UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No.
)
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Filed
by the Registrant
x
Filed
by a Party other than the Registrant
¨
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Check
the appropriate box:
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x
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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¨
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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M&F
BANCORP, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment
of Filing Fee (Check the appropriate
box):
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which the transaction
applies:
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(2)
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Aggregate
number of securities to which the transaction
applies:
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(3)
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Per
unit price or other underlying value of the transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of the
transaction:
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¨
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Fee
paid previously with preliminary
materials.
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¨
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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__________________________________________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 9, 2009
__________________________________________________
TO OUR
STOCKHOLDERS:
You are
invited to attend the 2009 annual meeting of stockholders (the “Annual Meeting”)
of M&F Bancorp, Inc. (the “Corporation”) to be held at its principal
executive offices located at the M&F Bank Corporate Center Auditorium, 2634
Durham Chapel Hill Boulevard, Durham, North Carolina 27707 on Tuesday, June 9,
2009 at 6:00 p.m. local time. At the Annual Meeting, you will be asked
to:
1.
|
Elect
seven people to serve on the Board of Directors of the Corporation until
the 2010 annual meeting of stockholders or until their successors are
elected and qualified;
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2.
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Consider
and vote upon a proposal to amend the Articles of Incorporation of the
Corporation to eliminate preemptive rights for
stockholders;
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3.
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Consider
and vote upon a proposal to amend the Articles of Incorporation of the
Corporation to change the authorized number of shares and classes of
capital stock of the Corporation by establishing a class of preferred
stock;
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4.
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Ratify
the appointment of Grant Thornton, LLP as the independent auditor for the
Corporation for the fiscal year ending December 31,
2009;
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5.
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Consider
and vote upon a proposal to amend the Articles of Incorporation of the
Corporation to eliminate cumulative voting rights in the election of
directors;
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6.
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Consider
and vote upon a proposal to amend the Articles of Incorporation of the
Corporation to change the authorized number of shares and classes of
capital stock of the Corporation by increasing the number of authorized
shares of common stock of the Corporation from five million (5,000,000) to
ten million (10,000,000); and
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7.
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Consider
any other business that may properly be brought before the Annual Meeting
or any adjournment thereof. The Board of Directors does not know of any
other business to be considered at the Annual
Meeting.
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Stockholders
of record at the close of business on April 1, 2009 are entitled to vote at the
Annual Meeting or any adjournment thereof. In the event there are not
sufficient shares present in person or by proxy to constitute a quorum or to
approve or ratify any proposal at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of proxies by
the Corporation.
You are
entitled to assert dissenters’ rights under Article 13 of the North Carolina
Business Corporation Act
, a copy of which is
attached
, in connection
with Proposals 2 and 5 above
. In order to perfect
dissenters’ rights, you must comply in full with the requirements of
North
Carolina
law
.
BY ORDER OF THE BOARD OF
DIRECTORS
Kim D. Saunders
President and Chief Executive
Officer
Durham,
North Carolina
April 30,
2009
You
may vote your shares at the Annual Meeting via the internet, by telephone, by
mail or in person. A form of proxy is enclosed to enable you to vote
your shares by mail. Alternatively, instructions for electronic and
telephone voting are provided on the form of proxy. You are urged,
regardless of the number of shares you hold, to register your proxy promptly by
following the instructions on the enclosed proxy card. A return
envelope, which requires no postage if mailed in the United States, is enclosed
for your convenience if you choose to vote by mail.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to
Be Held on June 9, 2009. The Notice, Proxy Statement and the Annual Report to
Stockholders for the year ended December 31, 2008 are also available at
http://www.snl.com/Irweblinkx/docs.aspx?iid=4050540
.
You may also access the above off-site website by going to
www.mfbonline.com
and
clicking on the links.
M&F BANCORP,
INC.
2634
Durham Chapel Hill Blvd.
Durham,
North Carolina 27707
(919)
687-7800
PROXY
STATEMENT
This
Proxy Statement is being furnished to stockholders of M&F Bancorp, Inc. (the
“Corporation”) in connection with the solicitation by the Board of Directors of
the Corporation (the “Board of Directors” or the “Board”) of proxies to be used
at the 2009 annual meeting of stockholders (the “Annual Meeting”). This Proxy
Statement and the enclosed proxy are being mailed to stockholders on or about
April 30, 2009.
INFORMATION
ABOUT THE ANNUAL MEETING
When
and Where is the Annual Meeting?
The
Annual Meeting will be held at 6:00 p.m. local time on June 9, 2009 at the
M&F Bank Corporate Center Auditorium, 2634 Durham Chapel Hill Boulevard,
Durham, North Carolina 27707.
What
Matters Will be Voted on at the Annual Meeting?
At the
Annual Meeting, you will be asked to:
·
|
Elect
seven people to serve on the Board of Directors until the annual meeting
of stockholders in 2010 or until their successors are elected and
qualified;
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·
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Consider
and vote upon a proposal to amend the Articles of Incorporation of the
Corporation to eliminate preemptive rights for stockholders (the
“Preemptive Rights Amendment”);
THE BOARD OF DIRECTORS INTEND
TO VOTE THEIR INDIVIDUAL SHARES OF COMMON STOCK
FOR
PROPOSAL 2: PREEMPTIVE RIGHTS
AMENDMENT, AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE
FOR
PROPOSAL 2: PREEMPTIVE RIGHTS
AMENDMENT;
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·
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Consider
and vote upon a proposal to amend the Articles of Incorporation of the
Corporation to change the authorized number of shares and classes of
capital stock of the Corporation by establishing a class of preferred
stock (the “Preferred Stock Amendment”);
THE BOARD OF DIRECTORS INTEND
TO VOTE THEIR INDIVIDUAL SHARES OF COMMON STOCK
FOR
PROPOSAL 3:
PREFERRED STOCK
AMENDMENT
, AND THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE
FOR
PROPOSAL 3:
PREFERRED STOCK
AMENDMENT;
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·
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Ratify
the appointment of Grant Thornton, LLP (“Grant Thornton”) as the
Corporation’s independent auditor for the fiscal year ending December 31,
2009;
THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON, LLP AS INDEPENDENT AUDITOR FOR THE
CORPORATION FOR THE FISCAL YEAR ENDING DECEMBER 31,
2009;
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·
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Consider
and vote upon a proposal to amend the Articles of Incorporation of the
Corporation to eliminate cumulative voting rights in the election of
directors (the “Cumulative Voting Amendment”);
THE BOARD OF DIRECTORS INTEND
TO VOTE THEIR INDIVIDUAL SHARES OF COMMON STOCK
FOR
PROPOSAL
5: CUMULATIVE VOTING AMENDMENT, AND THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMEND A VOTE
FOR
PROPOSAL
5: CUMULATIVE VOTING
AMENDMENT;
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·
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Consider
and vote upon a proposal to amend the Articles of Incorporation of the
Corporation to change the authorized number of shares and classes of
capital stock of the Corporation by increasing the number of authorized
shares of common stock of the Corporation from five million (5,000,000) to
ten million (10,000,000) (the “Common Stock Amendment”);
THE BOARD OF DIRECTORS INTEND
TO VOTE THEIR INDIVIDUAL SHARES OF COMMON STOCK
FOR
PROPOSAL 6:
COMMON STOCK
AMENDMENT
, AND THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE
FOR
PROPOSAL 6: COMMON
STOCK AMENDMENT;
and
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·
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Consider
and vote upon any other business that may properly come before the Annual
Meeting or any adjournment
thereof.
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Who
is Entitled to Vote?
Only
stockholders of record at the close of business on the record date, April 1,
2009, are entitled to receive notice of and to vote at the Annual
Meeting. On April 1, 2009, there were 2,031,337 shares of the
Corporation’s common stock outstanding and there were approximately 1,091
stockholders of record. Each share of the Corporation’s common stock
is entitled to one vote on each matter considered at the Annual Meeting, except
that stockholders can cumulate their votes in the election of
directors.
What
Constitutes a Quorum?
The
presence at the Annual Meeting, in person or by proxy, of a majority of the
outstanding shares eligible to vote at the Annual Meeting is required for a
quorum. Abstentions, broker non-votes and votes withheld from any
director nominee count as “shares present” at the Annual Meeting for purposes of
determining a quorum.
What
Vote is Required to Approve Each Proposal?
Election of
Directors.
The seven nominees for election as directors who
receive the greatest number of votes will be elected directors. Votes
may be cast in favor of some or all of the nominees or withheld as to some or
all of the nominees. Stockholders can cumulate their votes in the
election of directors.
Preemptive Rights
Amendment and the Cumulative Voting Amendment
.
The proposals to amend
the Corporation’s Articles of Incorporation to eliminate preemptive rights for
stockholders and to eliminate cumulative voting rights in the election of
directors must be approved by the affirmative vote of the holders of a majority
of the shares of common stock entitled to vote at the Annual
Meeting.
Ratification of
Independent Auditor.
The Audit Committee of the Board of
Directors has appointed Grant Thornton to act as the independent auditor for the
Corporation for the year ending December 31, 2009. Ratification of
this proposal requires the affirmative vote of the holders of a majority of the
shares of common stock voted on the proposal.
Preferred Stock
Amendment and Common Stock Amendment.
The proposals to amend
the Corporation’s Articles of Incorporation by establishing a class of preferred
stock and increasing the number of authorized shares of common stock each must
be approved by the affirmative vote of the holders of a majority of the shares
of common stock voted on the proposal.
Other Matters.
Any other matters presented for consideration at the Annual Meeting or
any adjournment thereof will require the affirmative vote of the holders of a
majority of the shares of common stock voted on the
matter. Management currently knows of no other matters to be
presented at the Annual Meeting.
Abstentions and
Broker Non-Votes.
Abstentions and broker
“non-votes” are not counted as votes cast.
Accordingly, abstentions and broker
“non-votes” will have the same effect as a vote
AGAINST
the Preemptive Rights
Amendment
and the
Cumulative Voting
Amendment
.
Abstentions and
broker “non-votes” will have no effect on the other proposals. A broker
“non-vote” occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee has not received instructions
from the beneficial owner and does not have discretionary voting power for that
particular item. You should therefore provide your broker with instructions as
to how to vote your shares.
How
Do I Vote?
Stockholders
are requested to submit their proxy by following the instructions on the
enclosed proxy card. Stockholders may vote in person, by mail via the
enclosed proxy, by telephone or via the internet. Any stockholder may vote for,
against or abstain with respect to any matter to come before the Annual
Meeting. If the proxy is properly completed and voted via the
internet, by telephone or in writing, and not revoked, it will be voted in
accordance with the instructions given.
If the proxy is returned with no
instructions given, the proxy will be voted
FOR
all
the proposals
described in this Proxy
Statement.
If
instructions are given for some but not all proposals, the instructions that are
given will be followed and the proxy will be voted
FOR
the proposals on which no
instructions are given.
If any other matters are properly presented at
the Annual Meeting for consideration, the persons named in the proxy will have
discretion to vote on those matters according to their best
judgment. “Street name” stockholders who wish to vote in person at
the Annual Meeting will need to obtain a proxy form from the institution that
holds their shares.
Can
I Change My Vote After I Submit My Proxy?
Yes. Even
after you have submitted your proxy, your proxy can be withdrawn at any time
before it is voted by:
|
•
|
delivering
written notice to the Corporate Secretary, M&F Bancorp, Inc., 2634
Durham Chapel Hill Boulevard, Durham, North Carolina 27707, before the
vote at the Annual Meeting,
or
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• completing
and returning a later dated proxy,
or
• re-voting
via telephone before the cut-of time indicated on the proxy card,
or
• re-voting
via the internet before the cut-of time indicated on the proxy card,
or
|
•
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attending
the Annual Meeting and voting in
person.
|
Who
Pays the Cost of Soliciting Proxies?
The
Corporation will bear the cost of soliciting proxies for the Annual
Meeting. In addition to soliciting proxies by mail, directors,
officers and employees of the Corporation and its bank subsidiary, Mechanics and
Farmers Bank (the “Bank”), may solicit proxies personally, by telephone, fax or
email. No director, officer or employee of the Corporation or the
Bank who solicits proxies will receive any compensation for his or her
solicitation efforts other than his or her regular compensation for the
positions held. The Corporation has also made arrangements with Regan
& Associates, Inc. to assist it in soliciting proxies and has agreed to pay
that firm a fee not expected to exceed $12,000 for these services. In addition,
the Corporation will request that banks, brokers and other record holders send
proxies and proxy materials to the beneficial owners of the Corporation’s common
stock and secure their voting instructions, if necessary. The Corporation will
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable expenses related to mailing proxy materials to beneficial
owners.
Do
I have Dissenters’ Rights?
As a
stockholder, you have the right to dissent from the Preemptive Rights Amendment
and the Cumulative Voting Amendment, as described in the sections entitled
“Proposal 2: Preemptive Rights Amendment” and “Proposal
5: Cumulative Voting Amendment,” and demand payment of the fair value
of your shares of common stock. Your right to dissent is conditioned
on your strict compliance with the requirements of Article 13 of the North
Carolina Business Corporation Act (the “NCBCA”), a copy of which is included as
Appendix A
to
this Proxy Statement. If you desire to preserve your statutory
dissenters’ rights, you must carefully follow the procedures described in the
section entitled “Proposals 2 and 5: Dissenters’ Rights.” Your
failure to comply precisely with all procedures required by North Carolina law
may result in the loss of your dissenters’ rights.
In order
to exercise dissenters’ rights, a stockholder must
not
vote in favor of
both the Preemptive Rights Amendment and the Cumulative Voting Amendment, and
must give the written notice required by Article 13 of the
NCBCA. Stockholders should note that the return of a signed unmarked
proxy will be considered a vote in favor of both the Preemptive Rights Amendment
and the Cumulative Voting Amendment, and a stockholder vote against the
Preemptive Rights Amendment and the Cumulative Voting Amendment alone will not
satisfy the Article 13 written notice requirements.
