outstanding shares must vote for the proposal.
Authorization to Vote on Adjournment and Other Matters
By signing an appointment of proxy, shareholders will be authorizing
the proxyholders to vote in their discretion regarding any procedural motions
which may come before the Annual Meeting. For example, this authority could be
used to adjourn the Annual Meeting if the Company believes it is desirable to do
so. Adjournment or other procedural matters could be used to obtain more time
before a vote is taken in order to solicit additional proxies or to provide
additional information to shareholders. However, proxies voted against the
Proposals will not be used to
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adjourn the Annual Meeting. The Company does not have any plans to adjourn the
meeting at this time, but intends to do so, if needed, to promote shareholder
interests.
Ownership of Voting Securities
As of December 31, 2001, no shareholder known to management owned more
than 5% of the Company's common stock.
As of December 31, 2001, the beneficial ownership of the Company's
common stock, by directors individually, and by directors and executive officers
as a group, was as follows:
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2) CLASS (3)
------------------- --------------------------- ----------
Brent D. Barringer 19,181(4) 1.31
Michael G. Carlton 50,581(5) 3.46
Joseph S. Colson, Jr. 37,773 2.58
Bruce I. Howell 21,193(6) 1.45
James A. Lucas 64,296 4.40
Kenneth A. Lucas 55,874 3.82
Sheila Hale Ogle 20,753 1.42
Larry W. Pegram 19,565 1.34
Jon S. Rufty 19,598(7) 1.34
Harry D. Stephenson 19,439 1.33
Stephen K. Zaytoun 14,053 0.96
All Directors and Executive
Officers 366,065 25.05
as a Group
(13 persons)
(1) Except as otherwise noted, to the best knowledge of the
Company's management, the above individuals and group exercise
sole voting and investment power with respect to all shares
shown as beneficially owned other than the following shares as
to which such powers are shared: Mr. Barringer - 8,125 shares;
Mr. Carlton - 247 shares; and Mr. Stephenson - 6,478 shares;
(2) Included in the beneficial ownership tabulations are the
following options to purchase shares of common stock of the
Company: Mr. Barringer - 7,264 options; Mr. Carlton - 37,122
options; Mr. Colson - 16,439 options; Mr. Howell - 12,379
options; Mr. J. Lucas - 17,693 options; Mr. K. Lucas - 17,692
options; Ms. Ogle - 8,970 options; Mr. Pegram - 8,098 options;
Mr. Rufty - 8,287 options; Mr. Stephenson - 10,184 options; Mr.
Zaytoun - 7,264 options; and two executive officers - 20,419
options.
3
(3) The calculation of the percentage of class beneficially owned
by each individual and the group is based on 1,461,338 shares
of common stock which is the sum of (i) a total of 1,289,527
shares of common stock outstanding as of December 31, 2001,
and (ii) 171,811 options to purchase shares of common stock
which are exercisable within 60 days of December 31, 2001.
(4) Includes 731 shares held in Mr. Barringer's spouse's SEP/IRA
account.
(5) Includes 122 shares held by Mr. Carlton as custodian for minor
children.
(6) Includes 371 shares held by Mr. Howell's spouse and 246 shares
held by Mr. Howell as custodian for his minor children.
(7) Includes 1,235 shares held by Mr. Rufty's spouse and 1,546 shares
held by Mr. Rufty as custodian for his minor children.
Required Reports of Beneficial Ownership
Directors and executive officers of the Company are required by federal
law to file reports with the SEC regarding the amount of and changes in their
beneficial ownership of the Company's common stock. Prior to the formation of
the Company as the holding company for Crescent State Bank (the "Bank"), such
ownership reports were filed with the Federal Deposit Insurance Corporation (the
"FDIC"). Upon the formation of the Company, such reports are now required to be
filed with the SEC. All such ownership reports have been timely filed since and
the ownership status of the Company's common stock is currently up to date.
