BANK OF THE CAROLINAS MANAGEMENT INCENTIVE COMPENSATION PLAN
Exhibit 10.3
BANK OF THE CAROLINAS
MANAGEMENT INCENTIVE COMPENSATION PLAN
2007 ANNUAL PLAN RULES
The 2007 Annual Plan Rules for the operation of the Management Incentive Compensation Plan shall be as described below. All capitalized terms used in these rules that are defined in the Plan shall have the same meanings as are assigned to them in the Plan. In the event that any of these rules are inconsistent with any term of the Plan, the Plan term will control.
| A. | Participants |
The employees of the Bank listed on Exhibit A are the Participants in the Plan for 2007.
| B. | Maximum Potential Awards |
Each Participant’s “Maximum Potential Award” under the Plan for 2007 is the dollar amount listed on Exhibit A and is the maximum incentive award that can be paid to that Participant under the Plan for 2007.
| C. | Individual Performance Goals |
Each Participant’s 2007 individual performance goals under the Plan are listed on Exhibit B.
| D. | Calculation of Incentive Awards Payable to Participants |
Each Participant’s incentive award for 2007 will be calculated as described below based on both (i) the extent to which his or her individual performance goals are met for the year and (ii) the amount of the Bank’s earnings for 2007, before taxes and before any deduction for the payment of incentive awards under the Plan (“Pre-tax, Pre-Incentive Income”).
| 1. | At the end of 2007, the Committee will determine the extent to which each Participant’s individual goals have been met. Subject to Paragraph D.2. below, each Participant will be eligible to receive a percentage (from 0.0% to 100.0%) of his or her Maximum Potential Award equal to the aggregate of the percentages listed on Exhibit B beside the descriptions of his or her individual goals that are met for 2007. To the extent that any such performance goal is not met for 2007, the Participant will not be eligible to receive the percentage of his or her Maximum Potential Award related to that goal. |
| 2. | The amount of incentive award that may be paid to each Participant will be the “Applicable Percentage” (from 0.0% to 100.0%) of the amount calculated under Paragraph D.1. above based on the Bank’s 2007 Pre-tax, Pre-incentive Income as indicated on Exhibit C attached to these Plan Rules. No incentive award will be paid to Participants unless the Bank’s 2007 Pre-tax, Pre-incentive Income exceeds $3,800,000, and 100% of the amount calculated for each Participant under Paragraph D.1. above will be paid if the Bank's Pre-tax, Pre-incentive Income equals or exceeds $6,200,000. |
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| E. | Incentive Award Amounts Subject to Approval by Board of Directors |
The Committee will determine the amounts of incentive awards payable to Participants for 2007. However, as provided in the Plan, the amount of each Participant’s incentive award for 2007 shall be subject to the approval of the Board of Directors, based on the Committee’s recommendation, prior to payment, and the Board may, at its discretion, decline to pay, or reduce the amount of, an incentive award payable to any Participant for any reason satisfactory to it.
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Exhibit A
Bank of the Carolinas
2007 MANAGEMENT INCENTIVE PLAN PARTICIPANTS
| Employee | Title | Location | 2007 Current Salary | Maximum Potential Award | |||||||||
| Percent of Salary | Dollar Amount | ||||||||||||
| Senior Management Participants | |||||||||||||
| Robert Marziano | CEO | Sr. Management Team | $ | 280,000 | 35 | % | $ | 98,000 | |||||
| Ed Jordan | Pres/COO | Sr. Management Team | $ | 135,600 | 35 | % | $ | 47,460 | |||||
| Eric Rhodes | CFO | Sr. Management Team | $ | 106,700 | 35 | % | $ | 37,345 | |||||
| Retail and Other Participants | |||||||||||||
| Harry Hill | Commercial Loan Officer, Sr. | Mocksville/Davie Co. | $ | 120,060 | 30 | % | $ | 36,018 | |||||
[Participants who are not named executive officers have been omitted.]
Exhibit B
2007 INDIVIDUAL PERFORMANCE GOALS
Senior Management Participants
Robert Marziano, Ed Jordan, Eric Rhodes
| 1. | Improve bank profitability with an ROAE (calculated before taxes and before deduction for payment of incentive awards under the Plan) of 9.50% | 30 | % | ||
| 2. | Maintain overall CAMEL rating of 2 or better | 30 | % | ||
| 3. | Control charge-offs to no more than 0.25% of average loans | 20 | % | ||
| 4. | Maintain a ratio of Non-performing Assets of no more than 1.0% of Average Assets | 20 | % |
Retail and Other Participants
Harry Hill
| 1. | Loan volume average per month $1,750,000 | 40 | % | ||
| 2. | Past due loans by $ amount must average 1% or less | 15 | % | ||
| 3. | All exceptions must average at or below stated goals per month | 15 | % | ||
| 4. | Non-performing assets must average below 1% or less per month | 15 | % | ||
| 5. | Charge offs must be less than 0.25% for the year | 15 | % |
[Participants who are not named executive officers are omitted.]
Exhibit C
APPLICABLE PERCENTAGES FOR PARTICIPANTS
| 2007 Pre-tax, | Applicable Percentage | ||
| $3,400,000 or below | 0.0 | % | |
| 3,500,000 | 0.0 | % | |
| 3,600,000 | 0.0 | % | |
| 3,700,000 | 0.0 | % | |
| 3,800,000 | 4.0 | % | |
| 3,900,000 | 8.0 | % | |
| 4,000,000 | 12.0 | % | |
| 4,100,000 | 16.0 | % | |
| 4,200,000 | 20.0 | % | |
| 4,300,000 | 24.0 | % | |
| 4,400,000 | 28.0 | % | |
| 4,500,000 | 32.0 | % | |
| 4,600,000 | 36.0 | % | |
| 4,700,000 | 40.0 | % | |
| 4,800,000 | 44.0 | % | |
| 4,900,000 | 48.0 | % | |
| 5,000,000 | 52.0 | % | |
| 5,100,000 | 56.0 | % | |
| 5,200,000 | 60.0 | % | |
| 5,300,000 | 64.0 | % | |
| 5,400,000 | 68.0 | % | |
| 5,500,000 | 72.0 | % | |
| 5,600,000 | 76.0 | % | |
| 5,700,000 | 80.0 | % | |
| 5,800,000 | 84.0 | % | |
| 5,900,000 | 88.0 | % | |
| 6,000,000 | 92.0 | % | |
| 6,100,000 | 96.0 | % | |
| 6,200,000 and above | 100.0 | % |
