-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LFb3ePI5PxHq1yulx4bAJ5ZG2fCyoCDxphOmnrxPahbIlcgQy/iVJ+GgUPOr2vij V4t8frgnQNEPJkZveNxC8Q== 0000950144-99-013022.txt : 19991117 0000950144-99-013022.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950144-99-013022 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: M&F BANCORP INC /NC/ CENTRAL INDEX KEY: 0001094738 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 561980549 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27307 FILM NUMBER: 99751730 BUSINESS ADDRESS: STREET 1: 116 WEST PARRSH STREET STREET 2: P O BOX 1932 CITY: DURHAM STATE: NC ZIP: 27701-3321 BUSINESS PHONE: 9196831521 MAIL ADDRESS: STREET 1: 116 WEST PARRISH STREET STREET 2: P O BOX 1932 CITY: DURHAM STATE: NC ZIP: 27701-3321 10QSB 1 M & F BANCORP, INC. 1 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ----------------------------- FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 Commission File Number 0-27307 M&F BANCORP, INC. - -------------------------------------------------------------------------------- (Name of small business issuer in its charter) NORTH CAROLINA 56-1980549 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2634 CHAPEL HILL BLVD., P.O. BOX 1932, DURHAM, NORTH CAROLINA 27702 - -------------------------------------------------------------------------------- (Address of principal executive offices) (919) 683-1521 - -------------------------------------------------------------------------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months ( or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] State the number of shares outstanding of each of the issuer's class of common equity, as of the latest practicable date: COMMON STOCK NO PAR VALUE 569,200 - -------------------------------------------------------------------------------- Outstanding at September 30, 1999 Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] 2 M&F BANCORP, INC.
INDEX PAGE PART I. FINANCIAL INFORMATION (unaudited) 3 Item 1. Consolidated Condensed Financial Statements 3 Consolidated Condensed Balance Sheet as of December 31, 1998 and September 30, 1999 3 Consolidated Condensed Statements of Income for the nine months ended September 30, 1999 and September 30, 1998 4 Consolidated Condensed Statements of Income for the three months ended September 30, 1999 and September 30, 1998 5 Consolidated Condensed Statement of Comprehensive Income for the periods ended September 30, 1999 and September 30, 1998 6 Consolidated Condensed Statements of Comprehensive Income and Shareholders' Equity for the nine months ended September 30, 1999 and September 30, 1998 6 Consolidated Condensed Statements of Cash flows for the periods ended September 30, 1999 and September 30, 1998 7 Notes to Consolidated Condensed Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION 12 Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 13 Signature Page 14
2 3 PART I: FINANCIAL INFORMATION ITEM 1 Financial Statements M&F BANCORP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited)
(in thousands) December 31, September 30, 1998 1999 --------- --------- Cash and due from financial institutions $ 6,314 $ 6,715 Interest-earning deposits in financial institutions 1,099 2,025 Federal funds sold 13,550 2,590 --------- --------- Cash and cash equivalents 20,963 11,330 Securities available for sale 32,751 34,313 Securities held to maturity 1,411 1,412 Loans: Commercial Loans 5,871 7,166 Real Estate -Construction Loans 874 5,680 Real Estate-Mortgage Loans 82,481 82,815 Consumer Loans 5,574 5,245 Other Loans 1,004 931 --------- --------- Total Loans 95,804 101,837 Unearned income (337) (342) Allowance for Loan Losses (1,150) (1,277) --------- --------- Net Loans 94,317 100,218 Bank premises and equipment, net 3,030 5,344 Other assets 1,493 1,948 --------- --------- TOTAL ASSETS $ 153,965 $ 154,565 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Noninterest-bearing demand deposits $ 28,451 $ 24,566 Savings, NOW, and MMDA 55,084 59,728 Time Deposits 41,759 41,992 --------- --------- Total Deposits 125,294 126,286 Other Borrowings 10,000 10,000 Other Liabilities 2,174 2,070 --------- --------- Total Liabilities 137,468 138,356 Shareholders' Equity: Common Stock 2,846 2,846 Capital Surplus 3,154 3,154 Retained Earnings 9,580 10,160 Accumulated Other Comprehensive Gain 917 49 --------- --------- Shareholders' Equity 16,497 16,209 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 153,965 $ 154,565 ========= =========
3 4 M&F BANCORP, INC. CONSOLIDATED CONDENSED STATEMENT OF INCOME (unaudited)
(in thousands, except per share data) September 30, September 30, Nine months ending: 1999 1998 ------ ------ Interest Income: Interest on Loans $6,416 $6,376 Securities : Taxable 1,066 1,040 Tax exempt 388 184 Federal Funds Sold 135 113 Other Interest 55 26 ------ ------ Total Interest Income $8,060 $7,739 Interest Expense: Interest-bearing Demand 95 153 Savings 779 798 Time Deposits 1,449 1,447 Interest on Federal Funds & Borrowings 360 28 ------ ------ Total Interest Expense $2,683 $2,426 Net Interest Income 5,377 5,313 Provision for Loan Losses 208 275 ------ ------ Net Interest Income After Provision for Loan Losses 5,169 5,038 Non-interest Income 1,124 1,085 Non-interest Expense 5,053 4,852 Income before Taxes 1,240 1,271 Income Tax Expense 350 458 ------ ------ Net Income $ 890 $ 813 ====== ====== Earnings per share common equivalent shares: Basic $ 1.56 $ 1.43 Diluted $ 1.56 $ 1.43 Weighted average shares outstanding: Basic 569 569 Diluted 569 569
4 5 M&F BANCORP, INC. CONSOLIDATED CONDENSED STATEMENT OF INCOME (unaudited)
(in thousands, except per share data) September 30, September 30, Quarter ending: 1999 1998 ------ ------ Interest Income: Interest on Loans $2,197 $2,178 Securities : Taxable 380 329 Tax exempt 128 66 Federal Funds Sold 17 11 Other Interest 28 4 ------ ------ Total Interest Income $2,750 $2,588 Interest Expense: Interest-bearing Demand 31 46 Savings 254 258 Time Deposits 487 494 Interest on Federal Funds & Borrowings 118 26 ------ ------ Total Interest Expense $ 890 $ 824 Net Interest Income 1,860 1,764 Provision for Loan Losses 12 118 ------ ------ Net Interest Income After Provision for Loan Losses 1,848 1,646 Non-interest Income 412 365 Non-interest Expense 1,617 1,595 Income before Taxes 646 416 Income Tax Expense 188 185 ------ ------ Net Income $ 458 $ 231 ====== ====== Earnings per share common equivalent shares: Basic $ .80 $ .41 Diluted $ .80 $ .41 Weighted average shares outstanding: Basic 569 569 Diluted 569 569
5 6 M&F BANCORP, INC. CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
(in thousands) Nine months ended: September 30 September 30, 1999 1998 -------- -------- Net Income $ 890 $ 813 Other Comprehensive Income, Net of Tax Unrealized Holdings Gains during period 49 963 Less Reclassification adjustments for gains included in net income Other Comprehensive Income 49 963 Comprehensive Income $ 939 $ 1,776
M&F BANCORP, INC. CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
(in thousands) December 31, September 30, 1998 1999 -------- -------- Beginning Balance $ 15,523 $ 16,497 Net Income 1,214 890 Change in Net Unrealized Gain(Loss) AFS 204 (868) Dividends (444) (310) Ending Balance $ 16,497 $ 16,209
6 7 M&F BANCORP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
Nine months ended: September 30, September 30, 1999 1998 ------------ ----------- Cash flows from operating activities: Net Income $ 890,470 $ 813,445 Adjustments to reconcile net income to net cash from operating activities: Provision for possible loan losses 207,804 274,653 Provision for depreciation 99,300 280,641 Deferred income taxes 513,433 143,946 Gain on sale or disposal of assets (16,850) Loss on sale of OREO 3,522 Deferred loan fees 4,819 511 Income Taxes Payable 5,096 331,683 Interest Receivable 55,198 97,623 Prepaid expenses and other assets 26,258 20,884 Accrued expenses and other liabilities (158,237) (105,560) Other 361,596 356,158 ------------ ----------- Net Cash from Operating Activities 1,992,409 2,213,984 Cash flows used in Investing Activities: Proceeds from sales and maturities of securities (AFS) 9,303,814 6,676,588 Purchase of securities (AFS) (13,044,850) (4,748,234) Proceeds from maturities of securities held to maturity 500,000 Net increase in loans (6,034,411) (7,216,970) Purchase of premises and equipment (2,732,502) (495,130) Proceeds from sale of assets 133,415 Proceeds from sale of real estate owned 24,474 ------------ ----------- Net Cash Used in Investing Activities (12,350,060) (5,283,746) Net Cash Provided by Investing Activities Net increase (decrease) in demand and savings deposits 833,059 3,411,547 Net increase (decrease) in certificates of deposit 202,138 3,172,614 Cash dividends (310,225) (335,840) ------------ ----------- Net Cash Provided By (Used) Financing Activities 724,972 6,248,321 Net Increase (Decrease) in Cash and Cash Equivalents (9,632,679) 3,178,559 Cash and Cash Equivalents at the Beginning of the Year 20,962,802 6,184,141 ------------ ----------- Cash and Cash Equivalents at the End of the Year $ 11,330,123 $ 9,362,700 ============ ===========
7 8 M&F BANCORP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation The consolidated financial statements include the accounts and transactions of M&F Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Mechanics & Farmers Bank ("M&F Bank"). All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and instructions from Regulation S-B. In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation have been included. M&F Bancorp, Inc. became the parent holding company of Mechanics & Farmers Bank on September 1, 1999; therefore, prior periods reflect the balance of the single bank, M&F Bank and its subsidiary. 2. Investment Securities The Company accounts for investment securities using Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115). Under SFAS 115, the accounting for investment securities held as an asset is dependent upon their classification as held to maturity, available for sale, or trading assets. 3. Loans Loans are carried at their principal amount outstanding , net of the allowance for possible loan losses and deferred fees. Interest on commercial, mortgage and installment loans is accrued and credited to operating income based upon the principal amount outstanding. The Company's policy is to discontinue the accrual of interest when, in management's judgment, circumstances indicate that collection is doubtful. Effective January 1, 1995, M&F Bank adopted Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan (SFAS 114) and Statement of Financial Accounting Standards No. 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures (SFAS 118). The effect of adopting both SFAS 114 and SFAS 118 did not have a significant impact on the Company's financial position or results of operations. 4. Earnings Per Share Earnings per share is calculated on the basis of the weighted-average number of common shares outstanding. There were no dilutive potential common shares outstanding for the periods ended September 30, 1999 and September 30, 1998. 5. Regulatory Capital Requirements The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary- actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. As of September 30, 1999, the Company had the following capital levels. Capital Risk Based Tier 1 Tier 2 17.00% 10.46% 11.31% 8 9 6. Comprehensive Income Effective January 1, 1998, M&F Bank adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). Adoption of this standard requires the Company to (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. 7. Accounting Change Pending Implementation The Financial Accounting Standards Board has issued Statement of Financial Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. 8. Common Stock Cash Dividends On September 21, 1999 the Board of Directors of the Company declared a quarterly cash dividend of $.11 per share to all shareholders of record September 21, 1999 payable October 15, 1999. The accrual of the cash dividend reduced shareholders' equity by $62,612. ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations General The following discussion, analysis of earnings and related financial data should be read in conjunction with the unaudited financial statements and related notes to the consolidated condensed statements. It is intended to assist you in understanding the financial condition and the results of operations for the nine months ended September 30, 1999 and quarter ended September 30, 1999. Forward-Looking Statements When used in this report, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or other similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or occurrences after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 9 10 Financial Condition Total assets increased 11.37 percent to $154,565,000 at September 30, 1999 from $138,779,000 for the same period 1998. Total assets increased less than one percent from $153,965,000 on December 31, 1998. The increase in assets from the prior year was primarily due to $10,000,000 borrowed from the Federal Home Loan Bank. The borrowings were used to purchase securities and provide liquidity. The investment portfolio balance as of September 30, 1999 was $35,725,000 compared with $28,398,000 for the same period 1998. The portfolio increased 4.58 percent from the December 1998 level of $34,162,000. The portfolio can be liquidated to meet loan demand if necessary. Approximately 96 percent of the bonds in the portfolio are classified as available-for-sale. All bonds purchased during 1999 were placed in the available-for-sale category. The increase of 3.96 percent in net loans from the prior year was represented by an increase in loans for construction and land development. Management continues its effort to add more adjustable rate loans to the portfolio in an effort to reduce the interest rate sensitivity of our loans. This effort is normally achieved in the commercial loans most of which are secured by real estate. Deposits increased 5.36 percent to $126,286,000 at September 30, 1999 from $119,926,000 for the same period 1998. Management believes that deposit growth may be difficult to maintain as we move forward as customers continue to look for alternative investment opportunities with higher yields. Because of availability of future deposits the Company will continue to seek other sources of liquidity to meet loan demand. Total shareholders' equity decreased .28 percent to $16,209,000 on September 30, 1999 from $16,254,000 