STOCK
OWNERSHIP
Who
are the Owners of the Greatest Percentage of the Corporation’s Common
Stock?
The
following table shows all “persons” or “groups,” as defined in the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), who are known to the
Corporation to beneficially own more than 5% of the Corporation’s common stock
as of April 1, 2009:
Name
and Address of
Beneficial Owner
|
Amount
and Nature of
Beneficial Ownership
1
|
Percent
of Outstanding
Common Stock
2
|
Dr.
Vivian M. Sansom
3
1521
Cross Link Road
Raleigh,
NC 27610
|
180,798
|
8.9%
|
Mrs.
Selena W. Wheeler
2029
Heritage Pines Drive
Cary,
NC 27519
|
163,234
|
8.0%
|
North
Carolina Mutual Life Insurance
Company
(“NC Mutual”)
411
West Chapel Hill Street
Durham,
NC 27701
|
186,040
|
9.2%
|
Ms.
Julia W. Taylor
4
2029
Heritage Pines Drive
Cary,
NC 27519
|
211,712
|
10.4%
|
________________
1
|
Unless
otherwise noted, all shares are owned directly of record by the named
persons, their spouses and minor children, or by other entities controlled
by the named persons.
|
2
|
Based
upon a total of 2,031,337 shares of common stock outstanding as of April
1, 2009.
|
|
3
|
Pursuant
to a Power of Attorney, Dr. Sansom’s sons, Joseph M. Sansom and James E.
Sansom, each have voting and investment powers over Dr. Sansom’s shares of
common stock.
|
|
4
|
Includes
163,234 shares of common stock owned by Mrs. Wheeler, for whom Ms. Taylor
serves as attorney-in-fact pursuant to a Power of Attorney and, as such,
has certain voting and investment powers over these
shares.
|
How
Much Stock Do Directors, Nominees and Executive Officers of the Corporation and
the Bank Own?
Set forth
below is certain information, as of April 1, 2009, regarding shares of common
stock owned beneficially by the members of the Board (including members who
resigned, or whose terms expired, during 2008), nominees to the Board, members
of the board of directors of the Bank (the “Bank Board”), certain executive
officers of the Corporation and the Bank, and the directors, nominees and
executive officers as a group.
Name
and Address of
Beneficial Owner
|
Amount
and Nature of
Beneficial Ownership
1
|
Percent
of Outstanding
common stock
2
|
William
V. Bell
Director
of the Bank
1003
Huntsman Drive
Durham,
NC 27713
|
1,500
|
__
|
George
W. Brooks
Director
of the Bank
1301
Alamance Church Rd.,
Greensboro,
NC 27406
|
500
|
__
|
Willie
T. Closs, Jr.
Director
of the Corporation and the Bank
411
West Chapel Hill Street
Durham,
NC 27701
|
400
|
*
|
Genevia
Gee Fulbright
Former
Director of the Corporation and the Bank
P.O.
Box 13156
Research
Triangle Park, NC 27709
|
1,054
|
*
|
Lyn
Hittle
Senior
Vice President and Chief Financial Officer
of
the Corporation and the Bank
2634
Durham Chapel Hill Boulevard, Suite 101
Durham,
NC 27707
|
0
|
*
|
Michael
L. Lawrence
Director
of the Corporation and the Bank
2634
Durham Chapel Hill Boulevard, Suite 206
Durham,
NC 27707
|
290
|
*
|
Cedric
L. Russell
Director
of the Bank
822
Carl Russell Avenue
Winston-Salem,
NC 27101
|
704
|
*
|
Joseph
M. Sansom
Director
of the Corporation and the Bank
2701
Little John Road
Raleigh,
NC 27610
|
182,646
3
|
9.0%
|
Kim
D. Saunders
President
and Chief Executive Officer of the Corporation and the Bank
Nominee
Director of the Corporation
Director
of the Bank
2634
Durham Chapel Hill Boulevard, Suite 101
Durham,
NC 27707
|
214
|
*
|
Maceo
K. Sloan
Former
Director of the Corporation and the Bank
2634
Durham Chapel Hill Boulevard, Suite 206
Durham,
NC 27707
|
8,284
|
*
|
Aaron
L. Spaulding
Director
of the Corporation and the Bank
116
Legacy Lane
Durham,
NC 27713
|
32,184
4
|
1.6%
|
James
H. Speed, Jr.
5
Director
of the Corporation and the Bank
411
West Chapel Hill Road
Durham,
NC 27701
|
500
|
*
|
Lenny
F. Springs
Director
of the Bank
1914
JN Pease Place, Suite 132
Charlotte,
NC 28262
|
250
|
__
|
James
A. Stewart
Director
of the Corporation and the Bank
3604
Shannon Road, Suite 103
Durham NC 27707
|
31,570
|
1.6%
|
Connie
J. White
Director
of the Bank
P.
O. Box 555
Durham,
NC 27702
|
2,024
6
|
*
|
Directors,
Nominees and Executive
Officers
as a group (15 people)
|
262,120
|
12.9%
|
________________
|
* Represents
less than 1% of the Corporation’s outstanding common
stock.
|
|
1
|
Unless
otherwise noted, all shares of common stock are owned directly of record
by the named individuals, their spouses and minor children, or by other
entities controlled by the named individuals. None of the named
individuals has pledged any shares of common stock as
security.
|
2
|
Based
upon a total of 2,031,337 shares of common stock of the Corporation
outstanding as of April 1, 2009.
|
3
|
Includes
180,798 shares of common stock held by Mr. Sansom’s mother, Dr. Vivian M.
Sansom, and over which Mr. Sansom has power of attorney to exercise voting
and investment powers.
|
4
|
Includes
1,784 shares of common stock held by the Estate of Mr. Spaulding’s late
mother, for whom Mr. Spaulding serves as Executor and, as such, has
certain voting and investment powers over these
shares.
|
5
|
Mr.
Speed is President/Chief Executive Officer of NC Mutual, a significant
stockholder. Mr. Speed does not have voting or investment power
over the common stock owned by NC Mutual, and therefore is not deemed to
beneficially own NC Mutual’s stock.
|
6
Includes
24 shares of common stock held jointly with her brother.
PROPOSAL
1: ELECTION OF DIRECTORS
General
The
Corporation’s Articles of Incorporation authorize the Board to fix the number of
directors from time to time within a range of no fewer than three or more than
nine people. The Board has fixed the number of directors for the
coming year at seven.
Directors
are nominated and elected for one year terms. The individuals elected
as directors at this Annual Meeting will hold office until the 2010 annual
meeting of stockholders or until their successors are elected and
qualified.
Each
nominee for director has indicated that he or she is able and willing to serve
on the Board. If any nominee becomes unable to serve, the common
stock represented by all properly completed proxies will be voted for the
election of a substitute nominee recommended by the Board. At this
time, the Board knows of no reason why any nominee might be unavailable to serve
or why a substitute nominee would be required.
Nominees
for Election at the Annual Meeting
Information
about the nominees for election at the Annual Meeting is set forth
below:
Name
|
Age
1
|
Positions Held During Past Five
Years
|
Has
Served the Corporation or
the Bank Since
|
Willie
T. Closs, Jr.
2
|
53
|
Retired
from NC Mutual on December 31, 2007. Mr. Closs continues to
serve NC Mutual on a consulting basis. Prior to his retirement,
Mr. Closs was a Director and Executive Vice President of NC Mutual, and
was associated with NC Mutual since 1983.
|
Director
of the Corporation since 2002. Director of the Bank since
2005.
|
Michael
L. Lawrence
|
38
|
Chief
Financial Officer of NCM Capital Management Group, Inc. since June
2003.
|
Director
of the Corporation since 2006. Director of the Bank since
2005.
|
Joseph
M. Sansom
3
|
65
|
Managing
Partner, Sansom Associates, LLC.
|
Director
of the Corporation since 1999. Director of the Bank (i) between
1987 and June 2008; and (ii) since December 2008.
|
Kim
D. Saunders
|
48
|
President/Chief
Executive Officer of the Corporation and the Bank since February 2007.
Previously, she was President/Chief Executive Officer of Consolidated Bank
and Trust Company from December 2003 to February 2007.
|
Director
of the Bank since 2007.
|
Aaron
L. Spaulding
|
65
|
Chairman,
President and Chief Executive Officer of Galaxy Travel Group, Inc., d/b/a
Prestige Travel, an American Express Travel Services
Representative.
|
Director
of the Corporation since 1999. Director of the Bank since
1994.
|
James
H Speed, Jr.
2
|
55
|
President/Chief
Executive Officer of NC Mutual since January, 2004. Director –
Nottingham Investment Trust II, Hillman Fund Capital Management, Tilson
Investment Trust and New Providence Investment Trust.
|
Director
of the Corporation and the Bank since February 2009.
|
James
A. Stewart
|
60
|
Commercial
real estate broker/consultant, associated with the following firms:
Stewart Investment (Principal); MAJAJA, Inc. and Clearview Housing
Corporation (President); Clearview Commercial Properties, LLC and Camellia
Associates, LLC (Member/Manager); and MAJAJA Siler City, LLC (Manager).
Real estate broker with Anthony & Company, 1998 to
2006.
|
Director
of the Corporation since December 2008. Director of the Bank since
2002.
|
____________________
1
Ages
are given as of February 1, 2009.
2
NC
Mutual is a significant holder of the Corporation’s common stock.
3
Mr.
Sansom is the son of Dr. Vivian M. Sansom, who is a significant holder of the
Corporation’s common stock.
In
December 2008, Maceo K. Sloan was appointed Chairman of the College Retirement
Equities Fund Board of Trustees. Also in December 2008, and as a consequence of
the significant time commitment involved in fulfilling this new position and
continuing to attend to his own firm’s clients, he resigned as a director and as
Chairman of the Board, and as a member of the Bank Board.
The Board
has determined that each of the above named nominee directors, except for Ms.
Saunders and Mr. Sansom, are “independent,” as determined pursuant to the Nasdaq
listing standards. Mr. Sansom was considered to be independent until the
appointment on February 4, 2008 of his brother, James E. Sansom, as the Bank’s
Senior Vice-President and Chief Lending Officer.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE ELECTION OF
THESE SEVEN NOMINEES AS DIRECTORS OF THE CORPORATION FOR THE COMING
YEAR.
THE
BOARD OF DIRECTORS AND ITS COMMITTEES
How
Often Did the Board of Directors Meet During 2008?
During
the year ended December 31, 2008, the Board of Directors held 10
meetings. With the exception of Mr. Closs (who was out of the country
for a period), all of the current directors of the Corporation attended at least
75% of the aggregate number of meetings of the Board of Directors and committees
of the Board on which they served during the year.
How
Often Did the Bank Board Meet During 2008?
During
the year ended December 31, 2008, the Bank Board held nine
meetings. All of the current directors of the Bank attended at least
75% of the aggregate number of meetings of the Bank Board and Bank Board
committees on which they served during the year.
What
is the Corporation’s Policy for Director Attendance at Annual
Meetings?
Although
it is customary for all members of the Board to attend, the Corporation has no
formal policy in place with regard to Board members’ attendance at its annual
meetings of stockholders. With the exception of Mr. Sloan, who was recovering
from surgery, all Board members attended the Corporation’s 2008 annual meeting
of stockholders, which was held on June 10, 2008.
How
Can a Stockholder Communicate with the Board or its Members?
The
Corporation does not have a formal procedure for stockholder communication with
the Board. In general, the Board members and executive officers are
easily accessible by telephone, postal mail or electronic mail. Any
matter intended for the Board, or for any individual member or members of the
Board, can be directed to Kim D. Saunders, the Corporation’s President and Chief
Executive Officer, or Valerie M. Quiett, the Corporation’s Secretary, at the
following address with a request to forward the same to the intended
recipient: M&F Bancorp, Inc., 2634 Durham Chapel Hill Boulevard,
Durham, North Carolina 27707. Alternatively, stockholders may direct
correspondence to the Board, or any of its members, care of the Corporation at
the above address. In addition, stockholders may contact the Board
via the Corporation’s website at
www.mfbonline.com
or
by telephone, using the Corporation’s toll-free number, 1-800-433-8283. The
Board has delegated to the Secretary, or her designee, responsibility for
determining in her discretion whether the communication is appropriate for
director, committee or Board consideration. According to the policy adopted by
the Board, the Secretary is required to direct all communications regarding
personal grievances, administrative matters, the conduct of the Bank's ordinary
business operations, billing issues, product or service related inquires, order
requests, and similar issues to the appropriate individual within the
Corporation or the Bank. All other communications are to be submitted to the
Board as a group, to the particular director or committee to whom it is directed
or, if appropriate, to the director or committee the Corporate Secretary
believes to be the most appropriate recipient, as the case may be.
What
Board Committees Have Been Established?
The Board
has four standing committees, the Audit Committee, Strategic Issues and Planning
Committee, Corporate Governance and Nominating Committee, and the Compensation
Committee.
Audit
Committee.
The Audit Committee reviews the engagement of the
Corporation’s independent registered public accounting firm, reviews quarterly
and annual consolidated financial statements, considers matters relating to
accounting policy and internal controls, discusses significant accounting
estimates with management and with the independent registered public accounting
firm, reviews whether non-audit services provided by the independent registered
public accounting firm affect the accountants’ independence and reviews the
scope of the annual audits in accordance with its written charter.
The Audit
Committee consists of directors Willie T. Closs, Jr., Chairman of the Committee,
Michael L. Lawrence, Vice-Chairman of the Committee, and Aaron L. Spaulding.
There were 15 meetings of the Audit Committee during the year ended December 31,
2008.
The Board
has
determined that
each member of the Audit Committee: (i)
satisfies the Nasdaq’s
independence standards and the independence standards established by the
Securities and Exchange Commission (the “SEC”); (ii)
is "financially literate"
and has "accounting or related financial management expertise," in each case as
required by the
Nasdaq’s corporate governance standards applicable to
audit committee composition; and (iii) has the requisite attributes of an “audit
committee financial expert” as defined by regulations promulgated by the SEC and
that such attributes were acquired through relevant education and/or
experience.