4
PROPOSAL 1: ELECTION OF DIRECTORS
---------------------------------
The Company's Bylaws provide that its Board of Directors shall consist
of between seven (7) and fifteen (15) members, as determined by the Board of
Directors or the shareholders. If there are more than nine (9) members, the
Board shall be divided into three classes approximately equal in number with
each class being elected for three year terms on a staggered basis. The Board of
Directors has set the number of directors of the Company at eleven. The four
directors whose terms expire at the Annual Meeting have been renominated to the
Board for three year terms are listed below:
Position(s) Director Principal Occupation and Business
Name and Age Held Since(1) Experience During Past 5 Years
------------ ----------- -------- ---------------------------------
Michael G. Carlton Director, 1998 President and Chief Executive Officer, Crescent Financial
(40) President and Corporation and Crescent State Bank, Cary, NC, 1998-Present;
Chief Vice President and Business Banking Manager, South Trust Bank
Executive N.A., Raleigh, NC 1997-1998.
Officer
Bruce I. Howell Director 1998 President, Wake Technical Community College, Raleigh, NC.
(59)
James A. Lucas Director 1998 Certified Public Accountant and Partner, James A.Lucas and
(50) Company, LLP, Certified Public Accountants, Raleigh, NC.
Larry W. Pegram Director 1998 Vice President of Administration, Secretary-Treasurer, PBM
(50) Graphics, Inc., Durham, NC (commercial printing).
----------
(1) Includes service as a director of the Bank which reorganized into
the bank holding company form of organization in 2001. Each director also serves
as a director of the Bank.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF
---
THE NOMINEES ABOVE FOR DIRECTOR OF THE COMPANY FOR THREE YEAR TERMS.
5
Incumbent Directors
The Company's Board of Directors includes the following directors whose
terms will continue after the Annual Meeting. Certain information regarding
those directors is set forth in the following table:
Director Term Principal Occupation and
Name and Age Since(1) Expires Business Experience During Past 5 Years
------------ -------- ------- ---------------------------------------
Brent D. Barringer 1998 2004 Attorney and Partner, Barringer, Barringer, Stephenson &
(42) Schiller, LLP, Cary, NC.
Joseph S. Colson, Jr. 1998 2003 Retired from Lucent Technologies, Inc.; President,
(54) International Regions and Professional Services, Lucent
Technologies, 1997-1998; President AT&T Customer Business
Unit, Lucent Technologies, both of Warren, NJ; Director,
InterDigital Communications Corp., King of Prussia, PA
(traded under symbol "IDCC" on Nasdaq).
Kenneth A. Lucas 1998 2003 President and Chief Executive Officer, The Tar Heel
(47) Companies of North Carolina, Inc., Raleigh, NC (real estate
property management and development, formerly named Tar
Heel Management and Maintenance Co.); Secretary-Treasurer,
Carolina Janitorial and Maintenance Supply, Inc.,
1995-President; President and Chief Executive Officer, Tar
Heel Commercial Realty, Inc., Raleigh, NC.
Sheila Hale Ogle 1998 2004 Owner and CEO, Media Research Planning & Placement, Inc.,
(62) Cary, NC (advertising).
Jon S. Rufty 1998 2004 Owner and President, Rufty Homes, Inc., Cary, NC
(47) (residential construction company).
Harry D. Stephenson 1998 2003 Retired from Cary Oil Company, Inc., Cary, NC
(69)
Stephen K. Zaytoun 1998 2004 Owner and President, Zaytoun & Associates, Inc., Cary, NC
(44) (insurance agency).
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(1) Includes service as a director of the Bank which reorganized into
the bank holding company form of organization in 2001. Each director also serves
as a director of the Bank.
Director Relationships
Only one family relationship on the Board of Directors exists. James A.
Lucas and Kenneth A. Lucas are brothers. Other than Mr. Colson, no director is a
director of any company with a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934 or subject to the requirements
of Section 15(d) thereof, or any company registered as an investment company
under the Investment Company Act of 1940.
6
Meetings and Committees of the Board of Directors
Board of Directors. The Company's Board of Directors held twelve (12)
meetings during 2001. Except for Mr. Stephenson who attended 67% of the meetings
he was scheduled to attend, each director attended 75% or more of the aggregate
number of meetings of the Board of Directors and any committees on which he or
she served. Mr. Stephenson's missed meetings were due to out of town
commitments.