for the same period 1998. The decrease in this account income was due to the decrease in the adjustment from unrealized appreciation of securities which resulted from higher yields in the current bond market. Shareholders' equity decreased 1.75 percent from the December 1998 level of $16,497,000. Results of Operations - Comparison of September 30, 1999 with September 30, 1998 Net income increased 9.47 percent to $890,000 on September 30, 1999 compared with $813,000 for the same period 1998. The increase in net income was primarily due to a decrease in the loan loss provision of $67,000 and the elimination of an accrual for incentive compensation of $135,000. The incentive plan was based on profitability and management does not anticipate reaching the minimum net income to pay incentive compensation for the calendar year. Net interest income increased $87,000 primarily due to the borrowings from the Federal Home Loan Bank which was partially off-set by increased interest income in the securities portfolio. The increase in noninterest expense was caused by higher security costs to provide uniformed officers for the Charlotte Branch, increased equipment maintenance, and Y2K costs of $7,750 not incurred in the prior year. The Company also experienced a large number of check and deposit account losses, including a $43,000 loss on a single account. The Company recognized a loss of $37,000 on the sale of a building which was owned by the subsidiary of M&F Bank, Mechanics & Farmers, Realty Services, Inc. Net income increased 98.27 percent from the same quarter in the prior year from $231,000 to $458,000. The increase in net income was primarily due to a decrease in the loan loss provision. Management evaluated the adequacy of the loan loss reserves and reduced the provision based on the loans outstanding, decrease in delinquencies, and non-accrual loans and the improved collection efforts. Management will continue its assessment of the reserves and adjust the provision as required. Management also discontinued accrual for incentive compensation based on profitability. The profits are not projected to reach the minimum amount to pay incentive pay. This adjustment resulted in a reduction of $135,000 from expenses. Non-performing assets and allowance for loan losses The allowance for loan losses is calculated based upon an evaluation of pertinent factors underlying the types and qualities of the Company's loans. Management considers such factors as the repayment status of a loan, the estimated net realizable value of the underlying collateral, the borrower's ability to repay the loan, current and 10 11 anticipated economic conditions which might affect the borrower's ability to repay the loan and the Company's past statistical history concerning charge-offs. The September 30, 1999 allowance for loan losses was 1,277,000 or 1.25 percent of total loans outstanding compared with $1,150,000 or 1.20 percent of total loans outstanding on December 31, 1998. Management has considered non-performing assets and total classified assets in establishing the allowance for loan losses. The ratio of non-performing assets to total assets is one indicator of the exposure to credit risk. Non-performing assets of the Company consist of non-accruing loans, accruing loans delinquent 90 days or more, and foreclosed assets, which have been acquired as a result of foreclosure or deed-in-lieu of foreclosure.
09/30/99 12/31/98 09/30/98 -------- -------- -------- (in thousands) Non-Accruing Loans $544 $ 539 $ 519 Accruing Loans Delinquent 90 days or more 136 1,163 1,371 Foreclosed Assets 71 45 45 Total Non-Performing Assets $756 $1,747 $1,935 ---- ------ ------ Percentage of total assets .49% 1.13% 1.39%
The improvement in non-performing assets resulting from enhanced practices and procedures put in place by management. Improving the credit quality was a primary focus for the institution for 1999. Disclosure of Year 2000 Issues ("Y2K") and Consequences by Public Companies, Investment Advisors, Investment Companies, and Municipal Securities Issuers. The Company established a Y2K Committee consisting of senior officers of the Company as well as representatives from all departments within the Company. This committee, with the assistance of an outside consultant, developed a Y2K plan which was subsequently approved by the Board of Directors of the Company. The purpose of the committee and the plan were to identify the systems that could be affected by Y2K and to determine the necessary activities required to prepare for processing the Company's data on and after January 1, 2000. As provided for in the guidance from the Financial Institutions Examination Council there are five phases with which the Company must comply to ensure its readiness for Y2K: awareness, assessment, renovation, validation, and implementation. The Company has conducted a comprehensive review of its computer systems, including its core processing systems to identify the systems that could be affected by the Y2K issue. The Company, along with its software provider for its core system, completed renovation of its core system in July 1998. This included program changes and other modifications. The Company has completed the validation phase which included testing of changes to hardware and software, including all vendor provided software and hardware. The Company completed the implementation phase by September 30, 1999. The Company has developed a comprehensive Business Continuation Plan to provide for such contingencies as the failure of our mission critical computer systems due to Y2K or other related equipment or software failures. The Company has evaluated third party business relationships, including vendors and borrowers. The significant dependence on providers of service creates potential exposure for the Company; however management fully expects providers of service to meet the schedule timetable for all mission critical items. The Company has analyzed the extent Y2K issues could adversely impact their borrowers' business operations, particularly its commercial borrowers. The Company has performed an initial assessment of each major borrower and has established an ongoing assessment as part of the Company's credit underwriting process. A substantial portion of the Company's loan portfolio consists of loans to individuals and churches rather than pure commercial companies, therefore, management believes that Y2K issues will not impair the ability of the borrowers to repay their debt. 11 12 The Company completed an inventory of all non-embedded technology under the assessment phase. Upon the completion of the assessment the Company upgraded or replaced the necessary equipment. The Company has estimated that the cost to replace computer equipment, software programs or other equipment containing embedded microprocessors that are not Y2K compliant in addition to expanding and enhancing services or equipment due to its assessment phase to be approximately $500,000. The Company believes this amount will be adequate because it has been continuously upgrading its technology with Y2K compliant hardware and software as previously indicated by the larger technology related expenditures over the past four years. System maintenance or modification costs are charged to expense as incurred, while the cost of new hardware, software, or other equipment is capitalized and amortized over their estimated useful lives. The Company does not track the internal costs and time that its own personnel devote to Y2K issues, which are primarily payroll costs. For the twelve months ended December 31, 1998, the Company had recorded $11,803 in expenses and capitalized $78,751 related to the Y2K issues. For the first nine months 1999 the Company has expensed $7,750 and capitalized $22,665 related to Y2K issues. Amounts recorded for Y2K in previous periods were insignificant. The Company's Internal Audit Department conducted a simulation exercise of the Business Continuation Plan and found the procedures provided adequate response from management in executing and responding to the Y2K issues tested. Because the Company depends substantially on its computer systems and the software support of other vendors, the failure of these systems to be Y2K compliant could cause substantial disruption of the Company's business and could have a material adverse financial impact on the company. Failure to resolve Y2K issues presents numerous risks such as: (1) loss of customers to other financial institutions, resulting in a loss of revenue, if the Company is unable to properly process customer transactions; (2) correspondent banks, the Federal Reserve Bank and the Federal Home Loan company could fail to provide funds to the Company, which could materially impair liquidity and affect the ability of the Company to fund loans and deposit withdrawals; (3) concern on the part of depositors that Y2K issues could impair access to their deposit account balances which could result in the Company experiencing significant deposit outflows prior to December 31, 1999; and (4) the Company could incur increase personnel cost if additional staff is required to perform functions that inoperative systems would have otherwise performed. Management can not estimate the potential loss of revenue due to the Y2K issue because neither the extent nor the longevity of any potential problem can be predicted. There can not be any assurances that the Company's Y2K plan will effectively address all of the Y2K issues, or that the Company's estimates of the timing and costs of completing the plan will ultimately be accurate or that the impact of any failure of the Company or of its software and hardware vendors or service providers to be Y2K compliant will not have a material adverse impact on the Company's business, financial condition or the results of its operations. PART II: OTHER INFORMATION ITEM 1. Legal Proceedings: Not applicable ITEM 2. Changes in Securities: Not applicable ITEM 3. Defaults upon Senior Securities: Not applicable ITEM 4. Submission of Matters to a Vote of Security Holders: Not applicable ITEM 5. Other Information: Not applicable 12 13 ITEM 6. Exhibits and Report on Form 8-K (a) Exhibits: Exhibit No. Description ----------- ----------- 3(i) Amended and Restated Articles of Incorporation 3(ii) Bylaws 10 Material Contracts: (a) Executive Employment Agreement dated April 1, 1999 between Mechanics and Farmers Bank and Julia W. Taylor. (b) Retention Bonus Agreement dated April 1, 1999 between Mechanics and Farmers Bank and Lee Johnson. (c) Retention Bonus Agreement dated April 1, 1999 between Mechanics and Farmers Bank and Donald Harrington. (d) Retention Bonus Agreement dated April 1, 1999 between Mechanics and Farmers Bank and Fohliette W. Becote. (e) Retention Bonus Agreement dated April 1, 1999 between Mechanics and Farmers Bank and Harold Sellers. (f) Retention Bonus Agreement dated April 1, 1999 between Mechanics and Farmers Bank and E. Elaine Small 27 Financial Data Schedule (b) Reports on Form 8-K: On September 13, 1999, the Company filed a report on Form 8-K1263 in order to register the Company as the successor issuer to M&F Bank pursuant to Rule 12g-3. 13 14 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to signed on its behalf by the undersigned, thereunto duly authorized. M&F Bancorp, Inc. (Registrant) Date: November 12, 1999 By: /s/ J.W. Taylor ------------------------------------- J.W. Taylor Chairman, President/CEO Date: November 12, 1999 By: /s/ Lee Johnson, Jr. ------------------------------------- Lee Johnson, Jr. Vice President 14 EX-3.I 2 AMENDED & RESTATED ARTICLES OF INCORPORATION 1 EXHIBIT 3(i) AMENDED AND RESTATED ARTICLES OF INCORPORATION OF M&F BANCORP, INC. ARTICLE I The name of the corporation is M&F Bancorp, Inc. (the "Corporation"). ARTICLE II Section 2.1. Total Authorized Shares of Capital Stock. The Corporation shall have authority to issue a total of 1,000,000 shares of capital stock, none of which shall have any par value, divided into such classes as follows: Class Number of Shares ----- ---------------- Common Stock 1,000,000 Section 2.2. Common Stock. The shares of Common Stock shall be one and the same class. Subject to the rights of holders of any Preferred Stock as determined by the Board of Directors pursuant to the North Carolina Business Corporation Act ("NCBCA") 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 any Preferred Stock in the distribution of the net assets of the corporation upon dissolution. ARTICLE III The street address and county of the current registered office of the Corporation is 116 West Parrish Street, Durham County, Durham, North Carolina 27702. The mailing address of the current registered office of the Corporation is Post Office Box 1932, Durham, North Carolina 27702. The name of the current registered agent is J.W. Taylor. ARTICLE IV The name and address of the incorporator is as follows: J.W. Taylor 116 West Parrish Street Post Office Box 1932 Durham, North Carolina 27702 ARTICLE V The provisions of Article 9 and Article 9A of the NCBCA entitled "The North Carolina Shareholder Protection Act" and "The North Carolina Control Share Acquisition Act", respectively, shall not be applicable to the Corporation. ARTICLE VI Section 6.1. Board of Directors. The number of directors of the Corporation shall not be less than three (3) nor more than nine (9), with the exact number to be fixed from time to time as provided in the Corporation's Bylaws. 2 Section 6.2. Initial Board of Directors. The number of directors constituting the initial Board of Directors of the Corporation shall be nine (9). Section 6.3. Cumulative Voting. The shareholders of the Corporation shall have cumulative voting rights in the election of directors. ARTICLE VII Shareholders shall have preemptive rights in this Corporation. This the 8th day of February, 1999. /s/ J. W. Taylor ---------------------------------------- J. W. Taylor Incorporator 2 EX-3.II 3 BYLAWS 1 Exhibit 3(ii) BYLAWS OF M&F BANCORP, INC. ARTICLE I OFFICES Section 1. Principal Office. The principal office of the corporation shall be located at such place as the Board of Directors may fix from time to time. Section 2. Registered Office. The registered office of the corporation required by law to be maintained in the State of North Carolina may be, but need not be, identical with the principal office. Section 3. Other Offices. The corporation may have offices at such other places, either within or without the State of North Carolina, as the Board of Directors may designate or as the affairs of the corporation may require from time to time. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. Place of Meetings. All meetings of shareholders shall be held at the principal office of the corporation, or at such other place, either within or without the State of North Carolina, as shall in each case be (i) fixed by the Chief Executive Officer, the President, the Chairman of the Board, or the Board of Directors and designated in the notice of the meeting or (ii) agreed upon by a majority of the shareholders entitled to vote at the meeting. Section 2. Annual Meetings. The annual meeting of shareholders shall be held during the first six (6) calendar months following the end of the corporation's fiscal year, on any day (except Saturday, Sunday, or a legal holiday) during that period as shall be determined by the Board of Directors, for the purpose of electing directors of the corporation and for the transaction of such other business as may be properly brought before the meeting. Section 3. Substitute Annual Meeting. If the annual meeting shall not be held within the time designated by these Bylaws, a substitute annual meeting may be called in accordance with the provisions of Section 4 of this Article II. A meeting so called shall be designated and treated for all purposes as the annual meeting. Section 4. Special Meetings. Special meetings of the shareholders may be called at any time by the Chief Executive Officer, the President, the Chairman of the Board of Directors or the Board of Directors. Section 5. Notice of Meetings. Written notice stating the date, time, and place of the meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of any shareholders' meeting, either by personal delivery, or by mail by or at the direction of the Chief Executive Officer, the President, the Chairman of the Board of Directors or the Board of Directors, to each shareholder entitled to vote at such meeting, provided that such notice must be given to all shareholders with respect to any meeting at which a merger or share exchange is to be considered and in such other instances as required by law. If mailed, such notice shall be deemed to be effective when deposited in the United States mail, correctly addressed to the shareholder at the shareholder's address as it appears on the current record of shareholders of the corporation, with postage thereon prepaid. 2 In the case of a special meeting, the notice of meeting shall include a description of the purpose or purposes for which the meeting is called; but, in the case of an annual or substitute annual meeting, the notice of meeting need not include a description of the purpose or purposes for which the meeting is called unless such a description is required by the provisions of Chapter 55 of the North Carolina General Statutes. When a meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment and if a new record date is not fixed for the adjourned meeting. If a new record date is fixed for the adjourned meeting (which must be done if the new date is more than 120 days after the date of the original meeting), notice of the adjourned meeting must be given as provided in this Section 5 to persons who are shareholders as of the new record date. Section 6. Waiver of Notice. Any shareholder may waive notice of any meeting before or after the meeting. The waiver must be in writing, signed by the shareholder, and delivered to the corporation for inclusion in the minutes or filing with the corporate records. A shareholder's attendance, in person or by proxy, at a meeting (i) waives objection to lack of notice or defective notice of the meeting, unless the shareholder or his proxy at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (ii) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder or his proxy objects to considering the matter before it is voted upon. Section 7. Shareholders' List. Before each meeting of shareholders, the Secretary of the corporation shall prepare an alphabetical list of the shareholders entitled to notice of such meeting. The list shall be arranged by voting group (and within each voting group by class or series of shares) and show the address of and number of shares held by each shareholder. The list shall be kept on file at the principal office of the corporation, or at a place identified in the meeting notice in the city where the meeting will be held, for the period beginning two (2) business days after notice of the meeting is given and continuing through the meeting, and shall be available for inspection by any shareholder, his agent or attorney, at any time during regular business hours. The list shall also be available at the meeting and shall be subject to inspection by any shareholder, his agent or attorney, at any time during the meeting or any adjournment thereof. Section 8. Voting Groups. All shares of one (1) or more classes or series that, under the Articles of Incorporation or the North Carolina Business Corporation Act, are entitled to vote and be counted together collectively on a matter at a meeting of shareholders constitute a voting group. All shares entitled by the Articles of Incorporation or the North Carolina Business Corporation Act to vote generally on a matter are for that purpose a single voting group. Classes or series of shares shall not be entitled to vote separately by voting group unless expressly authorized by the Articles of Incorporation or specifically required by law. Section 9. Quorum. Shares entitled to vote as a separate voting group may take action on a matter at the meeting only if a quorum of those shares exist. A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. In the absence of a quorum at the opening of any meeting of shareholders, such meeting may be adjourned from time to time by the vote of a majority of the votes cast on the motion to adjourn; and, subject to the provisions of Section 5 of this Article II, at any adjourned meeting any business may be transacted that might have been transacted at the original meeting if a quorum exists with respect to the matter proposed. Section 10. Proxies. Shares may be voted either in person or by one (1) or more proxies authorized by a written appointment of proxy signed by the shareholder or by his duly authorized attorney in fact. An appointment of proxy is valid for eleven months from the date of its execution unless a different period is expressly provided in the appointment form. 2 3 Section 11. Voting of Shares. Subject to the provisions of the Articles of Incorporation, each outstanding share shall be entitled to one (1) vote on each matter voted on at a meeting of shareholders. Except in the election of directors as governed by the provisions of Section 4 of Article III, if a quorum exists, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater vote is required by law or the Articles of Incorporation or these Bylaws. Absent special circumstances, shares of the corporation are not entitled to vote if they are owned, directly or indirectly, by a second corporation in which the corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation; provided that this provision does not limit the power of the corporation or such second corporation to vote shares held by it in a fiduciary capacity. ARTICLE III BOARD OF DIRECTORS Section 1. General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the Board of Directors. Section 2. Number and Qualification. The number of directors of the Corporation shall not be less than three (3) nor more than nine (9), with the exact number to be fixed from time to time by the Board of Directors. Section 3. Nominations. At any meeting of shareholders at which directors are to be elected, nominations for election to the Board of Directors may be made by the Board of Directors or, subject to the conditions described below, by any holder of shares entitled to be voted at that meeting in the election of directors. To be eligible for consideration at the meeting of shareholders, all nominations, other than those made by the Board of Directors, shall be in writing and must be delivered to the Secretary of the corporation not less than thirty (30) days nor more than fifty (50) days prior to the meeting at which such nominations will be made; provided, however, that if less than twenty-one (21) days' notice of the meeting is given to shareholders, such nominations must be delivered to the Secretary of the corporation not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Section 4. Election. Except as provided in Section 7 of this Article III, the directors shall be elected at the annual meeting of shareholders. Those persons who receive the highest number of votes at a meeting at which a quorum is present shall be deemed to have been elected. Section 5. Terms of Directors. Each initial director shall hold office until the earliest of the first shareholders' meeting at which directors are elected, or until such director's death, resignation, or removal. At all times that the number of directors is less than nine (9), each director shall be elected to a term ending as of the next succeeding annual meeting of shareholders or until his or her earlier death, resignation, retirement, removal or disqualification or until his or her successor shall be elected and shall qualify. Notwithstanding the provisions of this Section 5, a decrease in the number of directors does not shorten an incumbent director's term. Despite the expiration of a director's term, such director shall continue to serve until a successor shall be elected and qualified or until there is a decrease in the number of directors. Section 6. Removal. Any director may be removed from office at any time, with or without cause, by a vote of the shareholders if the number of votes cast to remove such director exceeds the number of votes cast not to remove him. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him. A director may not be removed by the shareholders at a meeting unless the notice of that meeting states that the purpose, or one (1) of the purposes, of the meeting is removal of the director. If any directors are so removed, new directors may be elected at the same meeting. 3 4 Section 7. Vacancies. Any vacancy occurring in the Board of Directors, including without limitation a vacancy resulting from an increase in the number of directors or from the failure by the shareholders to elect the full authorized number of directors, may be filled by the shareholders or by the Board of Directors, whichever group shall act first. If the directors remaining in office do not constitute a quorum, the directors may fill the vacancy by the affirmative vote of a majority of the remaining directors or by the sole remaining director. If the vacant office was held by a director elected by voting group, only the remaining director or directors elected by that voting group or the holders of shares of that voting group are entitled to fill the vacancy. Section 8. Chairman of the Board of Directors. There may be a Chairman of the Board of Directors elected by the directors from their number at any meeting of the Board of Directors. The Chairman shall serve in such position at the pleasure of the Board of Directors and shall preside at all meetings of the Board of Directors and shareholders, serve as a member of the Executive Committee, and perform such other duties as may be directed by the Board of Directors. In the absence of the Chairman, the President shall preside at meetings of directors or shareholders. Section 9. Compensation. The Board of Directors may provide for the compensation of directors for their services as such and for the payment or reimbursement of any or all expenses incurred by them in connection with such services. ARTICLE IV MEETINGS AND COMMITTEES OF DIRECTORS Section 1. Regular Meetings. A regular meeting of the Board of Directors shall be held immediately after, and at the same place as, the annual meeting of shareholders. In addition, the Board of Directors may provide, by resolution, the time and place, either within or without the State of North Carolina, for the holding of additional regular meetings. Section 2. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board or the President if such officer is also a director, or by any three (3) or more directors. Such a meeting may be held either within or without the State of North Carolina, as fixed by the person or persons calling the meeting. Section 3. Notice of Meetings. Regular meetings of the Board of Directors may be held without notice. The person or persons calling a special meeting of the Board of Directors shall, at least two (2) days before the meeting, give or cause to be given notice thereof by any usual means of communication. Such notice need not specify the purpose for which the meeting is called. Any duly convened regular or special meeting may be adjourned by the directors to a later time without further notice. Section 4. Waiver of Notice. Any director may waive notice of any meeting before or after the meeting. The waiver must be in writing, signed by the director entitled to the notice, and be delivered to the corporation for inclusion in the minutes or for filing with the corporate records. A director's attendance at or participation in a meeting waives any required notice of such meeting unless the director at the beginning of the meeting, or promptly upon arrival, objects to holding the meeting or to transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Section 5. Quorum. Unless the Articles of Incorporation or these Bylaws provide otherwise, a majority of the number of directors fixed by or pursuant to these Bylaws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, or if no number is so fixed, a majority of the number of directors in office immediately before the meeting begins shall constitute a quorum. 