The
Committee has adopted a written charter which is reviewed annually, and was
reviewed and restated on December 17, 2008 and again on February 18,
2009. A copy of the charter is available on the “Investor Relations –
Governance Documents” page of the Corporation’s website at
www.mfbonline.com
.
Report of Audit
Committee
.
The Audit
Committee has reviewed and discussed the Corporation's audited financial
statements with management and has discussed with McGladrey & Pullen, LLP,
the Corporation's independent registered public accounting firm for the year
ended December 31, 2008, the matters required to be discussed by the Statement
on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1
AU Section 380), as adopted by the Public Company Accounting Oversight Board
(the "PCAOB") in Rule 3200T. In addition, the Committee has received the written
disclosures and the letter from McGladrey & Pullen, LLP required by
applicable requirements of the PCAOB regarding the independent accountant's
communications with the Committee concerning independence, and has discussed
with McGladrey & Pullen, LLP the firm's independence in providing audit
services to the Corporation. Based upon these reviews and discussions, the
Committee recommended to the Board that the audited consolidated financial
statements be included in the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 2008. The Committee also appointed
Grant Thornton, LLP as the Corporation’s independent registered public
accounting firm for the fiscal year ending December 31, 2009 and the Board
concurred in the appointment.
|
Members of the Audit
Committee
|
Willie T. Closs, Jr.
Chairman
Michael
L. Lawrence, Vice-Chairman
Aaron L.
Spaulding
Strategic Issues
and Planning Committee
. The Strategic Issues and Planning
Committee assists in influencing the future direction of the
Corporation. The Committee recommends planning issues and policies to
the Board, monitors the planning activities of the Corporation’s officers, and
makes recommendations as appropriate, to the officers and directors of the
Corporation.
The
Strategic Issues and Planning Committee consists of directors James A. Stewart,
Chairman of the Committee, Aaron L. Spaulding, Willie T. Closs, Jr., Michael L.
Lawrence, Joseph M. Sansom and James H. Speed, Jr. There were no
meetings of the Committee during the year ended December 31, 2008.
Corporate
Governance and Nominating Committee.
The Corporate Governance
and Nominating Committee establishes corporate governance principles, evaluates
qualifications and candidates for positions on the Board, nominates new and
replacement members for the Board and recommends Board committee
composition. In addition, the Committee facilitates an annual
evaluation by Board members of the Board and individual director
performance.
The
Corporate Governance and Nominating Committee consists of directors Aaron L.
Spaulding, Chairman of the Committee, Willie T. Closs, Jr., and James A.
Stewart. There were two meetings of this Committee during the year
ended December 31, 2008.
The
Committee has adopted a written charter which is reviewed annually, and was
reviewed on March 25, 2008, and again on January 22, 2009. A copy of
this charter is available on the “Investor Relations – Governance Documents”
page of the Corporation’s website at
www.mfbonline.com
.
Process for
Nominating Directors.
The Corporate
Governance and Nominating Committee reviews the qualifications of, and approves
and recommends to the Board, those individuals to be nominated for positions on
the Board and submitted to stockholders for election at each annual meeting of
stockholders. The Committee identifies director nominees from various sources
such as officers, directors, and stockholders. Kim D. Saunders was
recommended to the Committee by the Board. In 2008, it did not retain
the services of any third party consultants to assist in identifying and
evaluating potential nominees.
The Committee currently
has no written policy with regard to the consideration of director candidates
recommended by stockholders, however, as a matter of practice the Committee will
consider and evaluate a director candidate recommended by a stockholder in the
same manner as a Committee-recommended nominee. Any stockholder who wishes to
recommend a candidate for consideration by the Committee should submit his or
her recommendation in writing to the Corporation’s Secretary not later than
December 31, 2009 and provide the Secretary with such information as the
Committee may reasonably require to properly consider the candidate’s
suitability. The Committee assesses all director nominees taking into
account several factors including, but not limited to, issues such as the
current needs of the Board and the nominee’s: (i) integrity, honesty and
accountability; (ii) successful leadership experience and strong business
acumen; (iii) forward-looking, strategic focus; (iv) collegiality;
(v) independence and absence of conflicts of interests; (vi) ability
to devote necessary time to meet director responsibilities; and
(vii) ability to commit to Corporation stock ownership. Where appropriate,
the Committee will ultimately recommend nominees whom it believes will enhance
the Board’s ability to oversee and direct, in an effective manner, the affairs
and business of the Corporation. Additional factors the Committee may
consider in evaluating candidates include: (i) relevant
business experience; (ii) judgment, skill and reputation; (iii) number of other
boards on which the candidate serves; (iv) other business and professional
commitments; (v) lack of potential conflicts of interest with other pursuits;
(vi) whether the candidate is a party to any action or arbitration adverse to
the Corporation; (vii) financial and accounting background to enable the
Committee to determine whether the candidate would be suitable for Audit
Committee membership or qualify as an “audit committee financial expert”; (viii)
executive compensation background, to enable the Committee to determine whether
a candidate would be suitable for Compensation Committee membership; and (ix)
the size and composition of the existing Board. In evaluating
candidates, the Committee also seeks to achieve a balance of knowledge,
experience and capability on the Board.
Before
nominating a current director for re-election at an annual meeting, the
Committee considers the director’s performance on the Board and whether the
director’s re-election will be consistent with any corporate governance policies
of the Corporation.
Compensation
Committee.
The Committee
determines the compensation of the Bank’s executive officers. The
salary of each of the executive officers is determined based upon the executive
officer’s contributions to the overall profitability of the Corporation and the
Bank, maintenance of regulatory compliance standards, professional leadership,
and management effectiveness in meeting the needs of day-to-day
operations. The Committee also compares the compensation of the
Bank’s executive officers with compensation paid to executives of comparable
financial institutions in North Carolina and executives of other businesses in
the Bank’s market areas. In addition, the Committee receives the
recommendations of the Bank’s Personnel/Compensation Committee and the Chief
Executive Officer for the compensation to be paid to executive officers (other
than the Chief Executive Officer), and after due deliberation determines the
compensation of such executive officers and the Chief Executive
Officer. This process is designed to ensure consistency throughout
the executive compensation program. The Committee’s charter allows
the Committee to delegate such of its duties and responsibilities as it deems
appropriate and advisable to a subcommittee of not less than two members. The
charter also allows the Committee to retain compensation consulting firms to
assist in evaluating executive compensation. The Corporation did not engage any
compensation consulting firms during 2008.
The
Compensation Committee consists of directors James A. Stewart, Chairman of the
Committee, Willie T. Closs, Jr. and Aaron L. Spaulding. A copy of the
Committee’s charter is available on the “Investor Relations – Governance
Documents” page of the Corporation’s website at
www.mfbonline.com
.
The Compensation Committee met two times during the year ended December 31,
2008.
What
Bank Board Committees Have Been Established?
The Bank
Board has several standing committees, including the Executive Committee and the
Personnel/Compensation Committee.
Executive
Committee.
The Executive Committee of the Bank may act,
between meetings of the Bank Board, with all the authority of the full Bank
Board. The membership of the Committee consists of the Chairman and
Vice-Chairman of the Bank Board, and the chairmen of the committees of the Bank
Board. The members of the Executive Committee are Bank directors James A.
Stewart, Chairman of the Committee, Willie T. Closs, Jr., Michael L. Lawrence,
Kim D. Saunders, Aaron L. Spaulding and Connie J. White. There were
11 meetings of the Executive Committee during the year ended December 31,
2008.
Personnel/Compensation
Committee.
The Personnel/Compensation Committee reviews and
recommends to the Compensation Committee of the Board compensation arrangements
for senior management of the Bank. The members of this Committee are
Bank directors Aaron L. Spaulding, Chairman of the Committee, James A. Stewart,
and Connie J. White. The Committee met two times during the year
ended December 31, 2008.
EXECUTIVE
AND DIRECTOR COMPENSATION
Executive
Officers
The
following table provides information about certain executive officers of the
Corporation and the Bank during the year ended December 31, 2008.
Name
|
Age
1
|
Positions Held During Past
Five Years
|
Has Served the Corporation or the Bank
Since
|
Kim
D. Saunders
|
48
|
President/Chief
Executive Officer of the Corporation and the Bank since February
2007. Previously, she was President/Chief Executive Officer of
Consolidated Bank and Trust Company from December 2003 to February
2007.
|
2007
|
Lyn
Hittle
|
55
|
Senior
Vice President/Chief Financial Officer of the Corporation and the Bank
since May 2008. Previously, she was Senior Vice President/Chief
Accounting Officer of Capital Bank from August 2007 to May 2008; Vice
President – Finance/ Controller of Eos Airlines, Inc. from January 2006 to
May 2007; and Senior Vice President/Chief Financial
Officer/Controller/Director of Human Resources of Harrington Bank from
October 2001 to January 2006.
|
May
2008
|
________________
1
Ages
are given as of February 1, 2009.
Summary
Compensation Table
. The following table shows, for the years
indicated, the cash compensation received by, as well as certain other
compensation paid or accrued, for Kim D. Saunders, the President and Chief
Executive Officer of the Corporation and the Bank, and Lyn Hittle, Senior Vice
President and Chief Financial Officer of the Corporation and the Bank (together,
the “named executive officers”). Cash compensation is paid by the Bank, not the
Corporation.
Name
and
Principal Position
|
Year
|
Salary
|
Bonus
1
|
All Other Compensation
2
|
Total
|
Kim
D. Saunders
President/Chief
Executive Officer of the Corporation and the Bank
|
2008
2007
|
$
236,250
$
190,100
|
$
507
$
25,535
|
$
8,407
$
12,238
|
$
245,164
$
227,962
|
Lyn
Hittle
Senior
Vice President/Chief Financial Officer of
the
Corporation and the Bank
|
2008
|
$
96,058
|
$
15,254
|
$
4,416
|
$
115,728
|
____________________
1
|
For
Ms. Saunders, for 2008, this represents a holiday bonus of $507. For Ms.
Saunders, for 2007, this represents (i) a holiday bonus of $535, and (ii)
an annual bonus of $25,000, pursuant to her employment
agreement. For Ms. Hittle, for 2008, this represents (i) a
signing bonus of $15,000, and (ii) a holiday bonus of
$254.
|
2
|
For
Ms. Saunders, for 2008, this represents (i) 401(k) employer matching
contributions and group insurance premiums. For Ms. Saunders,
for 2007, this represents (i) reimbursement of moving expenses of $3,327,
(ii) payment of a temporary housing allowance of $1,500 per month for six
months pursuant to Ms. Saunders’ employment agreement, and (iii) payment
of $5,000 made for the purpose of purchasing shares of the Corporation’s
common stock and an associated “gross up” of $3,316. For Ms.
Hittle, for 2008, this represents 401(k) employer matching contributions
and group insurance premiums.
|
Employment
Agreements
In
January, 2007, the Corporation and the Bank (together the “Employer”) entered
into an employment agreement with Ms. Saunders in connection with her
appointment as President and Chief Executive Officer of the Corporation and the
Bank. Ms. Saunders’ employment agreement provides for an initial term of
employment of three years, beginning February 26, 2007. At the end of the
initial term, the term of employment will be automatically extended for
additional terms of one year (each an “Additional Term”) unless a notice of
termination is given by the Employer to Ms. Saunders not less than 120 days
prior to the end of the initial term, or the Additional Term, as
applicable.
The employment agreement provides for an annual base salary of
$225,000
, which was
increase
d
to $247,500 in July 2008. Ms. Saunders
is eligible to receive an annual bonus of up to 50% of her annual base salary,
to be determined by the Employer’s Boards but guaranteed at the end of her first
year of employment to be not less than $25,000; a grant of $5,000 at the end of
Ms. Saunders’ first year of employment for the purpose of purchasing shares
of the Corporation’s common stock; reimbursement of her reasonable moving
expenses; and a temporary housing allowance of $1,500 per month for up to six
months. The employment agreement also provides for reimbursement of all
reasonable business expenses and participation in all retirement, welfare,
health and other benefit plans or programs currently offered by the Employer to
other executive officers or which may be later offered to other executive
officers. Further, Ms. Saunders is entitled to receive all other fringe
benefits, which are now or may be provided to the Employer’s executive
officers.
The
employment agreement provides that Ms. Saunders may be terminated by the
Employer for “cause,” as defined in the employment agreement, in which event she
shall only be entitled to receive payment of sums due her as base salary and/or
reimbursement of expenses incurred through the date of termination. In the event
that Ms. Saunders is terminated without cause, or is terminated as the
result of a change of control of either the Bank or the Corporation, she shall
be entitled to receive payment of severance compensation equal to 100% of her
then monthly base salary for 12 months following the date of termination. Also,
Ms. Saunders may choose to terminate her employment at any time upon giving
the Employer not less than 60 days notice.
In the
event of Ms. Saunders’ “disability” (as defined in the employment
agreement) for a period of 180 days, the Employer may terminate the employment
agreement at its option, after which termination it shall pay Ms. Saunders
an amount equal to her current base salary, less any benefits received from any
disability benefit or pension plan, until she becomes eligible for benefits
under any long term disability plan or disability insurance program provided by
the Corporation. In addition, Ms. Saunders shall receive any bonus earned
or accrued through the date of termination. In the event of Ms. Saunders’
death during the term of the employment agreement, the employment agreement
shall be terminated. In the event of Ms. Saunders’ death, her estate will
be entitled to all sums due her as base salary and/or reimbursement of expenses
through the end of the month during which her death occurred, plus any bonus
earned or accrued through the date of death.
Ms.
Hittle does not have a written employment agreement.