The Company's Board of Directors has several standing committees
including an Audit Committee, Compensation Committee and Executive Committee.
Report of the Audit Committee.
Report of the Audit Committee
The Audit Committee is responsible for receiving and reviewing the
annual audit report of the Company's independent auditors and reports of
examinations by bank regulatory agencies, and helps formulate, implement, and
review the internal audit programs of the Company and the Bank.
During the course of its examination of the Company's audit process in
2001, the Audit Committee reviewed and discussed the audited financial
statements with management. The Audit Committee also discussed with the
independent auditors, Dixon Odom PLLC ("Dixon Odom"), all matters required to be
discussed by the Statement of Auditing Standards No. 61, as amended.
Furthermore, the Audit Committee received from Dixon Odom disclosures regarding
their independence required by the Independence Standards Board Standard No. 1,
as amended and discussed with Dixon Odom their independence.
Based on the review and discussions above, the Audit Committee
recommended to the Board that the audited financial statements be included in
the Company's annual report on Form 10-KSB for the year ended December 31, 2001
for filing with the SEC.
The Audit Committee has written a charter.
The Company is not the member of any exchange. However, the Audit
Committee members are "independent" as defined by the Nasdaq listing standards.
The Audit Committee has considered whether Dixon Odom's provision of
the information technology services and other non-audit services to the Company
is compatible with maintaining independence of Dixon Odom. The Audit Committee
has determined that it is compatible with maintaining the independence of Dixon
Odom.
7
This report is submitted by the Audit Committee:
Kenneth A. Lucas
Sheila Hale Ogle
Larry W. Pegram
Harry D. Stephenson
Stephen K. Zaytoun
Compensation Committee. The members of the Compensation Committee in
2001 were Messrs. Howell, Lucas, and Zaytoun and Ms. Ogle. The Compensation
Committee reviews and recommends to the board the annual compensation, including
salary, stock option plans, incentive compensation, and other benefits for
senior management and other Company and Bank employees. The Compensation
Committee met four times in 2001.
Executive Committee. Among its various duties, the Executive
Committee performs the function of the Nominating Committee. The members of the
Executive Committee in 2001 were Messrs. Barringer, Carlton, Colson, Howell, and
Lucas. The Executive Committee met four times in 2001.
Director Compensation
Board Fees. As of December 31, 2001, each director received $500 per
board meeting attended and $100 per committee meeting attended except Mr.
Carlton who did not receive any fees for committee meeting attendance. All fees
were paid in the form of shares of stock of the Company purchased on the open
market pursuant to the Directors Compensation Plan which was adopted by the
board in 2001.
1999 Nonstatutory Stock Option Plan for Directors. The shareholders of
the Bank at the 1999 annual meeting approved the 1999 Nonstatutory Stock Option
Plan for Directors (the "Nonstatutory Option Plan") pursuant to which options
covering 123,750 shares, as adjusted for various stock dividends, of the Bank's
common stock were available for issuance to members of the Board of Directors
and the board of any subsidiary. In connection with the reorganization of the
Bank into the holding company form which resulted in the creation of the Company
in 2001, the Nonstatutory Option Plan was adopted by the Company and options
under such plan are now options of the Company. All other initial provisions of
the Nonstatutory Option Plan as approved by the shareholders in 1999 remain in
effect.
8
Executive Officers
Set forth below is certain information regarding the executive officers
of the Company and the Bank.
POSITION WITH
NAME AGE COMPANY BUSINESS EXPERIENCE
---- --- ------------- -------------------
Michael G. Carlton 40 President, Chief President and Chief Executive Officer, Crescent Financial
Executive Corporation and Crescent State Bank, Cary, NC,
Officer, and 1998-Present; Vice President and Business Banking Manager,
director of South Trust Bank N.A., Raleigh, NC 1997-1998.