4 5 Section 6. Manner of Acting. Except as otherwise provided in the Articles of Incorporation or these Bylaws, including Section 9 of this Article IV, the affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 7. Presumption of Assent. A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless (i) he objects at the beginning of the meeting, or promptly upon his arrival, to holding it or to transaction business at the meeting, or (ii) his assent or abstention from the action taken is entered in the minutes of the meeting, or (iii) he files written notice of his dissent or abstention with the presiding officer of the meeting before its adjournment or with the corporation immediately after the adjournment of the meeting. Such right of dissent or abstention is not available to a director who votes in favor of the action taken. Section 8. Action Without Meeting. Action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board of Directors. The action must be evidenced by one (1) or more written consents signed by each director before or after such action, describing the action taken, and included in the minutes or filed with the corporate records. Section 9. Committees of the Board of Directors. The Board of Directors may create such committees of the Board of Directors as it shall consider appropriate, including without limitation those committees specifically provided for in these Bylaws. The creation of a committee of the Board of Directors and appointment of members to it must be approved by the greater of (i) a majority of the number of directors in office when the action is taken or (ii) the number of directors required to take action pursuant to Section 6 of this Article IV. Each committee of the Board of Directors must have two (2) or more members and, to the extent authorized by law, shall have such duties and authority as may be described in these Bylaws or otherwise specified by the Board of Directors. Each committee member shall serve at the pleasure of the Board of Directors. The provisions in these Bylaws governing meetings, actions without meeting and other requirements of the Board of Directors shall also apply to any committees of the Board of Directors established pursuant to these Bylaws. Section 10. Executive Committee. There may be a standing committee of the Board of Directors to be known as the Executive Committee and consisting of not fewer than three (3) directors, one (1) of whom shall be the Chairman of the Board of Directors and one (1) of whom shall be the President of the corporation, if such officer is also a director. Except as limited by Section 9 of this Article IV or otherwise limited by law, the Executive Committee is empowered to act for and on behalf of the Board of Directors in any and all matters in the interim between meetings of the Board of Directors. Within the powers conferred upon it, action by the Executive Committee shall be as binding upon the corporation as if performed by the full Board of Directors. Such actions shall be reported to the Board of Directors for review at its next meeting following such action. The committee shall meet as often as it considers necessary or advisable. Section 11. Audit Committee. There may be a standing committee of the Board of Directors to be known as the Audit Committee and consisting of not fewer than three (3) directors. The Audit Committee shall supervise examination of the assets and the liabilities and the internal audit program of the corporation and its subsidiaries, cause outside audits to be performed on the financial statements of the corporation, and shall make periodic reports to the Board of Directors. ARTICLE V OFFICERS Section 1. Officers of the Corporation. The officers of the corporation shall consist of a President, a Secretary, a Treasurer, and such Vice Presidents or other officers (including assistant officers) as may from time to time be appointed by or under the authority of the Board of Directors. Any two (2) or more offices may be held by the same person, but no officer may act in more than one (1) capacity where action of two (2) or more officers is required. 5 6 Section 2. Appointment and Term. The officers of the corporation shall be appointed by the Board of Directors or by a duly appointed officer authorized by the Board of Directors to appoint one (1) or more officers. Each officer shall hold office until his death, resignation, retirement, removal, disqualification, or his successor shall have been appointed. Section 3. Compensation of Officers. The compensation of all officers of the corporation shall be fixed by or under the authority of the Board of Directors, and no officer shall serve the corporation in any other capacity and receive compensation therefor unless such additional compensation shall be duly authorized. The appointment of an officer does not itself create contract rights. Section 4. Removal. Any officer may be removed by the Board of Directors at any time with or without cause; but such removal shall not itself affect the officer's contract rights, if any, with the corporation except to the extent, if any, specified in any such contract. Section 5. Resignation. An officer may resign at any time by communicating his resignation to the corporation, orally or in writing. A resignation is effective when communicated unless it specifies in writing a later effective date. If a resignation is made effective at a later date that is accepted by the corporation, the Board of Directors may fill the pending vacancy before the effective date if the Board of Directors provides that the successor does not take office until the effective date. An officer's resignation does not affect the corporation's contract rights, if any, with the officer except to the extent, if any, specified in any subcontract. Section 6. Bonds. The Board of Directors may by resolution require any officer, agent, or employee of the corporation to give bond to the corporation, with sufficient sureties, conditioned on the faithful performance of the duties of his respective office or position, and to comply with such other conditions as may from time to time be required by the Board of Directors. Section 7. President. The President shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation. He shall sign, with the Secretary, an Assistant Secretary, or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed, and in general he shall perform all duties incident to the office of the President and such other duties as may be prescribed by the Board of Directors from time to time. The President shall be entitled to attend all regular and special meetings and meetings of committees of the Board of Directors. If the President of the corporation is also a director of the corporation, he shall serve as a member of the Executive Committee. Section 8. Vice Presidents. In the absence of the President or in the event of his death, inability or refusal to act, the Vice Presidents, unless otherwise determined by the Board of Directors, shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President (or Assistant Vice President) may sign, with the Secretary, an Assistant Secretary, or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation and any other instruments which may be signed by the President, and shall perform such other duties as from time to time may be prescribed by the President or Board of Directors. Section 9. Secretary. The Secretary shall: (i) keep the minutes of the meetings of shareholders, of the Board of Directors, and of all committees of the Board of Directors, in one or more books provided for that purpose; (ii) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (iii) maintain and authenticate the records of the corporation and be custodian of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (iv) sign with the President or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (v) maintain or cause to be maintained, and have general charge of, the stock transfer books of the corporation; (vi) prepare or cause to be 6 7 prepared shareholder lists prior to each meeting of shareholders as required by law; (vii) attest the signature or certify the incumbency or signature of any officer of the corporation; and (viii) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be prescribed by the President or by the Board of Directors. Section 10. Treasurer. The Treasurer shall be, and may be designated as such as, the corporation's Chief Financial Officer, and shall: (i) have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such depositories as shall be selected in accordance with the provisions of Section 4 of Article VI of these Bylaws; (ii) maintain, or cause to be maintained, appropriate accounting records as required by law; (iii) prepare, or cause to be prepared, annual financial statements of the corporation that include a balance sheet as of the end of the fiscal year and income and cash flow statement for that year, which statements, or a written notice of their availability, shall be mailed to each shareholder within 120 days after the end of such fiscal year; and (iv) in general perform all of the duties incident to the office of treasurer and such other duties as from time to time may be prescribed by the President or by the Board of Directors. Section 11. Assistant Officers. In the absence of a duly appointed officer of the corporation, or in the event of his death, inability or refusal to act, any person appointed by the Board of Directors, and designated by title as an assistant to that officer, unless otherwise determined by the Board of Directors, may perform the duties of, and when so acting shall have all the powers of and be subject to all the restrictions upon, that officer. Such assistant officers shall perform such other duties as from time to time may be prescribed by the President or by the Board of Directors. ARTICLE VI CONTRACTS, LOANS, CHECK, AND DEPOSITS Section 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authorization may be general or confined to specific instances. Also, the Board of Directors may limit, condition, restrict or deny such authority to any officer or officers, or any agent or agents. Section 2. Loans. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances. Section 3. Checks and Drafts. All checks, drafts, or other orders for the payment of money, issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by the Board of Directors. Section 4. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such depositories as may be selected by or under the authority of the Board of Directors. ARTICLE VII SHARES AND THEIR TRANSFER Section 1. Certificate for Shares. The Board of Directors may authorize the issuance of some or all of the shares of the corporation's classes or series without issuing certificates to represent such shares. If shares are represented by certificates, the certificates shall be in such form as required by law and as determined by the Board of Directors. Certificates shall be signed, either manually or in facsimile, by the President or a Vice President, and by the Secretary or Treasurer or an Assistant Secretary or an Assistant Treasurer. All certificates for shares shall be consecutively numbered or otherwise identified and entered into the stock transfer books of the corporation. When 7 8 shares are represented by certificates, the corporation shall issue and deliver, to each shareholder to whom such shares have been issued or transferred, certificates representing the shares owned by him. When shares are not represented by certificates, then within a reasonable time after the issuance or transfer of such shares, the corporation shall send the shareholder to whom such shares have been issued or transferred a written statement of the information required by law to be on certificates. Section 2. Stock Transfer Books. The corporation shall keep or cause to be kept a book or set of books, to be known as the stock transfer book of the corporation, containing the name of each shareholder of record, together with such shareholder's address and the number of class or series of shares held by him. Transfers of shares of the corporation shall be made only on the stock transfer books of the corporation (i) by the holder of record thereof or by his legal representative, who shall provide proper evidence of authority to transfer; (ii) by his attorney authorized to effect such transfer by power of attorney duly executed and filed with the Secretary; and (iii) on surrender for cancellation of the certificate for such shares (if the shares are represented by certificates). Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation claimed to have been lost or destroyed, upon receipt of an affidavit of such fact from the person claiming the certificate to have been lost or destroyed. When authorizing such issue of a new certificate, the Board of Directors shall require that the owner of such lost or destroyed certificate, or his legal representative, give the corporation a bond in such sum and with such surety or other security as the Board of Directors may direct as indemnity against any claims that may be made against the corporation with respect to the certificate claimed to have been lost or destroyed, except where the Board of Directors by resolution finds that in the judgment of the Board of Directors the circumstances justify omission of a bond. Section 4. Fixing Record Date. The Board of Directors may fix a future date as the record date for one (1) or more voting groups in order to determine the shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote, or to take any other action. Such record date may not be more than seventy (70) days before the meeting or action requiring a determination of shareholders. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for an adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. If no record date is fixed by the Board of Directors for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, the close of business on the day before the first notice of the meeting is delivered to shareholders shall be the record date for such determination of shareholders. The Board of Directors may fix a date as the record date for determining shareholders entitled to a distribution or share dividend. If no record date is fixed by the Board of Directors for such determination, it is the date of the Board of Directors authorizes the distribution or share dividend. Section 5. Holder of Record. Except as otherwise required by law, the corporation may treat the person in whose name the shares stand of record on its books as the absolute owner of the shares and the person exclusively entitled to receive notification and distributions, to vote, and to otherwise exercise the rights, powers, and privileges of ownership of such shares. Section 6. Shares Hold by Nominees. The corporation shall recognize the beneficial owner of shares registered in the name of the nominee as the owner and shareholder of such shares for certain purposes if the nominee in whose name such shares are registered files with the Secretary a written certificate in a form prescribed by the corporation, signed by the nominee, indicating the following: (i) the name, address, and taxpayer identification number of the nominee; (ii) the name, address, and taxpayer identification number of the beneficial owner; (iii) the number and class or series of shares registered in the name of the nominee as to which the beneficial owner shall be recognized as the shareholder; and (iv) the purposes for which the beneficial owner shall be recognized as the shareholder. 