Incentive
Compensation Program
The Bank,
as part of the implementation of its strategic plan, adopted an Incentive
Compensation Program (the “Program”) for employees. The Program is composed of
separate incentive compensation plans (“Group Plans”) for different groups of
employees: President and Chief Executive Officer, Executive Officers, Senior
Management, City Executives, Loan Production Personnel, Branch Customer Staff
and Corporate Support. The Program is administered by the President
and Chief Executive Officer under the supervision of the Bank’s Compensation
Committee. Each Group Plan in the Program describes eligibility for
incentive awards and the basis for payments (annual or
quarterly). Participants in the various Group Plans are rewarded
based on performance in key components of the Bank’s success, both in terms of
size and profitability. Each year the Program is presented to and
reviewed and approved by the Bank’s Compensation
Committee. Individual awards are determined by a formula set under
each Group Plan for different groups of employees that link attainment of the
Bank’s strategic objectives with attainment of individual goals and
objectives. No bonuses have been paid or accrued for
2008.
Bank-Owned
Life Insurance (“BOLI”)
The type
of BOLI held by the Bank involves the purchase of single premium, variable-rate
life insurance policies, covering the lives of a number of employees, usually
senior officers and members of the Board and the Bank Board. The purpose of this
type of investment is to increase after-tax earnings on the invested funds as a
means to offset costs associated with employee benefit plans or provide
additional benefits for employees and to compensate members of the Board and the
Bank Board for their services. During the fourth quarter of 2002, after having
completed an evaluation of BOLI arrangements, the Bank invested $4,259,500 in
BOLI, covering the lives of the then executive officers and select members of
the Board and the Bank Board. The Bank is the owner of the BOLI
policies and is entitled to the full cash surrender value of the policies. The
primary goal of this investment in BOLI is to help offset increased pension
costs associated with the Bank’s Supplemental Executive Retirement Plan and
other unqualified benefit programs of the Corporation and the Bank. Certain of
the BOLI policies have an associated split dollar death benefit. Upon the
insured’s death, the net split dollar death benefit is divided between the
insured’s named beneficiary and the Bank. The aggregate death benefit for former
and current officers of the Bank as of December 31, 2008 is $1,305,983; made up
of the following: Mr. Johnson ($516,184), Ms. Small ($347,463), and Mr.
Harrington ($442,336).
401(k)
Plan
The Bank
has established a contributory savings plan (the “401(k) Plan”) for its
employees, which meets the requirements of Section 401(k) of the Internal
Revenue Code of 1986, as amended (the “Code”). All employees who have
completed 90 days of service and who are at least 21 years of age may elect to
contribute up to 12% of their compensation to the 401(k) Plan each year, subject
to certain maximums imposed by federal law. The Bank is obligated
under the terms of the 401(k) Plan to match 100% of each eligible employee’s
pre-tax contributions (excluding the employee’s pre-tax contributions in excess
of 6% of compensation). Participants are fully vested in amounts that they
contribute to the 401(k) Plan. Participants are fully vested in
amounts contributed to the 401(k) Plan on their behalf by the Bank as employer
matching contributions or as discretionary contributions after five years of
service according to the following schedule: two years - 20%; three years - 40%;
four years - 60%; five years - 80%; and six years - 100%.
Benefits
under the 401(k) Plan are payable in the event of the participant’s retirement,
death, disability or termination of employment. Normal retirement age
under the 401(k) Plan is 65 years of age.
The named
executive officers are entitled to participate in the 401(k) Plan on the same
basis as all other eligible employees of the Bank. Both of the named
executive officers participated in the 401(k) Plan during 2008.
Equity
Compensation Plans
The
Corporation has one equity compensation plan, the Incentive Stock Option Plan of
1999 (the “Stock Option Plan” or “Plan”). Neither of the named executive
officers
has
received any equity awards under the Stock Option Plan.
The Stock
Option Plan provides for the grant of stock options for the purchase of up to
171,000 shares (adjusted for the January 21, 2000, 3-for-2 stock split and the
100% stock dividend paid on January 10, 2005) of the Corporation’s common stock
as incentive awards to officers of the Corporation and its subsidiaries (the
“Key Employees”). The purpose of the Plan generally is to assist the
Bank in attracting and retaining key employees and to align their interests with
those of stockholders, and to encourage and motivate Key Employees to perform at
levels that will contribute to both the Corporation’s financial performance and
to the growth of the market value of its common stock, thereby enhancing
stockholder value. The Plan expires on December 28, 2009, and no
options may be granted thereafter.
Plan
Administration.
The Stock Option Plan is administered by the
Board. If a director is eligible as an employee for the grant of an
option, that director must recuse himself or herself and not participate in the
discussion, nor vote on the award of any option to him or her. The
Board is authorized:
|
•
|
to
make all determinations regarding the persons to whom and numbers of
shares and amounts for which stock options will be granted under the
Plan,
|
|
•
|
to
specify the terms of all awards or grants under the
Plan,
|
|
•
|
to
interpret and make all other determinations under the
Plan,
|
|
•
|
to
prescribe, amend and rescind rules and regulations with respect to the
operation of the Plan, and
|
|
•
|
to
take other actions relating to and reasonable or advisable in
administering the Plan.
|
Stock
Options.
An
option is a right that may be granted to a Key Employee under the Stock Option
Plan to purchase a specified number of shares of common stock during a specified
period of time and at an agreed upon purchase price per share (the “Exercise
Price”). Stock options granted under the Plan are incentive stock
options (“ISOs”) pursuant to Section 422 of the Code. The Exercise Price per
share of common stock covered by each ISO granted is set by the Board at the
time the option is granted, but may not be less than 100% of the fair market
value (as determined by the Board in such manner as it, in its sole discretion,
deems to be reasonable and appropriate) of a share of common stock at the time
the ISO is granted (or 110% of the fair market value in the case of an ISO
granted to an optionee who owns more than 10% of the outstanding voting common
stock).
Each ISO
vests and becomes exercisable as specified by the Board and, to the extent not
previously exercised, expires and may not be exercised after the earlier
of:
|
(i)
|
the
expiration date set by the Board at the time of grant (which may be no
more than 10 years after the date of grant, or five years in the case of
an ISO granted to a Key Employee who owns more than 10% of the outstanding
voting common stock);
|
(ii)
|
90
days after the date of termination of the Key Employee’s employment other
than by reason of his or her death, “disability,” or termination for
“cause” (as defined in the Plan);
|
(iii)
|
12
months following the termination of the Key Employee’s employment as a
result of his or her death or “disability;”
or
|
(iv)
|
the
date of termination if the Key Employee’s employment is terminated for
“cause” or if the Key Employee competes with the Bank (as “compete” is
defined in the Plan).
|
The
aggregate fair market value (determined as of the date of grant) of common stock
for which all ISOs granted to any Key Employee may become exercisable for the
first time in any calendar year may not exceed $100,000. In addition,
the Board may impose such other restrictions or conditions as it may deem
appropriate.
At the
time an ISO is exercised, the optionee must make full payment of the aggregate
exercise price for shares being purchased. Payment shall be made in
cash. Optionees will have no rights as stockholders with respect to
any shares covered by options granted to them until those options have been
exercised and the exercise price for the shares has been paid.
ISOs
granted under the Stock Option Plan are intended to qualify for favorable income
tax treatment. Under the Code, an optionee is not taxed in the year
in which an ISO is exercised, unless the alternative maximum tax rules
apply. If an optionee holds common stock purchased upon the exercise
of an ISO for a period of at least two years following date of grant and at
least one year from the date the ISO is exercised (or dies while owning stock),
then, upon disposition of the common stock (or upon death while owning the
stock), he or she (or his or her estate, as applicable) will realize capital
gain equal to the excess of the sale price of the common stock over the Exercise
Price. The Corporation will not be permitted to take a tax deduction
at any time in connection with ISOs, unless stock purchased upon exercise is
disposed of prior to expiration of the two holding periods. If the
optionee exercises the ISO prior to the expiration of the two holding periods,
the optionee will realize ordinary income equal to the lesser of: (i) the
difference between the fair market value of the shares on the date of exercise
and the Exercise Price, or (ii) the difference between the Exercise Price and
sale price, and the Corporation is allowed to take a deduction for the same
amount.
THE
ABOVE DESCRIPTION OF TAX CONSEQUENCES UNDER FEDERAL LAW IS NECESSARILY GENERAL
IN NATURE AND DOES NOT PURPORT TO BE COMPLETE. MOREOVER, STATUTORY
PROVISIONS ARE SUBJECT TO CHANGE, AS ARE THEIR INTERPRETATIONS, AND THEIR
APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES. THE CONSEQUENCES
UNDER APPLICABLE STATE AND LOCAL INCOME TAX LAWS MAY NOT BE THE SAME AS UNDER
THE FEDERAL TAX LAWS. IN ACCORDANCE WITH TREASURY REGULATIONS, ANY
FEDERAL TAX ADVICE PROVIDED IN THIS PROXY STATEMENT MAY NOT BE USED TO AVOID ANY
FEDERAL TAX PENALTY. ANY SUCH ADVICE IS PROVIDED ON THE BASIS AND
WITH THE INTENT THAT THE ADVICE MAY NOT BE USED TO AVOID ANY FEDERAL TAX
PENALTY.
Adjustments of
Rights in Certain Events.
In the event of
increases, decreases or changes in the outstanding common stock resulting from a
merger, consolidation, stock dividend, split-up, combination, exchange of
shares, recapitalization, or change in capitalization, the total number of
shares authorized under the Plan, options outstanding and the Exercise Price per
share will be proportionately and appropriately adjusted.
Change in Control
Transactions.
Immediately prior to a “change in control,” each
outstanding ISO will become immediately vested and may be exercised in full
under the terms of the Plan. A “change in control”
includes:
|
(i)
|
the
acquisition of more than 50% of the common stock of the
Corporation,
|
|
(ii)
|
the
sale of all or substantially all of the assets of the Corporation,
and
|
(iii)
|
the
merger or consolidation of the Corporation with another entity at least
50% of the stock of which is not owned by the stockholders of the
Corporation.
|
Amendments.
The
Board may, from time to time, amend, suspend, or terminate the Stock Option
Plan. However, no such action will adversely affect any optionee’s
rights under any then outstanding option, and the Board shall not:
|
(i)
|
increase
the maximum number of shares of common stock authorized for the
Plan,
|
|
(ii)
|
change
the class of employees to other than Key
Employees,
|
|
(iii)
|
reduce
the basis upon which the Exercise Price is
determined,
|
|
(iv)
|
extend
the period within which the options under the Plan may be granted,
or
|
|
(v)
|
provide
for an option that is exercisable during a period of more than 10 years
from the date it is granted.
|
Tax
Withholding.
As a condition to the distribution of shares of
common stock upon the exercise or vesting of options under the Plan, the
Corporation may require that the Key Employee pay to it, or it may withhold, the
amount of any federal or state income or other taxes applicable to income that
the optionee is considered to realize from such delivery and that the Board
believes the Corporation is required by law to withhold.
Table.
The
following table presents the number of shares of common stock to be issued upon
the exercise of outstanding options; the weighted-average price of the
outstanding options; and the number of options remaining that may be issued
under the Plan.
EQUITY
COMPENSATION PLAN
INFORMATION
|
Plan
Category
|
(a)
Number
of shares
to
be issued upon exercise of
outstanding options
|
(b)
Weighted-average
exercise
price of
outstanding options
|
(c)
Number
of shares remaining
available
for future issuance under equity compensation plans
(excluding
shares
reflected in column (a))
|
Equity
compensation plans
approved
by our stockholders
|
25,200
|
$7.84
|
145,800
|
Equity
compensation plans not
approved
by our stockholders
|
-0-
|
N/A
|
-0-
|
Total
|
25,200
|
$7.84
|
145,800
|
Director
Compensation
How
are Directors Compensated?
Directors
who are officers or employees of the Corporation or its subsidiaries receive no
additional compensation for service on the Board, the Bank Board or their
committees. Any non-employee director who serves on both the Board
and the Bank Board receives a retainer only from the Corporation, and not from
the Bank. Directors are also reimbursed for reasonable travel
expenses incurred to attend meetings.
Board.
During
2008, the Corporation’s non-employee directors each received an annual retainer
of $2,000, and meeting fees of $600 for each Board meeting attended; $500 for
each Audit Committee meeting attended; and $450 for each other committee meeting
attended. In addition, non-employee committee chairmen received a $1,500 annual
retainer for each committee chaired, and the Chairman of the Board received a
$5,000 annual retainer.
Bank
Board.
During 2008, the Bank
paid its non-employee chairman an annual retainer of $5,000, its other
non-employee directors an annual retainer of $2,500, and all non-employee
directors $600 for each Bank Board meeting attended in person and $300 for each
Bank Board meeting attended via conference call. In addition,
non-employee directors received $600 for each Executive Committee meeting
attended in person, $450 for each other committee meeting attended in person,
and $200 for each committee meeting attended via conference call. In
addition, non-employee committee chairmen received an annual retainer of
$1,500.
Director
Compensation Table.
The following table shows, for the fiscal
year ended December 31, 2008, the cash compensation paid by the Corporation and
the Bank, as well as certain other compensation paid or accrued for that year,
to the members of the Board of Directors.
Name
|
Fees Earned or Paid in
Cash
1
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan
Compensation
|
Nonqualified
Deferred Compensation
Earnings
|
All
Other
Compensation
|
Total
|
Willie
T. Closs, Jr.
|
$26,752
|
—
|
—
|
—
|
—
|
—
|
$26,752
|
Genevia
Gee Fulbright
2
|
$4,630
|
—
|
—
|
—
|
—
|
—
|
$4,630
|
Michael
L. Lawrence
|
$23,750
|
—
|
—
|
—
|
—
|
—
|
$23,750
|
Joseph
M. Sansom
|
$21,044
|
—
|
—
|
—
|
—
|
—
|
$21,044
|
Maceo
K. Sloan
3
|
$20,450
|
—
|
—
|
—
|
—
|
—
|
$20,450
|
Aaron
L. Spaulding
|
$40,100
|
—
|
—
|
—
|
—
|
—
|
$40,100
|
James
H. Speed, Jr.
4
|
$0
|
—
|
—
|
—
|
—
|
—
|
$0
|
James
A. Stewart
5
|
$29,708
|
—
|
—
|
—
|
—
|
—
|
$29,708
|
____________________
1
|
Unless
otherwise indicated, this category sets forth the directors’ fees related
to the directors’ service on the Board, the Bank Board and their
committees.
|
2
|
Ms.