Company and Bank
Bruce W. Elder 39 Vice President Vice President and Secretary, Crescent Financial
and Secretary of Corporation and Senior Vice President and Chief Financial
Company and Officer, Crescent State Bank, Cary, NC, 1998-Present;
Senior Vice Chief Financial Officer, Mutual Community Savings Bank,
President and SSB, Durham, NC, 1996-1998.
Chief Financial
Officer of Bank
Thomas E. Holder, Jr. 42 Senior Vice Senior Vice President and Senior Commercial Lender,
President and Crescent State Bank, Cary, NC, 1998-Present; Commercial
Senior Lending Officer, Centura Bank, Raleigh, NC, 1997-1998.
Commercial
Lender of Bank
Executive Compensation. The Bank has entered into employment
agreements with Michael G. Carlton, President and Chief Executive Officer, and
Bruce W. Elder, Senior Vice President, Secretary, and Treasurer, and a change in
control contract with Thomas E. Holder, Jr., Senior Vice President and Senior
Commercial Lender.
Mr. Carlton's employment agreement (dated December 31, 1998) and Mr.
Elder's employment agreement (dated December 31, 2001) establish their duties
and compensation and provide for their continued employment with the Bank. Mr.
Carlton's employment agreement provides for an initial term of employment of
three years with an automatic renewal at the end of the initial term and on each
anniversary thereafter for an additional one-year term unless notified prior
thereto in accordance with the employment agreement. Mr. Elder's employment
agreement provides simply for a term of three years.
Mr. Holder's change in control agreement establishes protections for
him in the case of his termination in connection with a change in control of the
Bank which is discussed more fully below.
Mr. Carlton's and Mr. Elder's employment agreements provide for
annual base salaries, as adjusted for 2002, of $140,000 and $96,640,
respectively, both of which are to be reviewed by
9
the Board of Directors not less often than annually. In addition, the employment
agreements provides for discretionary bonuses, participation in other pension,
profit sharing, and retirement plans maintained by the Bank on behalf of its
employees, as well as fringe benefits normally associated with the officers'
positions or made available to all other employees.
Both Mr. Carlton's and Mr. Elder's employment agreements provide
that the officer may be terminated at any time by the Bank. However, unless the
officers are terminated for cause, as defined in the employment agreements, the
officers' rights to compensation and other benefits will not be prejudiced.
Mr. Carlton's and Mr. Elder's employment agreements and Mr. Holder's
change in control agreement establish certain protections for each of them
should they be terminated in connection with a change in control of the Bank. In
the event of a "termination event" in connection with or within twenty-four
months of a "change in control" each officer shall be entitled to terminate the
agreement and receive 299% of his base amount of compensation as then in effect.
A "termination event" will occur if (1) the officer is assigned any duties or
responsibilities that are inconsistent with his position, duties,
responsibilities, or status which existed at the time of the change in control
or with his reporting responsibilities or titles with the Bank in effect at the
time of the change in control; (2) the officer's annual base salary is reduced
below the annual amount in effect at the time of the change in control; (3) the
officer's life insurance, medical or hospitalization insurance, disability
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 the officer as of the 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 (4) the
officer is transferred to a location which is an unreasonable distance from his
current principal work location. A change in control of the Bank will occur if
(1) any individual or entity, directly or indirectly, acquires beneficial
ownership of voting securities or acquires irrevocable proxies or any
combination of voting stock and irrevocable proxies, representing 25% or more of
any class of voting securities of the Bank, or acquires control in any manner of
the election of a majority of the directors of the Bank; (2) the Bank
consolidates or merges with or into another corporation, association, or entity
where the Bank is not the surviving corporation; or (3) 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.
The following table shows the cash and certain other compensation
paid to or received or deferred by Michael G. Carlton, Bruce W. Elder, and
Thomas E. Holder, Jr. for services in all capacities during 2001, 2000, 1999. No
other current executive officer of the Company or the Bank received compensation
for 2001 which exceeded $100,000. Mr. Carlton does not receive any additional
compensation as President and Chief Executive Officer of the Company.