8 9 The purposes for which the corporation shall recognize the beneficial owner as the shareholder may include the following: (i) receiving notice of, voting at, and otherwise participating in shareholders' meetings; (ii) executing consents with respect to the shares; (iii) exercising dissenters' rights under the North Carolina Business Corporation Act; (iv) receiving distributions and share dividends with respect to the shares; (v) exercising inspection rights; (vi) receiving reports, financial statements, proxy statements, and other communications from the corporation; (vii) making any demand upon the corporation required or permitted by law; and (viii) exercising any other rights or receiving any other benefits of a shareholder with respect to the shares. The certificate shall be effective ten (10) business days after its receipt by the corporation and until it is changed by the nominee, unless the certificate specifies a later effective time or an earlier termination date. If the certificate affects less than all of the shares registered in the name of the nominee, the corporation may require the shares affected by the certificate to be registered separately on the books of the corporation and be represented by a share certificate that bears a conspicuous legend stating that there is a nominee certificate in effect with respect to the shares represented by that share certificate. ARTICLE VIII GENERAL PROVISIONS Section 1. Distributions. The Board of Directors may from time to time authorize, and the corporation may grant, distributions and share dividends to its shareholders pursuant to law and subject to the provisions of its Articles of Incorporation. Section 2. Seal. The corporate seal of the corporation shall consist of two concentric circles between which is the name of the corporation and in the center of which is inscribed SEAL; and such seal, as impressed or affixed on the margin hereof, is hereby adopted as the corporate seal of the corporation. Section 3. Fiscal Year. The fiscal year of the corporation shall be fixed by the Board of Directors. Section 4. Amendments. Except as otherwise provided in the Articles of Incorporation or by law, these Bylaws may be amended or repealed and new Bylaws may be adopted by the Board of Directors. No Bylaw adopted, amended, or repealed by the shareholders shall be readopted, amended, or repealed by the Board of Directors, unless the Articles of Incorporation or a Bylaw adopted by the shareholders authorizes the Board of Directors to adopt, amend, or repeal that particular Bylaw or the Bylaws generally. Section 5. Definitions. Unless the context otherwise requires, terms used in these Bylaws shall have the meanings assigned to them in the North Carolina Business Corporation Act to the extent defined therein. ARTICLE IX INDEMNIFICATION In addition to any indemnification required or permitted by law, and except as otherwise provided in these Bylaws, any person who at any time serves or has served as a director, officer, employee or agent of the corporation and any such person who serves or has served at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a trustee or administrator under an employee benefit plan, shall have a right to be indemnified by the corporation to the full extent allowed by applicable law against liability and litigation expense arising out of such status or activities in such capacity. "Liability and litigation expense" shall include costs and expenses of litigation (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement which are actually and reasonably incurred in connection with or as a consequence of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including appeals. 9 10 Promptly after the final disposition or termination of any matter which involves liability or litigation expense as described above or at such earlier time as it sees fit, the corporation shall determine whether any person described in this Article IX is entitled to indemnification thereunder. Such determination shall be limited to the following issues: (i) whether the persons to be indemnified are persons described in this Article IX, (ii) whether the liability or litigation expense incurred arise out of the status or activities of such persons as described in this Article IX, (iii) whether liability was actually incurred and/or litigation expense was actually and reasonably incurred, and (iv) whether the indemnification requested is permitted by applicable law. Such determination shall be made by a majority vote of directors who were not parties to the action, suit or proceeding (or, in connection with "threatened" actions, suits or proceedings, who were not "threatened parties"). If at least two such disinterested directors are not obtainable, or, even if obtainable, if at least half of the number of disinterested directors so direct, such determination shall be made by independent legal counsel in written opinion. Litigation expense incurred by a person described in this Article IX in connection with a matter described in this Article IX may be paid by the corporation in advance of the final disposition or termination of such matter, if the corporation receives an undertaking, dated, in writing and signed by the person to be indemnified, to repay all such sums unless such person is ultimately determined to be entitled to be indemnified by the corporation as provided in this Article IX. Requests for payments in advance of final disposition or termination shall be submitted in writing unless this requirement is waived by the corporation. Notwithstanding the foregoing, no advance payment shall be made as to any payment or portion of a payment for which the determination is made that the person requesting payment will not be entitled to indemnification. Such determination may be made only by a majority vote of disinterested directors or by independent legal counsel as next provided. If there are not at least two disinterested directors, the notice of all requests for advance payment shall be delivered for review to independent legal counsel for the corporation. Such counsel shall have the authority to disapprove any advance payment or portion of a payment for which it appears that the person requesting payment will not be entitled to indemnification. The corporation shall not be obligated to indemnify persons described in this Article IX for any amounts paid in settlement unless the corporation consents in writing to the settlement. The corporation shall not unreasonably withhold its consent to proposed settlements. The corporation's consent to a proposed settlement shall not constitute an agreement by the corporation that any person is entitled to indemnification hereunder. The corporation may waive the requirement of this section for its written consent as fairness and equity may require. A person described in this Article IX may apply to the corporation in writing for indemnification or advance expenses. Such applications shall be addressed to the Secretary or, in the absence of the Secretary, to any officer of the corporation. The corporation shall respond in writing to such applications as follows: to a request for indemnity under this Article IX, within ninety days after receipt of the application; to a request for advance expenses under this Article IX within fifteen days after receipt of the application. If any action is necessary or appropriate to authorize the corporation to pay the indemnification required by these Bylaws, the Board of Directors shall take such action, including (i) making a good faith evaluation of the indemnification request, (ii) giving notice to, and obtaining approval by, the shareholders of the corporation, and (iii) taking any other action. The right of indemnification or advance expenses provided herein shall be enforceable in any court of competent jurisdiction. A legal action may be commenced if a claim for indemnity or advance expenses is denied in whole or in part, or upon the expiration of the time periods provided above. In any such action, if the claimant establishes the right to indemnification, he or she shall also have the right to be indemnified against the litigation expense (including, without limitation, reasonable attorneys' fees) of such action. As provided by N.C. Gen. Stat. ss.55-8-57, the corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, 10 11 partnership, joint venture, trust or other enterprise, or as a trustee or administrator under an employee benefit plan, against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the corporation has the power to indemnify him against such liability. The right to indemnification provided herein shall not be deemed exclusive of any other rights to which any persons seeking indemnity may be entitled apart from the provisions of this bylaw, except there shall be no right to indemnification as to any liability or litigation expense for which such person is entitled to receive payment under any insurance policy other than a directors' and officers' liability insurance policy maintained by the corporation. Such right inures to the benefit of the heirs and legal representatives of any persons entitled to such right. Any person who at any time after the adoption of this bylaw serves or has served in any status or capacity described in this Article IX, shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein. Any repeal or modification hereof shall not affect any rights or obligations then existing. The right provided herein shall not apply as to persons serving institutions which are hereafter merged into or combined with the corporation, except after the effective date of such merger or combination and only as to status and activities after such date. If this Article or any portion hereof shall be invalidated on any ground by any court or agency of competent jurisdiction, then the corporation shall nevertheless indemnify each person described in this Article IX to the full extent permitted by the portion of this Article that is not invalidated and also to the full extent (not exceeding the benefits described herein) permitted or required by other applicable law. 11 EX-10.A 4 EXECUTIVE EMPLOYMENT AGREEMENT 1 Exhibit 10(a) EXECUTIVE EMPLOYMENT AGREEMENT This Agreement is made and effective as of this 1st day of April, 1999 by and between Mechanics and Farmers Bank, a North Carolina banking corporation with its principal location in Durham, North Carolina (the "Bank"), and Julia W. Taylor (the "Executive"). RECITALS: A. The Bank recognizes the value of the Executive's services and desires to insure the Executive's continued employment with the Bank. B. The Executive wishes to continue in the employment of the Bank. C. The Bank and the Executive mutually desire that their employment relationship be set forth under the terms of a written employment agreement. NOW, THEREFORE, in consideration of the foregoing and of the promises and mutual agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. EMPLOYMENT. The Bank agrees to continue to employ the Executive, and the Executive agrees to continue to serve and be employed by the Bank, on the terms and conditions, set forth herein. 2. TERM OF EMPLOYMENT. The employment of the Executive by the Bank as provided under Section 1 shall commence on the effective date hereof and end on April 1, 2000, unless further extended or sooner terminated as hereinafter provided. On April 1, 2000 and on April 1st of each year thereafter, the term of the Executive's employment hereunder shall be extended automatically one (1) additional year, unless prior to the date of such automatic extension the Bank shall have delivered to the Executive a Notice of Termination (as defined in Section 6(a)(vii)) or the Executive shall have delivered to the Bank a Notice of Termination that the term of the Executive's employment hereunder shall not be extended. 3. POSITION AND DUTIES. The Executive shall serve as President and Chief Executive Officer of the Bank with responsibilities and authority as may from time to time be assigned to her by the Board of Directors of the Bank. The Executive shall devote substantially all of her working time and efforts to the business affairs of the Bank. In addition, the Executive shall serve on the Board of Directors of the Bank during the term of this Agreement for so long as she is elected to such Board by the shareholders of the Bank. 4. PLACE OF PERFORMANCE. In connection with the Executive's employment hereunder, the Executive shall be based at the Bank's principal offices located in Durham, North Carolina, subject to reasonable travel on the business of the Bank. 5. COMPENSATION AND BENEFITS. In consideration of the Executive's performance of her duties hereunder, the Bank shall provide the Executive with the following compensation and benefits during the term of her employment hereunder. (a) Base Salary. The Bank shall pay to the Executive an aggregate base salary at a rate of not less than One Hundred Fifty Thousand and No/100 Dollars ($150,000.00) per annum, payable in accordance with the Bank's normal payroll practices. Such base salary may be increased from time to time by the Board of Directors in accordance with the normal business practices of the Bank and, if so increased, shall not thereafter during the term of the Executive's employment hereunder be decreased unless the decrease is generally applicable to substantially all similarly situated Bank employees (or employees of a successor or controlling entity of the Bank) formerly benefited. 