Fulbright did not stand for re-election to the Board at the 2008 annual
meeting, when her term expired.
|
3
|
Mr.
Sloan resigned from the Board in December
2008.
|
4
|
Mr.
Speed was elected to the Board and the Bank Board in February
2009.
|
5
|
Mr.
Stewart was elected to the Board in December 2008. He served as
chairman of the Bank Board throughout
2008.
|
Indebtedness
of and Transactions with Related Persons
The Bank
provides loans and other credit facilities in the ordinary course of its
business to certain persons who beneficially own more than 5% of the
Corporation’s common stock, Corporation and Bank directors, director-nominees
and employees, including executive officers, and businesses in which the
foregoing have direct or indirect interests, as well as the immediate family of
the foregoing. The Bank has adopted a policy which sets forth the
requirements applicable to such loans and other credit facilities. These loans
and other credit facilities are made using the same credit and underwriting
standards as are applicable to the general public, and such loans and other
credit facilities do not involve more than the normal risk of collectability or
present other unfavorable features. Pursuant to its employee loan
policy, loans and other credit facilities to directors and employees are made on
the same terms, including interest rates and collateral, as those prevailing for
comparable transactions with nonaffiliated persons.
The
Corporation entered into a lease on December 31, 2003 under which NCM Capital
Advisers, Inc. leases space in the Corporation’s corporate
offices. The lease was amended in 2004 to include additional office
space. The lease was amended again on December 18, 2008, pursuant to which the
term was extended to May 31, 2014. Currently, annual lease payments
to the Corporation are approximately $161,736 and will total approximately $1.6
million over the full term of the lease. Former Board Chairman Maceo K. Sloan
serves as Chairman, Chief Executive Officer and Chief Investment Officer, and is
a 66% stockholder of NCM Capital Advisors, Inc. Current Board member,
Michael L. Lawrence is Chief Financial Officer of NCM Capital Management Group,
an affiliate of NCM Capital Advisors, Inc.
The
Corporation entered into a ground lease with Vivian M. Sansom (a significant
stockholder) and her late husband in 1976, under which the Corporation leases
land at Rock Quarry Road, Raleigh, North Carolina for a branch office. Currently
the annual lease payment to Dr. Sansom is $6,000.
PROPOSALS 2 AND 5: DISSENTERS’
RIGHTS
Section
55-13-02 of the NCBCA provides that a stockholder is entitled to dissent from
and obtain payment for the fair value of his or her shares under certain
conditions in the event of specified corporate actions. Among the
actions which trigger these “dissenters’ rights” is an amendment to
a corporation’s articles of incorporation which materially and adversely
affects rights in respect of a dissenter’s shares because it (i) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities, or (ii) subject to limited exceptions, excludes or limits the
right of the shares to vote on any matter, or to cumulate
votes. Therefore, the stockholders of the Corporation who take the
necessary steps to perfect their rights are entitled to dissent from either the
Preemptive Rights Amendment and/or the Cumulative Voting Amendment, and obtain
payment for the fair value of their shares under Article 13 of the NCBCA
(“Article 13”). A copy of Article 13 is attached as
Appendix
A
.
A
stockholder who wishes to assert dissenters’ rights must follow the very
specific requirements set forth in Article 13. In addition to certain
other requirements, a dissenting stockholder must give the Corporation, and the
Corporation must actually receive before the Annual Meeting, a written notice
(the “Intent Notice”) of that stockholder’s intent to demand payment for his or
her shares if the Cumulative Voting Amendment and/or the Preemptive Rights
Amendment is effected. The dissenting stockholder must also not vote
his or her shares in favor of the Preemptive Rights Amendment or the Cumulative
Voting Amendment, as applicable. Failure to comply with these and
other requirements set forth in Article 13 will constitute a waiver of the
stockholder’s right to dissent.
If either
the Cumulative Voting Amendment or the Preemptive Rights Amendment are approved
by the Corporation’s stockholders, and subsequently effected by the Corporation,
the Corporation will mail by registered or certified mail, return receipt
requested, a written notice to all stockholders who properly delivered an Intent
Notice and satisfied the requirements of a dissenting stockholder set out in
Article 13 (a “Dissenters’ Notice”) with respect to the applicable
amendment(s). A stockholder who receives a Dissenters’ Notice must
demand payment and deposit his or her certificates for the shares of common
stock in accordance with the terms of the Dissenters’ Notice. A
stockholder who does not satisfy the foregoing requirements is not entitled to
payment for his or her shares under Article 13.
Upon
receipt of the dissenting stockholder’s payment demand(s), the Corporation will
offer to pay each dissenter, who properly demanded payment and deposited his or
her share certificates, the amount estimated to be the fair value of the common
stock owned by such stockholders, plus interest accrued to the date of payment,
and will pay this amount to the dissenters.
Under
certain terms and conditions specified in Article 13, a dissenter may notify the
Corporation in writing of his or her own estimate as to the fair value of his or
her shares and the amount of interest due, and that dissenter may demand payment
of the excess amount over the Corporation’s payment and interest
due. The stockholder waives the right to demand payment if he or she
fails to demand additional payment in accordance with Article 13.
Article
13 also sets forth the procedure to be followed in the event that a demand for
payment remains unsettled. This procedure involves an appraisal proceeding in
which the court may appoint one or more persons as an appraiser to receive
evidence and recommend a decision on the question of fair value.
A
beneficial owner who is not the record owner may assert dissenters’ rights as to
any shares held on his or her behalf only if (i) the Corporation receives the
record stockholder’s written consent to the dissent prior to or simultaneously
with the beneficial stockholder’s assertion of dissenters’ rights and (ii) he or
she does so with respect to all shares of which he or she is the beneficial
owner.
The
foregoing is only a summary of the rights of dissenting stockholders under the
NCBCA. Because Article 13 contains more detailed provisions and
requirements, each dissenting stockholder should carefully review the text of
Article 13 attached hereto as
Appendix
A
and should also
consult with his or her own legal counsel concerning the specific procedures and
available remedies under Article 13. Any failure to follow the
specific procedure set forth in Article 13 may result in a stockholder losing
the right to claim fair value as described above.
As
discussed above, you are advised that any Intent Notice pursuant to Article 13
must be in writing and must be received by the Corporation prior to the vote at
the Annual Meeting. If you desire to mail your Intent Notice to
demand payment, you should mail such notice to the Corporation at the address
set forth at the beginning of this Proxy Statement.
As
previously stated, in order to exercise dissenters’ rights with respect to
either the Preemptive Rights Amendment or the Cumulative Voting Amendment, you
must not vote in favor of such amendment and must give the written notice
required by Article 13. You should note that the return of a signed
unmarked proxy will be considered a vote in favor of both the Preemptive Rights
Amendment and the Cumulative Voting Amendment, and your vote against the
Preemptive Rights Amendment and/or the Cumulative Voting Amendment alone will
not satisfy the written notice requirement. You must deliver a
separate written notice to the Corporation.
PROPOSAL
2: PREEMPTIVE RIGHTS AMENDMENT
The Board
of Directors has approved and adopted for submission to stockholders an
amendment to Article VII of the Corporation’s Articles of Incorporation
eliminating preemptive rights for stockholders.
The
proposed amendment reads as follows:
Article
VII is hereby amended and restated to read in its entirety as
follows:
Article
VII
Shareholders
shall not have preemptive rights, provided, however, that the Corporation's
Board of Directors, in its sole discretion, may choose to grant preemptive
rights upon any new stock issuance.
Vote
Required
In order
to be implemented, this proposal must be approved at the Annual Meeting by the
affirmative vote of the holders of a majority of the shares of common stock
entitled to vote at the Annual Meeting.
Description
of Preemptive Rights and Purpose of the Proposed Amendment
The Board
of Directors is recommending that stockholders vote in favor of the proposed
amendment because the Board believes that eliminating preemptive rights will
enable the Corporation to raise capital more efficiently and with fewer costs.
At the same time, the Board believes that the historical protection that
preemptive rights offered to stockholders are not necessary to protect the
stockholders of a public company, such as the Corporation, against dilution of
their voting power in the Corporation.
Under
Article VII of the Corporation’s Articles of Incorporation, stockholders now
have the preemptive right to acquire newly issued shares of the Corporation’s
common stock pro rata to their existing holdings when those shares are issued
for cash. Accordingly, prior to issuing shares of common stock to the public,
the Corporation would have to first offer the shares to existing stockholders in
a complex process that guarantees for each stockholder the right to purchase
that number of shares that preserves the stockholder’s voting percentage of the
Corporation.
Preemptive
rights were originally developed in the United States during the 19
th
century. However, during the 20
th
century, most public companies abandoned these rights. In fact, North Carolina
law has recognized this shift away from preemptive rights by mandating that
stockholders of modern North Carolina companies do not have preemptive rights
unless the articles of incorporation specifically provide for them.
The
original purpose of preemptive rights was to prevent a company or a majority of
stockholders of the company from diluting a minority stockholder’s interest.
Although these rights may be beneficial in the context of a small, privately
held company, they present a cumbersome restriction on the ability of a public
company to issue and sell shares for corporate purposes. Moreover, unlike a
minority stockholder in a private company, a stockholder of a public company can
always prevent dilution of his or her voting power by purchasing more shares on
the open market.
It is
costly and time consuming to have to notify each stockholder of a public company
of his or her preemptive rights, and the process can cause expensive delay in
any stock issuance. The Corporation’s stockholders constantly change as its
common stock is traded on the OTC Bulletin Board. Many of the Corporation’s
stockholders hold their stock in street name, which would further complicate the
process of according preemptive rights to stockholders in the event of a
qualifying stock issuance. Given the size of the Corporation, the fact that its
common stock is publicly traded, and the characteristics of its stockholder
base, the Board of Directors believes that having preemptive rights in the
Corporation’s Articles of Incorporation prevents the Corporation from taking
full advantage of the public trading markets and restricts its ability to raise
capital in an efficient way.
Few
public companies still provide preemptive rights to their stockholders. The
Board of Directors believes that preemptive rights are rare among public
companies because the related loss of flexibility in raising capital is widely
recognized as undesirable. The Board believes that eliminating preemptive rights
will enhance stockholder value by enhancing the Corporation’s access to the
capital markets.
Previous
Support for Eliminating Preemptive Rights
At the
Corporation’s 2000 annual meeting of stockholders, an identical proposal to
eliminate preemptive rights received the overwhelming support of the
Corporation’s stockholders: of the then 853,725 shares eligible to vote, 484,940
shares voted in favor, while only 22,829 shares voted against and 2,796 shares
abstained. Although approved by a majority of the Corporation’s outstanding
shares of common stock, the proposal did not pass at that time because it was
presented as part of a series of proposals, some of which required a greater
vote.
At the
Corporation’s 2008 annual meeting of stockholders, an identical proposal to
eliminate preemptive rights received significant support of the Corporation’s
stockholders but failed to receive the necessary affirmative vote of the holders
of a majority of the shares entitled to vote: of the then 2,049,365 shares
eligible to vote, 511,886 shares voted in favor, 623,424 shares voted against,
31,329 shares abstained and there were 209,400 broker non-votes. The Board
believes that by engaging in a meaningful discussion with its stockholders, a
sufficient number of votes will be secured to pass the proposal.
Reservation
of Rights
The Board
of Directors reserves the right to abandon the proposed amendment without
further action by the Corporation’s stockholders at any time before the filing
of the necessary articles of amendment with the North Carolina Secretary of
State, even if the proposed amendment has been approved by the Corporation’s
stockholders at the Annual Meeting. By voting in favor of the
Preemptive Rights Amendment, stockholders also are expressly authorizing the
Board of Directors to determine not to proceed with the Preemptive Rights
Amendment if it should decide on that course of action.
Effectiveness
of Change
Subject
to the right of the Board of Directors to abandon the proposed amendment, as
described above, if the proposal to eliminate preemptive rights of stockholders
is approved at the Annual Meeting, the Corporation will deliver, as soon as
reasonably practicable, to the Secretary of State of North Carolina articles of
amendment reflecting such approval, and the change will be effective as of the
date of such filing.
THE
BOARD OF DIRECTORS INTEND TO VOTE THEIR INDIVIDUAL SHARES OF COMMON STOCK
FOR
PROPOSAL 2:
PREEMPTIVE RIGHTS AMENDMENT, AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A
VOTE
FOR
PROPOSAL 2: PREEMPTIVE RIGHTS AMENDMENT.
PROPOSAL
3: PREFERRED STOCK AMENDMENT
General
The Board
of Directors has approved and adopted for submission to stockholders an
amendment to Article II of the Corporation's Articles of Incorporation to change
the authorized number of shares and classes of capital stock of the Corporation
by establishing a class of preferred stock (the Preferred Stock
Amendment).
The
proposed amendment is set out in
Appendix B
to the
Proxy Statement.
Vote
Required
The
Preferred Stock Amendment must be approved by the affirmative vote of the
holders of a majority of the shares of common stock voted on the
proposal.
Purpose
of the Proposed Amendment
Currently,
the Articles of Incorporation authorizes the issuance of only five million
(5,000,000) shares of common stock and does not authorize the issuance of any
class of preferred stock. The proposed amendment will give the Board of
Directors the express authority, without further stockholder approval (except as
may be required by applicable laws, regulatory authorities, or the rules of any
stock exchange on which the Corporation’s securities are then listed), to issue
shares of preferred stock from time to time in one or more series and to fix
with respect to each series such voting powers, full or limited, or no voting
powers, and such designations, preferences, limitations and relative rights (or
qualifications, conditions or restrictions thereon) as the Board of Directors
may determine, subject to any approval as required by law. All the shares of any
one series of the preferred stock shall be identical in all
respects.