10
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------- Awards
----------------------
Other
Annual
Bonus($) Compensation
Name and Principal Position Year Salary($) (1) (2) Options
----------------------------- ---- --------- --- --- -------
Michael G. Carlton, President 2001 130,000 15,822 -0- -0-
and Chief Executive Officer 2000 110,000 11,352 -0- -0-
of the Company and the Bank 1999 101,500 950 -0- 40,000
Bruce W. Elder, Vice 2001 90,673 10,230 -0- -0-
President and Secretary of 2000 84,767 7,408 -0- -0-
the Company and Senior Vice 1999 80,000 700 -0- 14,850
President and Chief Financial
Officer of Bank
Thomas E. Holder, Jr., Senior 2001 94,950 10,230 -0- -0-
Vice President and Senior 2000 89,485 7,408 -0- -0-
Commercial Lender of Bank 1999 85,000 700 -0- 12,375
----------
(1) Bonuses are paid each year based on each prior year's results.
(2) Perquisites and other personal benefits did not exceed 10% of any
officer's total salary in 2001, 2000, or 1999.
Stock Options
The following table sets forth information with regard to stock options
granted under the Bank's 1999 Incentive Stock Option Plan (the "Incentive Plan")
which, upon the organization of the Company, was adopted as the Incentive Plan
of the Company. Currently 123,750 shares, as adjusted for stock dividends, may
be issued under the Incentive Plan. No options were granted during the fiscal
year ended December 31, 2001.
Aggregated Option Exercises in Fiscal Year 2001
And Fiscal Year End Option Values
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Value Options at December 31, Options at December 31,
Name on Exercise Realized 2001 2001(1)
---- ----------- -------- --------------------------- ---------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
--------------------------- ---------------------------
Michael G. Carlton -0- -0- 37,122 / 12,378 -0- / -0-
Bruce W. Elder -0- -0- 11,138 / 3,712 -0- / -0-
Thomas E. Holder, Jr. -0- -0- 9,281 / 3,094 -0- / -0-
----------
(1) The Company's stock price on December 31, 2001 was $8.50 per share.
11
401(k) Savings Plan
On April 9, 1999, the Bank adopted the Crescent State Bank Employees'
401(k) Plan (the "Plan") effective January 1, 1999. The Plan provides that
employees may elect to defer up to 22% of their salary, subject to the $10,500
limit contained in Section 402(g) of the Internal Revenue Code for the plan year
beginning January 1, 2000. The Bank makes matching contributions equal to 50% of
a contributing participant's elective deferral. The maximum matching
contribution by the Bank is 3%. A participant becomes vested in his or her
individual account derived from Bank matching contributions over a three-year
period. Employees are eligible to become contributing participants in the Plan
immediately upon employment subject to an age requirement of 18 years.
Indebtedness of and Transactions with Management
The Company has had, and expects to have in the future, banking
transactions in the ordinary course of business with certain of its current
directors, nominees for director, executive officers and their associates. All
loans included in such transactions were made on substantially the same terms,
including interest rates, repayment terms and collateral, as those prevailing at
the time such loans were made for comparable transactions with other persons,
and do not involve more than the normal risk of collectibility or present other
unfavorable features.
PROPOSAL 2: RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------------
The Board of Directors has appointed the firm of Dixon Odom PLLC,
Certified Public Accountants, as the Company's independent public accountants
for 2002. A representative of Dixon Odom PLLC is expected to be present at the
Annual Meeting and available to respond to appropriate questions, and will have
the opportunity to make a statement if he desires to do so.
The Company has paid Dixon Odom PLLC fees in connection with its
assistance in the Company's annual audit and review of the Company's financial
statements. Sometimes the Bank engages Dixon Odom PLLC to assist in other areas
of financial planning. The following table sets forth the fees paid to Dixon
Odom PLLC in various categories in 2001.