2 Compensation of the Executive by base salary payments shall not be deemed exclusive and shall not prevent the Executive from participating in any other compensation or benefit program of the Bank. Such base salary payments (including increases or decreases thereto) shall not in any way limit or reduce any other obligation of the Bank hereunder, and no other compensation, benefit or payment hereunder shall in any way limit or reduce the obligation of the Bank with respect to such base salary. (b) Performance Bonus. The Bank shall pay to the Executive with respect to each fiscal year during the term of the Executive's employment hereunder, a discretionary performance bonus according to the Bank's then existing bonus plan. (c) Expenses. The Bank, as applicable, shall promptly reimburse the Executive for reasonable out-of-pocket expenses incurred by the Executive in her performance of services hereunder, including reasonable expenses of travel and living expense while away from home on business of the Bank, provided that such expenses are incurred, accounted for and documented in accordance with the regular policies and procedures established by the Bank from time to time. (d) Employee Benefits. The Executive shall be entitled to continue to participate in all Bank employee benefit plans and arrangements in effect on the date hereof in which the Executive participates, (including, but not limited to, any employee benefit pension plan, stock option plan, life insurance plan, vacation plan, disability plan, and the group health-and-accident and medical insurance plans) as such plans may continue or be altered by the Bank Board of Directors from time to time at the Board's discretion. (e) Vacation. The Executive shall be entitled to vacation in each calendar year during the term of this Agreement, in accordance with the Bank's vacation policies, as well as to all paid holidays provided by the Bank to its employees. (f) Services. The Bank shall furnish the Executive with office space, secretarial and administrative assistance, and such other facilities and services as shall be suitable to her position and adequate for the performance of her duties hereunder. 6. COMPENSATION AND BENEFITS IN THE EVENT OF TERMINATION OR ACQUISITION OF THE BANK. In the event of the termination of the Executive's employment by the Bank during the term of this Agreement, compensation and benefits shall be paid as set forth below. (a) Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated: (i) "Cause" means any one or more of the following: (A) Willful malfeasance or gross negligence in the performance of Executive's duties; (B) Conviction of a crime other than minor traffic offenses; or (C) Conduct which is or could be demonstrably and significantly harmful to the Bank, as reasonably determined by the Bank's Board of Directors on the advice of legal counsel. (ii) "Change in Control" shall mean either: 2 3 (A) the acquisition, directly or indirectly, by any person or group of persons other than in the formation of the Bank's holding company of shares in the Bank other than by M&F Bancorp, Inc. in connection with the formation of Bank's holding company or otherwise, or, if formed, the Bank's holding company, which, when added to any other shares the beneficial ownership of which is held by such acquiror(s), shall result in ownership by any person(s) of greater than 50 percent (50%) of such stock or which would require prior notification under any federal or state banking law or regulation; or (B) the occurrence of any merger, consolidation, exchange or reorganization to which the Bank or, if formed, the Bank's holding company is a party and to which the Bank, or the Bank's holding company (or an entity controlled thereby) is not a surviving entity, or the sale of all or substantially all of the assets of the Bank or the Bank's holding company. (C) For purposes of this sub-paragraph (ii), the definition of "person" shall be as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934. (iii) "Compensation" shall mean the total compensation paid to Executive as reported or reportable in her W-2 and 1099 Forms from Bank for that year, excluding any interest or dividends received, plus tax sheltered compensation including, but not limited to, 401(k) contributions, insurance premiums and the like. (iv) "Coincident With" shall mean any time within nine months prior to the occurrence of a Change in Control of the Bank. (v) "Date of Termination" shall mean: (A) if the Executive's employment is terminated by reason of her death, her date of death; (B) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of her duties as provided under sub-paragraph (vi) of this paragraph (a)); or (C) if the Executive's employment is terminated by action of either party for any other reason, the date specified in the Notice of Termination. (vi) "Disability" shall mean the Executive's failure to satisfactorily perform her regular duties on behalf of the Bank on a full-time basis for ninety (90) consecutive days or such lesser period of time as provided under the disability insurance policy provided through Bank, by reason of the Executive's incapacity due to physical or mental illness, except where within thirty (30) days after Notice of Termination is given following such absence, the Executive shall have returned to the satisfactory, full-time performance of such duties. Any determination of Disability hereunder shall be made by the Board of Directors in good faith and on the basis of the certificates of at least three (3) qualified physicians chosen by it for such purpose, one (1) of whom shall be the Executive's regular attending physician. (vii) "Good Reason" means any one or more of the following: (A) Reduction, without Executive's consent, of Executive's salary or elimination of any compensation or benefit plan benefiting Executive, unless the reduction or elimination is generally applicable to substantially all similarly situated Bank employees (or employees of a successor or controlling entity of the Company) formerly benefited; (B) The assignment to Executive without her consent of any authority or duties materially inconsistent (excluding promotions entailing greater authority or duties) with Executive's position as of the date of this Agreement; or 3 4 (C) A relocation or transfer of Executive's principal place of employment that would require Executive to commute on a regular basis more than 25 miles each way from her current business office at the Bank on the date of this Agreement, unless Executive consents to the relocation or transfer. (viii) "Notice of Termination" shall mean a written notice which shall include the specific termination provision under this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment including any termination resulting from the nonrenewal of this Agreement. Any purported termination of the Executive's employment hereunder by action of either party shall be communicated by delivery of a Notice of Termination to the other party. Any purported termination of the Executive's employment hereunder which is not effected in accordance with the foregoing shall be ineffective for purposes of the Agreement. (ix) "Retirement" shall mean termination of the Executive's employment pursuant to the Bank's regular retirement policy applicable to the position held by the Executive at the time of such termination. (x) "Termination" shall mean any action, event or series of events that causes the Executive to no longer be employed by the Bank, for any reason, including the failure to renew or extend this Agreement. (b) Termination by Bank Not for Cause Prior to a Change of Control or Termination by Executive for Good Reason Prior to a Change in Control. If prior to, but not Coincident With, a Change in Control there is a Termination of Executive's employment, (A) by action of the Bank without Cause or (B) by action of the Executive for Good Reason, the Executive shall be entitled to receive payments under this Agreement as though the Agreement was in effect through the end of the period set forth in Section 2 hereof without further automatic extensions, but such payment shall, under no circumstances, be less than the Executive's base salary then in effect as provided under paragraph (a) of Section 5 as calculated for a period of eight (8) months plus directors' fees. Executive acknowledges that such payments serve as total satisfaction of Executive's claim under this Agreement. (c) Termination at Any Time by Reason of the Executive's Death, Disability or Retirement. In the event of the Executive's death, Disability or Retirement at any time, the following compensation and benefits shall be paid and provided the Executive (or her beneficiary): (i) The Executive's base salary under paragraph (a) of Section 5 through the last day of the month in the Date of Termination occurs, at the annual rate in effect at the time Notice of Termination is given (or death occurs), to the extent unpaid prior to such Date of Termination; (ii) Any benefits to which the Executive (or her beneficiary) may be entitled as a result of such termination (or death), under the terms and conditions of the pertinent plans or arrangements in effect at the time of the Notice of Termination under paragraph (d) of Section 5; and (iii) Any amounts due the Executive with respect to paragraph (c), paragraph (e) or paragraph (h) of Section 5 as of the Date of Termination. 4 5 (d) Termination By the Bank at Any Time for Cause or by the Executive at Any Time Without Good Reason. If there is a Termination of Executive's employment before, Coincident With, or after a Change in Control (A) by action of the Bank for Cause or (B) by action of the Executive without Good Reason, the following compensation and benefits shall be paid and provided the Executive: (i) The Executive's base salary provided under paragraph (a) of Section 5 through the last day of the month in which the Date of Termination occurs, at the annual rate in effect at the time Notice of Termination is given, to the extent unpaid prior to such Date of Termination; (ii) Any benefits to which the Executive may be entitled as a result of such termination, under the terms and conditions of the pertinent plans or arrangements in effect at the time of the Notice of Termination under paragraph (d) of Section 5; and (iii) Any amounts due the Executive with respect to paragraph (c) or paragraph (e) of Section 5 as of the Date of Termination. (e) Termination by Bank Not For Cause Coincident With or Following a Change In Control or by Executive for Good Reason Coincident With or Following a Change in Control. If Coincident With or following a Change in Control there is a Termination of Executive's employment (A) by action of the Executive for Good Reason or (B) by action of the Bank not for Cause, the Bank shall pay and provide the Executive the compensation and benefits stipulated under sub-paragraph (d) immediately above plus the pro rata portion of any bonus under paragraph (b) of Section 5 which has been earned prior to the Date of Termination, to the extent unpaid prior to such date; provided, however, in addition thereto, the following compensation and benefits shall be paid and provided the Executive: (i) If such Termination occurs Coincident With a Change in Control or within 12 months following a Change in Control, the Bank shall pay to the Executive in a lump sum, in cash, within 30 days following the Date of Termination or on the effective date of the Change in Control, whichever occurs later, an amount equal to 2.99 times the Compensation paid in the preceding calendar year, or scheduled to be paid to the Executive during the year of the Notice of Termination, whichever is greater, plus an additional amount sufficient to pay United States income tax on the lump sum amount paid; (ii) If such Termination occurs after 12 months from the Change in Control but before the end of 24 months following the Change in Control, the Bank shall pay to the Executive in a lump sum, in cash, within 30 days following the Date of Termination an amount equal to 2.0 times the Compensation paid in the preceding calendar year, or scheduled to be paid to the Executive during the year of the Notice of Termination, whichever is greater, plus an additional amount sufficient to pay United States income tax on the lump sum amount so paid; (iii) If such Termination occurs after 24 months following the Change in Control but before the end of the 36th month following the Change in Control, the Bank shall pay to the Executive in a lump sum, in cash, within 30 days following the Date of Termination an amount equal to 1.0 times the Compensation paid in the preceding calendar year, or scheduled to be paid to the Executive during the year of the Notice of Termination, whichever is greater, plus an additional amount sufficient to pay United States income tax on the lump sum amount so paid; or (iv) If such Termination occurs after the 36th month following the Change in Control, the Bank shall pay to the Executive in a lump sum, in cash, within 30 days following the Date of Termination the amount provided in paragraph (b) of Section 7 hereof. 5 6 If any lump sum payment under this paragraph (e) of Section 7, either alone or together with other payments which the Executive has the right to receive from the Company, would constitute a "parachute payment" [as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")], such lump sum severance payment shall be reduced to the largest amount as will result in no portion of the lump sum severance payment under this Section 7 being subject to the excise tax imposed by Section 4999 of the Code. The determination of any reduction in the lump sum severance payment under this Section, pursuant to the foregoing provision, shall be made by the Bank in good faith. (f) Termination of Employment by Executive/Non-Competition Agreement. In the event the Executive is no longer employed by the Bank such that Executive receives payment pursuant to the provisions of Section 6(e) of this Agreement, for a period of 12 months for each payment of 1.0 times Executive's previous year's compensation, the Executive agrees not to compete, directly or indirectly, with the Bank or any successor as an employee, officer, director, independent contractor, consultant, or shareholder of any financial services company or any other entity providing financial services, including but not limited to lending, securities, brokerage, trust or insurance products or services within a one hundred (100) mile radius of the main office of the Bank, or such other office of the Bank at which such Executive was physically located during the majority of Executive's work tenure for the Company. (g) Continuation of Benefits. Following the Termination of Executive's employment hereunder, the Executive shall have the right to continue in the Bank's group health insurance plan and other Bank benefit program as may be required by COBRA or any other federal or state law or regulation. (h) Compensation During Disability. In the event of the Executive's failure to satisfactorily perform her duties hereunder on a full-time basis by reason of her incapacity due to physical or mental illness (as determined by the Executive's regular attending physician) for any period not otherwise constituting Disability as defined under sub-paragraph (vi) of paragraph (a) of this Section 7, the Executive's employment hereunder shall not be deemed terminated and she shall continue to receive the compensation and benefits provided under Section 5 in accordance with the terms thereof. 