The Board
believes that the flexibility to issue preferred stock is in the best interests
of the Corporation and its stockholders and believes that it is advisable to
authorize such shares and have them available in connection with possible future
transactions, such as equity financings, corporate mergers and acquisitions, as
may be deemed to be feasible and in the best interests of the
Corporation. In addition, the Board believes that it is desirable
that the Corporation have the flexibility to issue shares of preferred stock
without further stockholder action, except as may be required by applicable
laws, regulatory authorities, or the rules of any stock exchange on which the
Corporation’s securities are then listed. The Corporation currently has no
written plans, arrangements, or understandings for the issuance of shares of
preferred stock to be authorized pursuant to this proposal.
The Board
believes that the flexibility to issue preferred stock can enhance the Board’s
arm’s-length bargaining capability on behalf of the Corporation’s stockholders
in a takeover situation. However, under some circumstances, the ability to
designate the rights of, and issue, preferred stock could be used by the Board
to make a change in control of the Corporation more difficult.
Possible
Effects on Holders of Common Stock
The
Corporation is unable to determine the actual effects of the issuance of a
series of preferred stock on the rights of the stockholders of the Corporation
until the Board determines the rights of the holders of such series. However,
such effects might include: (i) restrictions on the payment of dividends to
holders of the common stock; (ii) dilution of voting power to the extent that
the holders of shares of preferred stock are given voting rights; (iii) dilution
of the equity interests and voting power of holders of common stock if the
preferred stock is convertible into common stock; and (iv) restrictions upon any
distribution of assets to the holders of the common stock upon liquidation or
dissolution and until the satisfaction of any liquidation preference granted to
the holders of preferred stock.
Effectiveness
of Change
If the
Preferred Stock Amendment is approved at the Meeting, the Corporation will
deliver, as soon as reasonably practicable, to the Secretary of State of North
Carolina articles of amendment reflecting such approval, and the changes will be
effective as of the date of such filing.
THE BOARD OF DIRECTORS INTEND TO VOTE
THEIR INDIVIDUAL SHARES OF COMMON STOCK
FOR
PROPOSAL 3:
PREFERRED STOCK AMENDMENT
, AND THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMEND A VOTE
FOR
PROPOSAL 3:
PREFERRED STOCK
AMENDMENT.
PROPOSAL
4: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
Change
of Independent Auditor
On April
6, 2009, the Corporation advised McGladrey & Pullen, LLP (“McGladrey”) that
it was being dismissed as the Corporation’s independent registered public
accounting firm. The decision to dismiss McGladrey was considered and approved
by the Audit Committee on April 6, 2009.
McGladrey’s
reports on the Corporation’s consolidated financial statements for the fiscal
years ended December 31, 2008 and 2007, did not contain an adverse opinion
or disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
During
the fiscal years ended December 31, 2008 and 2007, and through the period
ended April 6, 2009, there were no disagreements with McGladrey on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures which disagreements, if not resolved to McGladrey’s
satisfaction, would have caused McGladrey to make reference to the subject
matter of the disagreements in connection with their report on the Corporation
's consolidated financial statements; in addition, there were no reportable
events as listed in Item 304(a)(1)(v) of Regulation S-K. The Corporation has
complied with Item 304(a)(3) of Regulation S-K.
On April
7, 2009, the Corporation appointed Grant Thornton as the Corporation’s
independent registered public accounting firm for fiscal year ending
December 31, 2009. Neither the Corporation nor anyone on its behalf has
consulted with Grant Thornton during the last two fiscal years ended
December 31, 2008 and 2007, or during any subsequent interim period
preceding the date of their appointment, regarding either (i) the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Corporation’s
consolidated financial statements; and as such, no written report or oral advice
was provided, and none was an important factor considered by the Corporation in
reaching a decision as to the accounting, auditing or financial reporting
issues; or (ii) or any matter that was either the subject of a disagreement or a
reportable event, as there were none.
Ratification
of Appointment of Independent Auditor
A
proposal to ratify the appointment of Grant Thornton is being submitted to the
stockholders. Representatives of Grant Thornton are expected to
attend the Annual Meeting and will be available to respond to appropriate
questions and will have the opportunity to make a statement. Representatives of
McGladrey are not expected to attend the Annual Meeting, but should they choose
to attend, then the Corporation shall give them an opportunity to respond to
appropriate questions and make a statement.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
RATIFICATION OF
THE APPOINTMENT OF GRANT THORNTON, LLP AS INDEPENDENT AUDITOR FOR THE
CORPORATION FOR THE FISCAL YEAR ENDING DECEMBER 31, 2009.
Audit
Fees Paid to Independent Auditors
The
following table represents fees for professional services rendered by McGladrey
for the audit of the Corporation’s annual consolidated financial statements for
the years ended December 31, 2007 and 2008 and fees billed for
audit-related services, tax services and all other services rendered by the
accounting firm for each of those fiscal years.
|
Year
ended December 31,
|
2008
|
2007
|
Audit
Fees
1
|
$252,440
|
$283,750
|
Audit-Related
Fees
2
|
47,299
|
16,205
|
Tax
Fees
3
|
20,675
|
14,724
|
Total
Fees
|
$320,414
|
$314,679
|
________________
1
|
These
are fees paid for professional services rendered for the audit of the
Corporation’s annual consolidated financial statements and for the reviews
of the consolidated financial statements included in the Corporation’s
quarterly reports on Form 10-Q, and for services normally provided in
connection with statutory or regulatory filings or
engagements.
|
2
|
These
are fees paid for assurance and related services that were reasonably
related to the performance of the audit or review of our consolidated
financial statements and that are not reported under “Audit Fees” above,
including fees related to audits of financial statements of employee
benefit plans and any subsidiaries, and due diligence
services.
|
3
|
These
are fees paid for professional services rendered for tax compliance, tax
planning and tax advice, including assistance in the preparation of the
Corporation’s various federal, state and local tax returns, tax credit
consultation and franchise tax return
amendments.
|
Pre-Approval
of Audit and Permissible Non-Audit Services
All
audit-related services, tax services and other services rendered in 2007 and
2008 were pre-approved by the Audit Committee, which concluded that the
provision of those services by McGladrey was compatible with the maintenance of
the firm’s independence in the conduct of its auditing functions. The
Committee’s charter provides for pre-approval of all audit and non-audit
services to be provided by the Corporation’s independent auditor. The Charter
authorizes the Committee to delegate to one or more of its members pre-approval
authority with respect to permitted services, provided that any approvals using
this procedure are presented to the Committee at its next scheduled
meeting.
PROPOSAL
5: CUMULATIVE VOTING AMENDMENT
The Board
of Directors has approved and adopted for submission to stockholders an
amendment to Section 6.3 of the Corporation’s Articles of Incorporation that
would eliminate cumulative voting rights in the election of
directors.
The
proposed amendment reads as follows:
Section
6.3 is hereby amended and restated to read in its entirety as
follows:
Section
6.3
No Cumulative Voting in
Election of Directors.
The
shareholders of the Corporation shall not have the right to cumulate their votes
in the election of directors.
Vote
Required
In order
to be implemented, this proposal must be approved at the Annual Meeting by the
affirmative vote of the holders of a majority of the shares of common stock
entitled to vote at the Annual Meeting.
Description
of Cumulative Voting Rights and Purpose of the Proposed Amendment
Under
North Carolina law, unless the articles of incorporation provide otherwise, each
director is elected by a plurality of the votes cast in an election of
directors. The Corporation’s Articles of Incorporation currently provide that
stockholders shall have cumulative voting rights in the election of directors.
Accordingly, in the election of directors, each holder of shares of stock
entitled to vote is currently entitled to as many votes as shall equal the
number of shares of such stock held, multiplied by the number of directors to be
elected. A stockholder may cast all such votes for a single director nominee or
may distribute the votes among director nominees as the stockholder sees
fit.
For
example, if there are five Board positions to be filled, a stockholder with 10
shares may cast 50 votes (i.e., 5 x 10). These votes may be cast for a single
nominee or for more than one nominee, as the stockholder directs in his or her
proxy. If five Board positions are to be filled and all shares of the
Corporation’s outstanding common stock are voted at a meeting, then a
stockholder holding approximately 16.7% of the Corporation’s common stock would
have the power to cause at least one person to be elected as a
director.
The
percentage of shares required to cause one person to be elected as a director is
reduced as (i) the number Board positions to be filled increases; and (ii) the
number of shares voted at a meeting decreases. For example, if there
are nine Board positions to be filled, a stockholder with 10 shares may cast 90
votes (9 x 10). As before, these votes may be cast for a single nominee or for
more than one nominee, as the stockholder directs in his or her proxy. If nine
Board positions are to be filled and only 50% of the shares of the Corporation’s
outstanding common stock are voted at a meeting, then a stockholder holding
approximately 5.0% of the Corporation’s common stock would have the power to
cause at least one person to be elected as a director.
The Board
of Directors believes that it would be in the best interest of the Corporation
and its stockholders to eliminate cumulative voting rights. Specifically, the
Board believes that it is unwise to promote a system that allows one group of
stockholders to cause the election of a representative that would owe loyalty to
that
electing group, rather than to
all
stockholders
equally. In this sense, the Board believes that the purpose of cumulative voting
rights is inconsistent with current law regarding the fiduciary duties of
directors toward
all
stockholders,
rather than to one stockholder or a particular group of stockholders. Cumulative
voting may allow a minority of stockholders to pool their votes to obtain
representation on the Board to further objectives that may be contrary to the
majority of the stockholders. The Board believes that this sort of special
interest element on the Board might steer the Corporation away from more broad
based objectives. For the Board to work effectively for
all
stockholders,
each director should feel a responsibility to the stockholders
as a whole
and not to
any special group of minority stockholders.
The Board
believes that non-cumulative voting, on the other hand, is more likely to lead
to representation of the shared interests of all stockholders. When cumulative
voting is not present, each director is elected by plurality vote and therefore
a single stockholder or group may not elect a director that is not supported by
the plurality. The Board believes that a non-cumulative, plurality system will
be consistent with modern North Carolina law and the corporate laws of most
jurisdictions. The Board also believes that a non-cumulative,
plurality system will best ensure that the Board will act for the benefit of all
stockholders.
Previous
Support for Eliminating Cumulative Voting
At the
Corporation’s 2000 annual meeting of stockholders, an identical proposal to
eliminate cumulative voting received the overwhelming support of the
Corporation’s stockholders: of the then 853,725 shares eligible to vote, 512,229
shares voted in favor, while only 20,626 shares voted against and 2,665 shares
abstained. Although approved by a majority of the Corporation’s outstanding
shares of common stock, the proposal did not pass at that time because it was
presented as part of a series of proposals, some of which required a greater
vote.
At the
Corporation’s 2008 annual meeting of stockholders, an identical proposal to
eliminate cumulative voting received significant support of the Corporation’s
stockholders but failed to receive the necessary affirmative vote of the holders
of a majority of the shares entitled to vote: of the then 2,049,365 shares
eligible to vote, 574,996 shares voted in favor, 573,810 shares voted against,
17,833 shares abstained and there were 209,400 broker non-votes. The Board
believes that by engaging in a meaningful discussion with its stockholders, a
sufficient number of votes will be secured to pass the proposal.
Special
Considerations
While the
Board of Directors has not recommended
elimination of
cumulative
voting as an anti-takeover measure, it is
recognized that the
elimination of
cumulative
voting could, under certain circumstances, render more difficult or
discourage a merger, tender offer or proxy contest, the assumption of control by
a holder of a block of the Corporation’s stock or the removal of incumbent
management, that some stockholders might believe to be in their best interests.
The Board of Directors believes that an unsolicited, non-negotiated takeover
proposal can seriously disrupt the business and management of a company and
cause great expense. Accordingly, the Board of Directors believes it
is in the best interests of the Corporation and its stockholders to encourage
potential acquirers to negotiate directly with management. The Board
believes that the elimination of cumulative voting will encourage such
negotiations and discourage hostile takeover attempts. It is also the
Board’s view that these provisions should not discourage persons from proposing
a merger or transaction at prices reflective of the true value of the
Corporation and that otherwise is in the best interests of all
stockholders.
Reservation
of Rights
The Board
of Directors reserves the right to abandon the proposed amendment without
further action by the Corporation’s stockholders at any time before the filing
of the necessary articles of amendment with the North Carolina Secretary of
State, even if the proposed amendment has been approved by the stockholders at
the Annual Meeting. By voting in favor of the Cumulative Voting
Amendment, stockholders also are expressly authorizing the Board of Directors to
determine not to proceed with the Cumulative Voting Amendment if it should
decide on that course of action.
Effectiveness
of Change
Subject
to the right of the Board of Directors to abandon the proposed amendment, as
described above, if the proposal to eliminate cumulative voting is approved at
the Annual Meeting, the Corporation will deliver, as soon as reasonably
practicable, to the Secretary of State of North Carolina articles of amendment
reflecting such approval, and the change will be effective as of the date of
such filing.
THE
BOARD OF DIRECTORS INTEND TO VOTE THEIR INDIVIDUAL SHARES OF COMMON STOCK
FOR
PROPOSAL
5: CUMULATIVE VOTING AMENDMENT AND THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMEND A VOTE
FOR
PROPOSAL
5: CUMULATIVE VOTING AMENDMENT.
PROPOSAL 6:
COMMON STOCK
AMENDMENT
General
The Board
of Directors has approved and adopted for submission to stockholders an
amendment to Article II of the Corporation's Articles of Incorporation to change
the authorized number of shares and classes of capital stock of the Corporation
by increasing the number of authorized shares of common stock of the Corporation
from five million (5,000,000) to ten million (10,000,000) (the Common Stock
Amendment).
The
proposed amendment is set out in
Appendix B
to this
Proxy Statement.
Vote
Required
The
Common Stock Amendment must be approved by the affirmative vote of the holders
of a majority of the shares of common stock voted on the proposal.