Category Amount Paid
-------- -----------
Audit Fees: $ 20,850
Financial Information System Design and Implementation Fees: --
All Other Fees: 2,740
--------
Total Fees Paid: $ 23,590
========
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
---
RATIFICATION OF DIXON ODOM PLLC AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
12
PROPOSAL 3: APPROVAL OF AMENDMENT TO
------------------------------------
1999 INCENTIVE STOCK OPTION PLAN
--------------------------------
On August 16, 2001, the Board approved an amendment to the Incentive
Plan, subject to shareholder approval, to increase the shares available under
the Incentive Plan. The amendment provides that an aggregate of 64,476 shares
will be added to the 123,750 shares currently reserved for issuance by the
Company upon exercise of stock options granted from time to time under the
Incentive Plan. Options granted under the Incentive Plan are intended to qualify
as "incentive stock options" within the meaning of Section 422A of the Internal
Revenue Code (the "Code"). Under the Code, options afforded favorable tax
treatment to recipients upon compliance with certain restrictions but do not
result in tax deductions to the Company. The purpose of the Incentive Plan is to
increase the performance incentive for employees of the Company, to encourage
the continued employment of current employees and to attract new employees by
facilitating their purchase of a stock interest in the Company.
The Incentive Plan is administered by the Compensation Committee of the
board. No member of the board who is not also an officer of the Company or the
Bank is eligible to receive options under the Incentive Plan. Employees of the
Company are eligible to receive options under the Incentive Plan at no cost to
them other than the option exercise price. Any options granted under the
Incentive Plan are subject to a vesting schedule whereby 25% of the options vest
at the date of grant and an additional 25% vest on each anniversary of the date
of grant until all options are vested. Generally, the exercise price for options
granted pursuant to the Incentive Plan may not be less than 100% of the fair
market value of the shares on the date of grant. No option will be exercisable
more than ten years after the date that it is granted. In the case of an
employee who owns more than 10% of the outstanding shares of common stock of the
Company at the time the stock option is granted, the option price may not be
less than 110% of the fair market value of the shares on the date of the grant,
and the option shall not be exercisable more than five years from the date it is
granted. The optionee cannot transfer or assign any option other than by will or
in accordance with the laws of descent and distribution. In the event the
optionee is discharged for cause or voluntary separation on the part of an
optionee (but not separation due to retirement or disability) the options will
immediately terminate. In the event of an optionee's retirement, the options
will continue to be exercisable for three months following retirement. In the
event optionee becomes disabled or dies, the options will continue to be
exercisable for twelve months following the date of the disability or death.
Common stock subject to options which expire or terminate prior to the exercise
of the options shall lapse and such shares shall again be available for future
grants under the Incentive Plan.
The Company receives no monetary consideration at the time of granting
the stock options. The consideration, if any, which the Company receives from
the granting of such stock options is the further dedication of its employees in
the performance of their responsibilities, duties, and functions on behalf of
the Company. Upon exercise of options, the Company will receive payment of cash
or stock from the optionee in exchange for shares issued.
Subject to alternative minimum tax rules under the Code, a recipient of
a stock option under the Incentive Plan will not be taxed upon either the grant
of the option or on the date he or she
13
exercises such option. Unless subject to the alternative minimum tax, a
recipient will be taxed only upon the sale of the stock underlying the option
and will be taxed on the difference between the option price and the sales price
of the stock. The taxable amount will be treated as capital gain. If the
Incentive Option requirements are satisfied, the Company will receive no
corresponding deduction for any portion of the stock option.
If the amendment to the Incentive Plan is approved by the shareholders,
it will become effective immediately and options, if any, granted prior to
shareholder approval beyond the original 123,750 will become exercisable
pursuant to the Incentive Plan's vesting schedule. If the amendment to the
Incentive Plan is not approved by shareholders, the number of shares available
under the Incentive Plan will remain at 123,750, and all options granted prior
to the shareholder vote will be forfeited and void. The price of the Company's
common stock on December 31, 2001 was $8.50.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL
3 APPROVING AN AMENDMENT TO THE 1999 INCENTIVE STOCK OPTION PLAN.
OTHER MATTERS
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The Board of Directors knows of no other business that will be brought
before the Annual Meeting. Should other matters properly come before the
meeting, the proxies will be authorized to vote shares represented by each
appointment of proxy in accordance with their best judgment on such matters.