7. RETURN OF COMPANY PROPERTY. If and when Executive ceases, for any reason, to be employed by Bank, Executive must return to Bank all keys, pass cards, identification cards, Bank-owned credit or debit cards, and any other property of Bank. At the same time, Executive also must return to Bank all originals and copies (whether in hard copy, electronic or other form) of any documents, drawings, notes, memoranda, designs, devices, diskettes, tapes, manuals, and specifications which constitute proprietary information or material of Bank. The obligations in this Section 8 include the return of documents and other materials which may be in Executive's desk at work, in Executive's car or place of residence or any in other location under Executive's control. 8. NON-DISCLOSURE. During the term of her employment hereunder, or at any time thereafter, the Executive shall not disclose or use (except in the course of his employment hereunder) any confidential or proprietary information or data of the Bank or any of their subsidiaries or affiliates regardless of whether such information or data is embodied in writing or other physical form. 9. WITHHOLDING. Any provision of this Agreement to the contrary notwithstanding, all payments made by the Bank hereunder to the Executive or her estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Bank may accept other provisions to the end that they have sufficient funds to pay all taxes required by law to be withheld in respect of any or all such payments. 10. POOLING OF INTERESTS TREATMENT. In the event anything in this Agreement will prevent, or have the effect of preventing, the use of the pooling of interests accounting method by an acquiror in a Change in Control of 6 7 Bank and the use of the pooling of interests accounting method is a condition precedent to the consummation of the Change in Control by the acquiror, then this Agreement shall be deemed valid only to the extent that the pooling of interests accounting method can be used, provided, however, that any determination that this Agreement would prevent, or have the effect of preventing, the use of the pooling of interests method for accounting purposes shall be supported by an opinion letter from the acquiror's independent accounting firm or the Securities and Exchange Commission. 11. NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail, or personally delivered to the party entitled thereto, at the address stated below or to such changed address as the addressee may have given by a similar notice: To the Bank: Mechanics and Farmers Bank 116 West Parrish Street Durham, NC 27701-3321 To the Executive: 12. SUCCESSORS; BINDING AGREEMENT. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank, by agreement in the form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place. Failure of the Bank to obtain such agreement prior to or at the time of the effectiveness of any such succession shall be a breach of this Agreement. For purposes of this Agreement, "Bank" shall mean the Bank as defined above, and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to her hereunder if she had continued to live, all such amounts, except to the extent otherwise provided under this Agreement, shall be paid in accordance with the terms of this Agreement to her devisee, legatee or other designee, or if there be no such designee, to the Executive's estate. 13. MODIFICATION, WAIVER OR DISCHARGE. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and an authorized officer of the Bank. No waiver by either party hereto at anytime of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof had been made by either party which are not expressly set forth in this Agreement; provided, however, that this Agreement shall not supersede or in any way limit the right, duties or obligations that the Executive or the Bank may have under any other written agreement between such parties, under any employee pension benefit plan or employee welfare benefit plan as defined under the Employee Retirement Income Security Act of 1974, as amended, and maintained by the Bank, or under any established personnel practice or policy applicable to the Executive. 14. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina to the extent federal law does not apply. 7 8 15. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which latter provisions shall remain in full force and effect. 16. MISCELLANEOUS. (a) No Adequate Remedy At Law. The Bank and the Executive recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Bank and the Executive hereby agree and consent that the other shall be entitled to decree of specific performance, mandamus, or other appropriate remedy to enforce performance of such agreements. (b) Non-Assignability. No right, benefit, or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or setoff in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. Any of the foregoing to the contrary notwithstanding, this provision shall not preclude the Executive from designating one or more beneficiaries to receive any amount that may be payable after her death, and shall not preclude the legal representative of the Executive's estate from assigning any right hereunder to the person or persons entitled thereto under her will or, in the case of intestacy applicable to her estate. (c) Primary Obligor on Contract. Bank and, when formed, M&F Bancorp, Inc., the Bank's holding company, although jointly and severally liable for all payments under this Agreement, between themselves, acknowledge that Bank is the primary obligor and is primarily responsible for fulfilling the financial obligations of this Agreement. In the event the Bank is unable, for regulatory or financial reasons, to fulfill the obligations under this Agreement, the terms of the Agreement shall become the primary obligation of the Bank's holding company. Nothing in this paragraph shall be deemed to bar Executive from recovering under this Agreement from either Bank or the Bank's holding company if the Agreement is breached by either Bank or Bank's holding company. (d) Headings and Titles. The headings and titles used in this Agreement are for reference purposes only and are not a part of this Agreement. 17. MEDIATION/ARBITRATION CLAUSE. In the event of any dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof ("Dispute"), the parties hereto shall use their best efforts to resolve the Dispute in manner satisfactory to both parties through consultation and negotiation with each other in good faith. If the Dispute cannot be resolved through direct negotiations within a period of sixty (60) days, the parties agree to attempt to settle the Dispute in an amicable manner by mediation before resorting to arbitration. Thereafter, any unresolved dispute shall be resolved by arbitration. Any mediation or arbitration hereunder shall be conducted in accordance with the Commercial Mediation Rules or the Commercial Arbitration Rules, as appropriate, of the American Arbitration Association ("AAA"), as in effect at the time of the mediation or arbitration. In the event of arbitration, the final award of the commercial Arbitration Tribunal shall be binding on the parties. Unless the parties agree otherwise, such mediation or arbitration shall also be conducted under the auspices of, and administered by, the AAA. 18. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but of which together will constitute one and the same instrument. 8 9 IN WITNESS WHEREOF, the Executive and the Bank (by action of their duly authorized officers) have executed this Agreement on the date first above written. MECHANICS AND FARMERS BANK By: /s/ Benjamin S. Ruffin --------------------------------------- Benjamin S. Ruffin, Chairman Compensation and Management Development Committee, at the direction of the Board of Directors Attest: ------------------------ EXECUTIVE: /s/ Julia W. Taylor ------------------------------------------- Julia W. Taylor Attest: ------------------------ 9 EX-10.B 5 RETENTION BONUS AGREEMENT 1 Exhibit 10(b) RETENTION BONUS AGREEMENT This Agreement is made as of the 1st day of April, 1999 by and between Mechanics and Farmers Bank, a North Carolina banking corporation with its principal office in Durham, North Carolina (the "Bank"), and Lee Johnson, a resident of Durham, North Carolina (the "Executive"). RECITALS A. The Bank and Executive acknowledge the ownership consolidation that is occurring in the financial institutions industry, particularly among community banks, and the Bank and Executive acknowledge that at some point it may be appropriate for the Bank to participate in this industry consolidation. B. The Bank recognizes the value of Executive's services to the Bank and desires to insure that Executive has adequate incentive to continue in the employment of the Bank. C. Given the current consolidation occurring within the financial institutions industry, Executive desires to continue in the employment of the Company with appropriate financial incentives. NOW, THEREFORE, in consideration of the foregoing Recitals and of the promises and mutual agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Bank and Executive agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meanings indicated: (a) "Cause" shall mean (A) the rendering of a final judgment against Executive by a court of competent jurisdiction, which is not subject to further appeal, for the willful and continued failure by Executive to substantially perform his or her duties to the Bank, the Bank's policies or federal and/or state law (other than any such failure resulting from his or her incapacity due to physical or mental illness); which breach of duty has materially and adversely affected the safety and soundness of the Bank; or (B) Executive's conviction of a felony which is not subject to further appeal. For purposes of this definition, no act, or failure to act on Executive's part, shall be considered "willful" unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission is in the best interest of the Bank. (b) "Change in Control" shall mean either: (A) the acquisition, directly or indirectly, by any person or group of persons of shares in the Bank other than by M&F Bancorp, Inc. in connection with the formation of the Bank's holding company or otherwise, which, when added to any other shares the beneficial ownership of which is held by such acquiror(s), shall result in ownership by any person(s) of greater than 50% of such stock or which would require prior notification under any federal or state banking law or regulation; or (B) the occurrence of any merger, consolidation, exchange or reorganization to which the Bank or, if formed, the Bank's holding company is a party and to which the Bank, or the Bank's holding company (or an entity controlled thereby) is not a surviving entity, or the sale of all or substantially all of the assets of the Bank or the Bank's holding company. For purposes of this definition, "person" shall be as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934. 2 (c) "Coincident With" shall mean any time within nine months prior to the occurrence of a Change in Control of the Bank. 2. CHANGE IN CONTROL AND RETENTION BONUS. If a Change in Control of the Bank is consummated and on the date of the consummation of the Change in Control, Executive is employed by Bank, Bank shall pay to Executive in a lump sum, in cash, within five days following the consummation date of the Change in Control, a Retention Bonus of twelve (12) months base salary. If the lump sum payment under this Section 2, either alone or together with other payments which Executive has the right to receive from the Company, would constitute a "parachute payment" [as defined in Section 280G of the Internal Revenue Code of 1986, as amended, (the "Code")], such lump sum payment shall be reduced to the largest amount as will result in no portion of the lump sum payment under this Section 2 being subject to the excise tax imposed by Section 4999 of the Code. The determination of any reduction in the lump sum payment under this Section 2, pursuant to the foregoing provision, shall be made by the Bank in good faith. 3. TERMINATION BY BANK NOT FOR CAUSE COINCIDENT WITH A CHANGE IN CONTROL. In the event Executive's employment is terminated by action of the Bank not for Cause Coincident With a Change in Control, the Bank shall pay Executive within five days following the consummation date of the Change in Control the same Retention Bonus in amount and manner described in Section 2 above. In the event of Executive's termination pursuant to this Section 3, Executive shall not be subject to any non-compete or similar restrictions that exist with regard to Executive, contractually or otherwise. 4. TERMINATION OF EMPLOYMENT BY EXECUTIVE/NON-COMPETITION AGREEMENT. In the event Executive voluntarily terminates his or her own employment at any time subsequent to receipt of the Retention Bonus provided for in paragraph 2 above, Executive agrees not to compete, directly or indirectly, with the Bank or any successor as an employee, officer, director, independent contractor, consultant, or shareholder of any financial services company or any other entity providing financial services, including but not limited to lending, securities, brokerage, trust or insurance products or services within a sixty (60) mile radius of the main office of the Bank, or such other office of the Bank at which such Employee was physically located during the majority of Employee's work tenure for the Company, for a period of 12 months following the date of such termination. 5. WITHHOLDING. All payments made by the Bank hereunder to Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation. 6. EMPLOYMENT AT WILL. Nothing in this Agreement should be construed to constitute an employment agreement for any length of time of Executive by the Bank. At all times, Executive shall remain an "At Will" employee of the Bank subject to the rights arising under this Agreement. 