Purpose
of the Proposed Amendment
Currently,
the Articles of Incorporation authorize the issuance of only five million
(5,000,000) shares of common stock. As of April 1, 2009, the record date for the
Annual Meeting, there were 2,031,337 shares of the Corporation’s common stock
outstanding and there were approximately 1,091 stockholders of
record. In addition, as of April 1, 2009, the Corporation has
authority to issue options to purchase up to 145,800 shares of common stock, and
options to purchase 25,200 shares of common stock had been granted and were
outstanding.
The
additional authorized shares of common stock will be part of the existing class
of common stock, will not affect the terms of the common stock or the rights of
the holders of common stock, and will have the same rights and privileges as the
shares of common stock presently outstanding.
The Board
believes that an increased level of authorized common stock would benefit the
Corporation in its ability to pursue strategies intended to support planned
growth and to enhance stockholder value by ensuring that the Corporation has a
sufficient number of authorized but unissued shares of common stock available
for future use. The Board considers the proposed increase in the number of
authorized shares of common stock is desirable because it would give the
Corporation the necessary flexibility to issue common stock in connection with
stock dividends and splits, equity financings, corporate mergers and
acquisitions, and for other general corporate purposes. The Corporation
currently has no written plans, arrangements, or understandings for the issuance
of the additional shares of common stock to be authorized pursuant to this
proposal.
As is the
case with the shares of common stock that currently are authorized but unissued,
if this amendment to the Corporation’s Articles of Incorporation is approved by
our stockholders, the Board of Directors will have authority to issue the
additional shares of common stock from time to time without the expenses and
delay of a special meeting of stockholders or other stockholder action, except
as may be required by applicable laws, regulatory authorities, or the rules of
any stock exchange on which the Corporation’s securities are then
listed.
Possible
Effects on Holders of Common Stock
As is the
case with the shares of common stock that currently are authorized but unissued,
any future issuance of common stock may have a dilutive effect on earnings per
share and on the equity and voting rights of those holding common stock at the
time the additional shares are issued.
Effectiveness
of Change
If the
Common Stock Amendment is approved at the Meeting, the Corporation will deliver,
as soon as reasonably practicable, to the Secretary of State of North Carolina
articles of amendment reflecting such approval, and the changes will be
effective as of the date of such filing.
THE BOARD OF DIRECTORS INTEND TO VOTE
THEIR INDIVIDUAL SHARES OF COMMON STOCK
FOR
PROPOSAL 6:
COMMON STOCK AMENDMENT
AND THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMEND A VOTE
FOR
PROPOSAL 6: COMMON
STOCK AMENDMENT.
STOCKHOLDER
PROPOSALS FOR 2010
It is
presently anticipated that the 2010 annual meeting of stockholders will be held
on May 20, 2010. In order for stockholder proposals to be included in
the proxy materials for that meeting, such proposals must be received by the
Secretary of the Corporation at the Corporation’s main office (2634 Durham
Chapel Hill Blvd., Durham, North Carolina 27707) not later than December 31,
2009, and meet all other applicable requirements for inclusion in the 2010
Proxy Statement.
In the
alternative, a stockholder may commence his own proxy solicitation subject to
the SEC’s rules on proxy solicitation and may present a proposal from the floor
at the 2010 annual meeting of stockholders. In order to do so, the
stockholder must notify the Secretary of the Corporation, in writing, of his
proposal at the Corporation’s main office no later than March 16,
2010. If the Secretary of the Corporation is not notified of the
stockholder’s proposal by March 16, 2010, the Board of Directors may vote on the
proposal pursuant to the discretionary authority granted by the proxies
solicited by the Board of Directors for the 2010 annual meeting of
stockholders.
According
to the Corporation’s Bylaws, any stockholder nomination of candidates for
election to the Board at an annual meeting of stockholders must be made in
writing to the Corporation’s Secretary not fewer than 30 days nor more than 50
days prior to the date of the meeting at which such nominations will be made;
provided, however, if less than 21 days notice of the meeting is given to
stockholders, such nominations must be delivered to the Secretary not later than
the close of business on the seventh day following the day on which the notice
of meeting was mailed.
Stockholder
nominations must contain the following information, if known to the nominating
stockholder:
• The name
and address of each proposed nominee;
• The
principal occupation of each proposed nominee;
|
•
|
The
total number of shares of common stock of the Corporation that will be
voted for each proposed nominee;
|
• The name
and address of the nominating stockholder; and
• The number
of shares of common stock owned by the nominating stockholder.
The Board
may disregard any nominations that do not comply with these
requirements. Upon the instruction of the Board, the inspector of
voting for the annual meeting of stockholders may disregard all votes cast for a
nominee if the nomination does not comply with these requirements.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires the Corporation’s directors, executive
officers and greater than 10% stockholders (“Reporting Persons”) to file reports
of their ownership and any changes in ownership of common stock with the
SEC. Reporting Persons are required by regulation to provide the
Corporation with a copy of any Section 16(a) reports they file. Based
on the Corporation’s review of copies of the reports received by it and written
representations made to it by these persons, the Corporation believes that all
Section 16(a) filing requirements applicable to its Reporting Persons were
satisfied during the year ended December 31, 2008.
In 2005,
Julia W. Taylor, the former President and Chief Executive Officer of the
Corporation and the Bank was granted power of attorney by Selena W.
Wheeler. As disclosed in the stock ownership table above, Ms. Taylor
is deemed to have beneficial ownership of Mrs. Wheeler’s shares, which together
with other shares over which she is also deemed to have beneficial ownership,
establishes Ms. Taylor as a greater than 10% stockholder for Section 16(a)
reporting purposes. Ms. Taylor failed to file the necessary Form 3
with the SEC, which became due upon her becoming a greater than 10%
stockholder. We anticipate that the Form 3 will be filed as soon
as possible.
OTHER
MATTERS
Because
no matters were presented to management on or prior to March 10, 2009, it is
intended that the proxyholders named in the enclosed form of proxy will vote the
shares represented thereby on any matters properly coming before the Annual
Meeting, according to their best judgment, pursuant to the discretionary
authority granted therein. As of the date of this mailing, management
knows of no other matters to be presented for consideration at the Annual
Meeting or any adjournments thereof.
MISCELLANEOUS
The
Corporation’s annual report to stockholders for the year ended December 31, 2008
and Form 10-K, filed with the SEC, have been mailed with this Proxy Statement to
all stockholders of record as of April 1, 2009.
Any stockholder who has not received
a copy of the annual report or Form 10-K may obtain a copy without charge by
writing to the Corporation. Please make your written request to the
Secretary, M&F Bancorp, Inc., 2634 Durham Chapel Hill Blvd., Durham, North
Carolina 27707.
The annual report and Form 10-K are not to be treated as
part of this Proxy Statement or as a solicitation of proxies.
BY ORDER
OF THE BOARD OF DIRECTORS
Kim D. Saunders
President and Chief Executive
Officer
Durham, North
Carolina
April 30,
2009
Appendix
A
Article
13 of the North Carolina Business Corporation Act
Dissenters’
Rights.
Part
1. Right to Dissent and Obtain Payment for Shares.
In this
Article:
|
(1)
|
“Corporation”
means the issuer of the shares held by a dissenter before the corporate
action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
|
|
(2)
|
“Dissenter”
means a shareholder who is entitled to dissent from corporate action under
G.S. 55-13-02 and who exercises that right when and in the manner required
by G.S. 55-13-20 through 55-13-28.
|
|
(3)
|
“Fair
value”, with respect to a dissenter’s shares, means the value of the
shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be
inequitable.
|
|
(4)
|
“Interest”
means interest from the effective date of the corporate action until the
date of payment, at a rate that is fair and equitable under all the
circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the
rate provided in G.S. 24-1.
|
|
(5)
|
“Record
shareholder” means the person in whose name shares are registered in the
records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a
corporation.
|
|
(6)
|
“Beneficial
shareholder” means the person who is a beneficial owner of shares held in
a voting trust or by a nominee as the record
shareholder.
|
|
(7)
|
“Shareholder”
means the record shareholder or the beneficial shareholder. (1925, c. 77,
s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s.
39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s.
1.)
|
|
§
55-13-02. Right to
dissent.
|
(a) In
addition to any rights granted under Article 9, a shareholder is entitled to
dissent from, and obtain payment of the fair value of his shares in the event
of, any of the following corporate actions:
|
(1)
|
Consummation
of a plan of merger to which the corporation (other than a parent
corporation in a merger whose shares are not affected under G.S. 55-11-04)
is a party unless (i) approval by the shareholders of that corporation is
not required under G.S. 55-11-03(g) or (ii) such shares are then
redeemable by the corporation at a price not greater than the cash to be
received in exchange for such
shares;
|
|
(2)
|
Consummation
of a plan of share exchange to which the corporation is a party as the
corporation whose shares will be acquired, unless such shares are then
redeemable by the corporation at a price not greater than the cash to be
received in exchange for such
shares;
|
|
(2a)
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Consummation
of a plan of conversion pursuant to Part 2 of Article 11A of this
Chapter;
|
|
(3)
|
Consummation
of a sale or exchange of all, or substantially all, of the property of the
corporation other than as permitted by G.S. 55-12-01, including a sale in
dissolution, but not including a sale pursuant to court order or a sale
pursuant to a plan by which all or substantially all of the net proceeds
of the sale will be distributed in cash to the shareholders within one
year after the date of sale;
|
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(4)
|
An
amendment of the articles of incorporation that materially and adversely
affects rights in respect of a dissenter’s shares because it (i) alters or
abolishes a preferential right of the shares; (ii) creates, alters, or
abolishes a right in respect of redemption, including a provision
respecting a sinking fund for the redemption or repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities; (iv) excludes or limits the right
of the shares to vote on any matter, or to cumulate votes, other than an
amendment of the articles of incorporation permitting action without
meeting to be taken by less than all shareholders entitled to vote,
without advance notice, or both, as provided in G.S. 55-7-04; (v) reduces
the number of shares owned by the shareholder to a fraction of a share if
the fractional share so created is to be acquired for cash under G.S.
55-6-04; or (vi) changes the corporation into a nonprofit corporation or
cooperative organization; or
|
|
(5)
|
Any
corporate action taken pursuant to a shareholder vote to the extent the
articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their
shares.
|
(b) A
shareholder entitled to dissent and obtain payment for his shares under this
Article may not challenge the corporate action creating his entitlement,
including without limitation a merger solely or partly in exchange for
cash or other property, unless the action is unlawful or fraudulent with respect
to the shareholder or the corporation.
(c) Notwithstanding
any other provision of this Article, there shall be no right of shareholders to
dissent from, or obtain payment of the fair value of the shares in the event of,
the corporate actions set forth in subdivisions
(1), (2), or (3) of subsection (a) of this section if the affected shares
are any class or series which, at the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting at which
the
plan of merger or share exchange or the sale or exchange of property is to be
acted on, were (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or (ii) held by
at least 2,000 record shareholders. This subsection does not apply in cases in
which either:
|
(1)
|
The
articles of incorporation, bylaws, or a resolution of the board of
directors of the corporation issuing the shares provide otherwise;
or
|
|
(2)
|
In
the case of a plan of merger or share exchange, the holders of the class
or series are required under the plan of merger or share exchange to
accept for the shares anything
except:
|
|
b.
|
Shares,
or shares and cash in lieu of fractional shares of the surviving or
acquiring corporation, or of any other corporation which, at the record
date fixed to determine the shareholders entitled to receive notice of and
vote at the meeting at which the plan of merger or share exchange is to be
acted on, were either listed subject to notice of issuance on a national
securities exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held by at least 2,000 record shareholders;
or
|
|
c.
|
A
combination of cash and shares as set forth in sub-subdivisions a. and b.
of this subdivision. (1925, c. 77, s. 1; c. 235; 1929, c. 269; 1939, c.
279; 1943, c. 270; G.S., ss. 55-26, 55-167; 1955, c. 1371, s. 1; 1959, c.
1316, ss. 30, 31; 1969, c. 751, ss. 36, 39; 1973, c. 469, ss. 36, 37; c.
476, s. 193; 1989, c. 265, s. 1; 1989 (Reg. Sess., 1990), c. 1024, s.
12.18; 1991, c. 645, s. 12; 1997-202, s. 1; 1999-141, s. 1; 2001-387, s.
26; 2003-157, s. 1.)
|
|
§
55-13-03. Dissent by nominees and beneficial
owners.
|
(a) A
record shareholder may assert dissenters’ rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters’ rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
(b) A
beneficial shareholder may assert dissenters’ rights as to shares held on his
behalf only if:
|
(1)
|
He
submits to the corporation the record shareholder’s written consent to the
dissent not later than the time the beneficial shareholder asserts
dissenters’ rights; and
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|
(2)
|
He
does so with respect to all shares of which he is the beneficial
shareholder. (1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167;
1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989,
c. 265, s. 1.)
|
|
§§
55-13-04 through 55-13-19. Reserved for future codification
purposes.
|
Part 2.
Procedure for Exercise of dissenters’ rights.
|
§
55-13-20. Notice of dissenters’
rights.
|
(a) If
proposed corporate action creating dissenters’ rights under G.S. 55-13-02 is
submitted to a vote at a shareholders’ meeting, the meeting notice must state
that shareholders are or may be entitled to assert dissenters’
rights under this Article and be accompanied by a copy of this
Article.
(b) If
corporate action creating dissenters’ rights under G.S. 55-13-02 is taken
without a vote of shareholders or is taken by shareholder action without meeting
under G.S. 55-7-04, the corporation shall no later than 10 days
thereafter notify in writing all shareholders entitled to assert dissenters’
rights that the action was taken and send them the dissenters’ notice described
in G.S. 55-13-22. A shareholder who consents to shareholder action
taken without meeting under G.S. 55-7-04 approving a corporate action is not
entitled to payment for the shareholder’s shares under this Article with respect
to that corporate action.