PROPOSALS FOR 2003 ANNUAL MEETING
---------------------------------
It is anticipated that the 2003 Annual Meeting will be held on a date
during April 2003. Any proposal of a shareholder which is intended to be
presented at the 2003 Annual Meeting must be received by the Company at its main
office in Cary, North Carolina no later than November 15, 2002, in order that
any such proposal be timely received for inclusion in the proxy statement and
appointment of proxy to be issued in connection with that meeting. If a proposal
for the 2003 Annual Meeting is not expected to be included in the proxy
statement for that meeting, the proposal must be received by the Company by
February 15, 2003 for it to be timely received for consideration. The Company
will use its discretionary authority for any proposals received thereafter.
14
REVOCABLE PROXY
CRESCENT FINANCIAL CORPORATION
1005 High House Road
Cary, North Carolina 27513
APPOINTMENT OF PROXY
SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby appoints Bruce W. Elder and Thomas E. Holder, Jr. (the
"Proxies"), or either of them, as attorneys and proxies, with power of
substitution, to vote all outstanding shares of the common stock of Crescent
Financial Corporation (the "Company") held of record by the undersigned on March
8, 2002, at the Annual Meeting of Shareholders of the Company to be held at
MacGregor Downs Country Club, 430 St. Andrews Lane, Cary, North Carolina, at
3:00 p.m., on April 30, 2002, and at any adjournments thereof:
1. ELECTION OF DIRECTORS: Proposal to elect four directors of the Company for
three year terms.
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote for
(except as indicated otherwise below) all nominees listed below
Nominees:
Michael G. Carlton
Bruce I. Howell
James A. Lucas
Larry W. Pegram
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided.
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2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS: Proposal to
ratify the appointment of Dixon Odom PLLC as the Company's independent
accountants for 2002.
[_] FOR [_] AGAINST [_] ABSTAIN
3. APPROVAL OF AMENDMENT TO THE 1999 INCENTIVE STOCK OPTION PLAN: An amendment
to the 1999 Incentive Stock Option Plan increasing the number of shares
available under the plan by 64,476 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
4. OTHER BUSINESS: The Proxies are authorized to vote the shares represented
by this Appointment of Proxy according to their best judgment on such other
matters as may be presented for action at the Annual Meeting.
THE SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY WILL BE VOTED BY THE PROXIES
IN ACCORDANCE WITH THE SPECIFIC INSTRUCTIONS ABOVE. IN THE ABSENCE OF
INSTRUCTIONS, THE PROXIES WILL VOTE SUCH SHARES "FOR" THE ELECTION OF EACH OF
THE NOMINEES LISTED IN PROPOSAL 1 ABOVE AND "FOR" PROPOSALS 2 AND 3. IF, AT OR
BEFORE THE TIME OF THE MEETING, ANY OF THE NOMINEES LISTED IN PROPOSAL 1 FOR ANY
REASON HAVE BECOME UNAVAILABLE FOR ELECTION OR UNABLE TO SERVE AS DIRECTORS, THE
PROXIES HAVE THE DISCRETION TO VOTE FOR A SUBSTITUTE NOMINEE OR NOMINEES. THIS
APPOINTMENT OF PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED BY FILING
WITH THE SECRETARY OF THE COMPANY AN INSTRUMENT REVOKING IT OR A DULY EXECUTED
APPOINTMENT OF PROXY BEARING A LATER DATE, OR BY ATTENDING THE ANNUAL MEETING
AND REQUESTING THE RIGHT TO VOTE IN PERSON.
Date: , 2002
-----------------------------
(SEAL)
----------------------------------
(Signature)
(SEAL)
----------------------------------
(Signature, if shares held jointly)
Instruction: Please sign above exactly as your name
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appears on this appointment of proxy. Joint owners of
shares should both sign. Fiduciaries or other persons
----
signing in a representative capacity should indicate
the capacity in which they are signing.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD
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IN THE ENCLOSED ENVELOPE
------------------------