(c) If
a corporation fails to comply with the requirements of this section, such
failure shall not invalidate any corporate action taken; but any shareholder may
recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters’ rights under G.S.
55-13-02 unless he voted for such corporate action. (1925, c. 77, s. 1; c.
235;
1929, c. 269; 1939, c. 5; c. 279; 1943, c. 270; G.S., ss. 55-26, 55-165, 55-167;
1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c.
265, s. 1; 2002-58, s. 2.)
|
§
55-13-21. Notice of intent to demand
payment.
|
(a) If
proposed corporate action creating dissenters’ rights under G.S. 55-13-02 is
submitted to a vote at a shareholders’ meeting, a shareholder who wishes to
assert dissenters’ rights:
|
(1)
|
Must
give to the corporation, and the corporation must actually receive, before
the vote is taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated;
and
|
|
(2)
|
Must
not vote his shares in favor of the proposed
action.
|
(b) A
shareholder who does not satisfy the requirements of subsection (a) is not
entitled to payment for his shares under this Article. (1925, c. 77, s. 1; 1943,
c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c.
469, ss. 36, 37; 1989, c. 265, s. 1.)
|
§
55-13-22. Dissenters’
notice.
|
(a) If
proposed corporate action creating dissenters’ rights under G.S. 55-13-02 is
approved at a shareholders’ meeting, the corporation shall mail by registered or
certified mail, return receipt requested, a written dissenters’
notice to all shareholders who satisfied the requirements of G.S.
55-13-21.
(b) The
dissenters’ notice must be sent no later than 10 days after shareholder
approval, or if no shareholder approval is required, after the approval of the
board of directors, of the corporate action creating dissenters’
rights under G.S. 55-13-02, and must:
|
(1)
|
State
where the payment demand must be sent and where and when certificates for
certificated shares must be
deposited;
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|
(2)
|
Inform
holders of uncertificated shares to what extent transfer of the shares
will be restricted after the payment demand is
received;
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(3)
|
Supply
a form for demanding payment;
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(4)
|
Set
a date by which the corporation must receive the payment demand, which
date may not be fewer than 30 nor more than 60 days after the date the
subsection (a) notice is mailed;
and
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|
(5)
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Be
accompanied by a copy of this Article. (1925, c. 77, s. 1; 1943, c. 270;
G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469,
ss. 36, 37; 1989, c. 265, s. 1; 1997-485, s. 4; 2001-387, s. 27; 2002-58,
s. 3.)
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|
§
55-13-23. Duty to demand
payment.
|
(a) A
shareholder sent a dissenters’ notice described in G.S. 55-13-22 must demand
payment and deposit his share certificates in accordance with the terms of the
notice.
(b) The
shareholder who demands payment and deposits his share certificates under
subsection (a) retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate
action.
(c) A
shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the dissenters’ notice, is not entitled to
payment for his shares under this Article. (1925, c. 77, s. 1;
1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973,
c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
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§
55-13-24. Share
restrictions.
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(a) The
corporation may restrict the transfer of uncertificated shares from the date the
demand for their payment is received until the proposed corporate action is
taken or the restrictions released under G.S. 55-13-26.
(b) The
person for whom dissenters’ rights are asserted as to uncertificated shares
retains all other rights of a shareholder until these rights are cancelled or
modified by the taking of the proposed corporate action. (1925, c.
77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s.
39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
(a) As
soon as the proposed corporate action is taken, or within 30 days after receipt
of a payment demand, the corporation shall pay each dissenter who complied with
G.S. 55-13-23 the amount the corporation estimates to
be the fair value of his shares, plus interest accrued to the date of
payment.
(b) The
payment shall be accompanied by:
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(1)
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The
corporation’s most recent available balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of payment, an
income statement for that year, a statement of cash flows for that year,
and the latest available interim financial statements, if
any;
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(2)
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An
explanation of how the corporation estimated the fair value of the
shares;
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(3)
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An
explanation of how the interest was
calculated;
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(4)
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A
statement of the dissenter’s right to demand payment under G.S. 55-13-28;
and
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(5)
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A
copy of this Article. (1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167;
1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989,
c. 265, s. 1; c. 770, s. 69; 1997-202, s.
2.)
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§
55-13-26. Failure to take
action.
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(a) If
the corporation does not take the proposed action within 60 days after the date
set for demanding payment and depositing share certificates, the corporation
shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(b) If
after returning deposited certificates and releasing transfer restrictions, the
corporation takes the proposed action, it must send a new dissenters’ notice
under G.S. 55-13-22 and repeat the payment demand procedure.
(1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c.
751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
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§
55-13-27. Reserved for future codification
purposes.
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§
55-13-28. Procedure if shareholder dissatisfied with
corporation’s payment or failure to
perform.
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(a) A
dissenter may notify the corporation in writing of his own estimate of the fair
value of his shares and amount of interest due, and demand payment of the amount
in excess of the payment by the corporation under G.S.
55-13-25
for the fair value of his shares and interest due, if:
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(1)
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The
dissenter believes that the amount paid under G.S. 55-13-25 is less than
the fair value of his shares or that the interest due is incorrectly
calculated;
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(2)
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The
corporation fails to make payment under G.S. 55-13-25;
or
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(3)
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The
corporation, having failed to take the proposed action, does not return
the deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding
payment.
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(b) A
dissenter waives his right to demand payment under this section unless he
notifies the corporation of his demand in writing (i) under subdivision (a)(1)
within 30 days after the corporation made payment for his shares
or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period
shall be deemed to have withdrawn his dissent and demand for payment. (1925, c.
77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s.
39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1; 1997-202, s. 3.)
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§
55-13-29. Reserved for future codification
purposes.
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Part 3.
Judicial Appraisal of Shares.
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§
55-13-30. Court action.
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(a) If
a demand for payment under G.S. 55-13-28 remains unsettled, the dissenter may
commence a proceeding within 60 days after the earlier of (i) the date payment
is made under G.S. 55-13-25, or (ii) the date of the
dissenter’s payment demand under G.S. 55-13-28 by filing a complaint with the
Superior Court Division of the General Court of Justice to determine the fair
value of the shares and accrued interest. A dissenter who takes
no action within the 60-day period shall be deemed to have withdrawn his dissent
and demand for payment.
(a1) Repealed
by Session Laws 1997-202, s. 4.
(b) Reserved
for future codification purposes.
(c) The
court shall have the discretion to make all dissenters (whether or not residents
of this State) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be
served with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The
jurisdiction of the superior court in which the proceeding is commenced under
subsection (a) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The parties are
entitled to the same discovery rights as parties in other civil
proceedings. The proceeding shall be tried as in other civil actions. However,
in a proceeding by a dissenter in a corporation that was a public corporation
immediately prior to consummation of the corporate action
giving rise to the right of dissent under G.S. 55-13-02, there is no right to a
trial by jury.
(e) Each
dissenter made a party to the proceeding is entitled to judgment for the amount,
if any, by which the court finds the fair value of his shares, plus interest,
exceeds the amount paid by the corporation. (1925, c. 77, s. 1; 1943, c. 270;
G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36,
37; 1989, c. 265, s. 1; 1997-202, s. 4; 1997-485, ss. 5, 5.1.)
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§
55-13-31. Court costs and counsel
fees.
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(a) The
court in an appraisal proceeding commenced under G.S. 55-13-30 shall determine
all costs of the proceeding, including the reasonable compensation and expenses
of appraisers appointed by the court, and shall
assess the costs as it finds equitable.
(b) The
court may also assess the fees and expenses of counsel and experts for the
respective parties, in amounts the court finds equitable:
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(1)
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Against
the corporation and in favor of any or all dissenters if the court finds
the corporation did not substantially comply with the requirements of G.S.
55-13-20 through 55-13-28; or
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(2)
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Against
either the corporation or a dissenter, in favor of either or any other
party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this
Article.
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(c) If
the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court
may award to these counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited. (1925, c. 77, s. 1; 1943, c. 270; G.S., s.
55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37;
1989, c. 265, s. 1.)
Appendix
B
The
Preferred Stock Amendment and the Common Stock Amendment read as
follows:
Article
II is hereby amended and restated to read in its entirety as
follows:
Article
II
Section 2.1
.
Total Authorized Shares of
Capital Stock
. The Corporation shall have authority to issue a
total of 15,000,000 shares of capital stock, divided into classes as
follows:
Class
|
Number
of Shares
|
Par
Value
|
Common Stock
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10,000,000
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None
|
Preferred Stock
|
5,000,000
|
$.01
|
Section
2.2.
Common
Stock
. The shares of Common Stock shall be of one and the same
class. Subject to the rights of holders of the Preferred Stock as
determined by the Board of Directors pursuant to Section 2.3 hereof and by the
North Carolina Business Corporation Act as now constituted or hereafter amended,
the holders of shares of Common Stock shall have one vote per share on all
matters on which holders of shares of Common Stock are entitled to vote and
shall be entitled to participate pro rata after preferential rights of holders
of Preferred Stock in the distribution of the net assets of the Corporation upon
dissolution.
Section
2.3
.
Preferred
Stock
. The shares of Preferred Stock may be issued from time
to time by the Corporation, and the Board of Directors may create and divide
such shares into series within that class, and such shares and the shares of
each such series shall have such voting powers, full or limited, or no voting
powers, and such designations, preferences, limitations and relative rights (or
qualifications, conditions or restrictions thereon) as the Board of Directors
may and hereby is authorized to determine.
ANNUAL
MEETING OF STOCKHOLDERS OF
M&F
BANCORP, INC.
June
9, 2009
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PROXY
VOTING INSTRUCTIONS
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MAIL
- Sign, date and mail your proxy card in the envelope provided as soon as
possible.
-
OR -
TELEPHONE
-
Call toll-free
1-800-PROXIES
(1-800-776-9437)
in the United States or
1-718-921-8500
from foreign
countries and follow the instructions. Have your proxy card available when you
call.
-
OR -
INTERNET
- Access “
www.voteproxy.com
” and follow the on-screen
instructions. Have your proxy card available when you access the web
page.
-
OR -
IN
PERSON
-
You may
vote your shares in person by attending the Annual Meeting.
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COMPANY
NUMBER
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ACCOUNT
NUMBER
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You
may enter your voting instructions at 1-800-PROXIES in the United States
or 1-718-921-8500 from foreign countries or www.voteproxy.com up until
11:59 PM Eastern Time the day before the cut-off or meeting
date.
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i
Please
detach along perforated line and mail in the envelope provided
IF
you are not voting
via telephone or the Internet.
i
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¢
20533300000000000000 8
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061008
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” EACH OF THE NOMINEES AND LISTED PROPOSALS.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS
SHOWN
HERE
x
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FOR
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AGAINST
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ABSTAIN
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1.Elect
seven people to serve on the Board of Directors of the Corporation until
the 2010 annual meeting of stockholders or until their successors are
elected and qualified;
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2.Amend
the Articles of Incorporation of the Corporation to eliminate preemptive
rights for stockholders;
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¨
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¨
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¨
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¨
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NOMINEES
m
Willie T. Closs, Jr.
m
Michael L. Lawrence
m
Joseph M.
Sansom
m
Kim D.
Saunders
m
Aaron L.
Spaulding
m
James H. Speed,
Jr.
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3.Amend
the Articles of Incorporation of the Corporation to establish a class of
preferred stock;
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¨
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¨
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¨
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¨
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4.Ratify
the appointment of Grant Thornton, LLP as the independent auditor for the
Corporation for the fiscal year ending December 31, 2009;
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¨
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¨
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¨
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FOR
ALL EXCEPT
(See
instructions below)
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5.Amend
the Articles of Incorporation of the Corporation to eliminate cumulative
voting rights in the election of directors;
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¨
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¨
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¨
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INSTRUCTION:
To withhold
authority to vote for any individual nominee(s), mark
“FOR
ALL
EXCEPT”
and fill in the circle next to
each nominee you wish to withhold, as shown here:
l
Shareholders
may cumulate their votes for one or more directors. To cumulate votes,
place the number of votes for a nominee on the line next to such nominee’s
name. The total votes cast for one or more nominees may not be more than
seven (7).
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6.Amend
the Articles of Incorporation of the Corporation to increase the number of
authorized shares of common stock of the Corporation from five million
(5,000,000) to ten million (10,000,000); and
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¨
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¨
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¨
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7.Consider
any other business that may properly be brought before the Annual Meeting
or any adjournment thereof. The Corporation’s Board of Directors does not
know of any other business to be considered at the Annual
Meeting.
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To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
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¨
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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¢
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Note:
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Please
sign exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
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¢
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¨
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M&F
BANCORP, INC.
2634
Durham Chapel Hill Boulevard
P.O.
Box 1932 (27702)
Durham,
NC 27707
(919)
687-7800
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This
Proxy is solicited by the Board of Directors in connection with the Annual
Meeting of the Stockholders of M&F BANCORP, INC. (the “Corporation”).
The undersigned hereby
appoints_______________________________________________ or any of them, as
Proxies of the undersigned, with full power of substitution to vote, as
designated on the reverse side of this Proxy, the number of shares of
common stock of the Corporation held of record by the undersigned on April
1, 2009 on the proposals set forth on the reverse and described in the
accompanying Proxy Statement at the Annual Meeting of Stockholders of the
Company to be held on Tuesday, June 9, 2009, at 6:00 p.m. at the M&F
Bank Corporate Center, 2634 Durham Chapel Hill Boulevard, Durham, NC
27707.
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This
Proxy will be voted as directed. If you execute and return this Proxy but
do not specify otherwise, this Proxy will be voted FOR all the nominees
and FOR the proposals listed on the reverse, and, in the Proxies’
discretion, on any other matter that may properly come before the meeting.
This Proxy is revocable prior to its exercise.
The
above signed acknowledge(s) receipt from the Corporation, prior to the
election of this proxy, of a Notice of Annual Meeting and a Proxy
Statement dated April 30, 2009.
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(Continued
and to be signed on the reverse side)
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14475
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M and F Bancorp (PK) (USOTC:MFBP)
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