7. NON-DISCLOSURE. During the term of his or her employment hereunder, or at any time thereafter, Executive shall not disclose or use (except in the course of his or her employment hereunder) any confidential or proprietary information or data of the Bank or any of its subsidiaries or affiliates, including any such information with respect to a sale or merger of the Bank, regardless of whether such information or data is embodied in writing or other physical form. 8. POOLING OF INTERESTS TREATMENT. In the event anything in this Agreement will prevent, or have the effect of preventing the use of the pooling of interests accounting method by an acquiror in a Change in Control of Bank and the use of the pooling of interests accounting method is a condition precedent to the consummation of such Change in Control by the acquiror, then this Agreement shall be deemed valid only to the extent that 2 3 the pooling of interests accounting method can be used; provided however, that any determination that this Agreement would prevent, or have the effect of preventing, the use of the pooling of interests accounting method shall be supported by an opinion letter from the acquiror's independent accounting firm or from the Securities and Exchange Commission. 9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Bank and Executive and their respective successors, assigns, personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to him or her hereunder if she had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to his or her devisee, legatee or other designee, or if there be no such designee, to Executive's estate. 10. MODIFICATION, WAIVER OR DISCHARGE. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and authorized officers of the Bank. No waiver by any party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement; provided, however, that this Agreement shall not supersede or in any way limit the rights, duties, or obligations that Executive or the Bank may have under any other written agreement between such parties, under any employee pension benefit plan or Executive welfare benefit plan as defined in the Executive Retirement Income Security Act of 1974 as amended, and maintained by the Bank, or under any established personnel practice or policy applicable to Executive. 11. TERMINATION OF AGREEMENT. Notwithstanding any other provisions of this Agreement, the rights, duties and obligations of all parties to this Agreement shall cease, and this Agreement shall terminate, five (5) years from the date first listed above. 12. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina to the extent federal law does not apply. 13. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which latter provisions shall remain in full force and effect. 14. MEDIATION/ARBITRATION. In the event of any dispute, claim, question, or disagreement arising from or relating to this agreement or the breach thereof ("Dispute"), the parties hereto shall use their best efforts to resolve the Dispute in a manner satisfactory to both parties through consultation and negotiation with each other in good faith. If the Dispute cannot be resolved through direct negotiations within a period of sixty (60) days, the parties agree to attempt to settle the dispute in an amicable manner by arbitration. Any mediation or arbitration hereunder shall be conducted in accordance with the Commercial Mediation Rules or the Commercial Arbitration Rules, as appropriate, of the American Arbitration Association ("AAA"), as in effect at the time of the mediation or arbitration. In the event of arbitration, the final award of the Commercial Arbitration Tribunal shall be binding on the parties. Unless the parties agree otherwise, such mediation or arbitration shall also be conducted under the auspices of, and administered by, the AAA. 15. MISCELLANEOUS (a) No adequate remedy at law. The Bank and Executive recognize that each party shall have no adequate remedy at law for breach by the other of any of the agreements contained herein, and in the 3 4 event of any such breach, the Bank and Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus, injunction or other appropriate remedy to enforce performance of such agreements. (b) Non-assignability. No right, benefit or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. Any of the foregoing to the contrary notwithstanding, this provision shall not preclude Executive from designating one or more beneficiaries to receive any amount that may be payable after his or her death, and shall not preclude the legal representative of Executive's estate from assigning any right hereunder to the person or persons entitled thereto under his or her will or, in the case of intestacy, as applicable, to his or her estate. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but which together will constitute one and the same instrument. 17. NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by Registered or Certified Mail, or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by similar notice: to the Bank: Mechanics & Farmers Bank 116 West Parrish Street Durham, NC 27701-3321 Attn: Ms. Julia W. Taylor, Chairman, President and CEO to Executive: ------------------------ ------------------------ ------------------------ Executed and effective as of the date first above written. MECHANICS AND FARMERS BANK By: /s/ Julia W. Taylor ----------------------------------------------- Julia W. Taylor, Chairman, President & CEO By: /s/ Benjamin S. Ruffin ----------------------------------------------- Benjamin S. Ruffin, Compensation and Management Development Committee EXECUTIVE /s/ Lee Johnson -------------------------------------------------- Lee Johnson 4 EX-10.C 6 RETENTION BONUS AGREEMENT 1 Exhibit 10(c) RETENTION BONUS AGREEMENT This Agreement is made as of the 1st day of April, 1999 by and between Mechanics and Farmers Bank, a North Carolina banking corporation with its principal office in Durham, North Carolina (the "Bank"), and W. Donald Harrington, a resident of Durham, North Carolina (the "Executive"). RECITALS A. The Bank and Executive acknowledge the ownership consolidation that is occurring in the financial institutions industry, particularly among community banks, and the Bank and Executive acknowledge that at some point it may be appropriate for the Bank to participate in this industry consolidation. B. The Bank recognizes the value of Executive's services to the Bank and desires to insure that Executive has adequate incentive to continue in the employment of the Bank. C. Given the current consolidation occurring within the financial institutions industry, Executive desires to continue in the employment of the Company with appropriate financial incentives. NOW, THEREFORE, in consideration of the foregoing Recitals and of the promises and mutual agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Bank and Executive agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meanings indicated: (a) "Cause" shall mean (A) the rendering of a final judgment against Executive by a court of competent jurisdiction, which is not subject to further appeal, for the willful and continued failure by Executive to substantially perform his or her duties to the Bank, the Bank's policies or federal and/or state law (other than any such failure resulting from his or her incapacity due to physical or mental illness); which breach of duty has materially and adversely affected the safety and soundness of the Bank; or (B) Executive's conviction of a felony which is not subject to further appeal. For purposes of this definition, no act, or failure to act on Executive's part, shall be considered "willful" unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission is in the best interest of the Bank. (b) "Change in Control" shall mean either: (A) the acquisition, directly or indirectly, by any person or group of persons of shares in the Bank other than by M&F Bancorp, Inc. in connection with the formation of the Bank's holding company or otherwise, which, when added to any other shares the beneficial ownership of which is held by such acquiror(s), shall result in ownership by any person(s) of greater than 50% of such stock or which would require prior notification under any federal or state banking law or regulation; or (B) the occurrence of any merger, consolidation, exchange or reorganization to which the Bank or, if formed, the Bank's holding company is a party and to which the Bank, or the Bank's holding company (or an entity controlled thereby) is not a surviving entity, or the sale of all or substantially all of the assets of the Bank or the Bank's holding company. For purposes of this definition, "person" shall be as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934. 2 (c) "Coincident With" shall mean any time within nine months prior to the occurrence of a Change in Control of the Bank. 2. CHANGE IN CONTROL AND RETENTION BONUS. If a Change in Control of the Bank is consummated and on the date of the consummation of the Change in Control, Executive is employed by Bank, Bank shall pay to Executive in a lump sum, in cash, within five days following the consummation date of the Change in Control, a Retention Bonus of twelve (12) months base salary. If the lump sum payment under this Section 2, either alone or together with other payments which Executive has the right to receive from the Company, would constitute a "parachute payment" [as defined in Section 280G of the Internal Revenue Code of 1986, as amended, (the "Code")], such lump sum payment shall be reduced to the largest amount as will result in no portion of the lump sum payment under this Section 2 being subject to the excise tax imposed by Section 4999 of the Code. The determination of any reduction in the lump sum payment under this Section 2, pursuant to the foregoing provision, shall be made by the Bank in good faith. 3. TERMINATION BY BANK NOT FOR CAUSE COINCIDENT WITH A CHANGE IN CONTROL. In the event Executive's employment is terminated by action of the Bank not for Cause Coincident With a Change in Control, the Bank shall pay Executive within five days following the consummation date of the Change in Control the same Retention Bonus in amount and manner described in Section 2 above. In the event of Executive's termination pursuant to this Section 3, Executive shall not be subject to any non-compete or similar restrictions that exist with regard to Executive, contractually or otherwise. 4. TERMINATION OF EMPLOYMENT BY EXECUTIVE/NON-COMPETITION AGREEMENT. In the event Executive voluntarily terminates his or her own employment at any time subsequent to receipt of the Retention Bonus provided for in paragraph 2 above, Executive agrees not to compete, directly or indirectly, with the Bank or any successor as an employee, officer, director, independent contractor, consultant, or shareholder of any financial services company or any other entity providing financial services, including but not limited to lending, securities, brokerage, trust or insurance products or services within a sixty (60) mile radius of the main office of the Bank, or such other office of the Bank at which such Employee was physically located during the majority of Employee's work tenure for the Company, for a period of 12 months following the date of such termination. 5. WITHHOLDING. All payments made by the Bank hereunder to Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation. 6. EMPLOYMENT AT WILL. Nothing in this Agreement should be construed to constitute an employment agreement for any length of time of Executive by the Bank. At all times, Executive shall remain an "At Will" employee of the Bank subject to the rights arising under this Agreement. 7. NON-DISCLOSURE. During the term of his or her employment hereunder, or at any time thereafter, Executive shall not disclose or use (except in the course of his or her employment hereunder) any confidential or proprietary information or data of the Bank or any of its subsidiaries or affiliates, including any such information with respect to a sale or merger of the Bank, regardless of whether such information or data is embodied in writing or other physical form. 8. POOLING OF INTERESTS TREATMENT. In the event anything in this Agreement will prevent, or have the effect of preventing the use of the pooling of interests accounting method by an acquiror in a Change in Control of Bank and the use of the pooling of interests accounting method is a condition precedent to the consummation of such Change in Control by the acquiror, then this Agreement shall be deemed valid only to the extent that 2 3 the pooling of interests accounting method can be used; provided however, that any determination that this Agreement would prevent, or have the effect of preventing, the use of the pooling of interests accounting method shall be supported by an opinion letter from the acquiror's independent accounting firm or from the Securities and Exchange Commission. 9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Bank and Executive and their respective successors, assigns, personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to him or her hereunder if she had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to his or her devisee, legatee or other designee, or if there be no such designee, to Executive's estate. 10. MODIFICATION, WAIVER OR DISCHARGE. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and authorized officers of the Bank. No waiver by any party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement; provided, however, that this Agreement shall not supersede or in any way limit the rights, duties, or obligations that Executive or the Bank may have under any other written agreement between such parties, under any employee pension benefit plan or Executive welfare benefit plan as defined in the Executive Retirement Income Security Act of 1974 as amended, and maintained by the Bank, or under any established personnel practice or policy applicable to Executive. 11. TERMINATION OF AGREEMENT. Notwithstanding any other provisions of this Agreement, the rights, duties and obligations of all parties to this Agreement shall cease, and this Agreement shall terminate, five (5) years from the date first listed above. 12. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina to the extent federal law does not apply. 13. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which latter provisions shall remain in full force and effect. 14. MEDIATION/ARBITRATION. In the event of any dispute, claim, question, or disagreement arising from or relating to this agreement or the breach thereof ("Dispute"), the parties hereto shall use their best efforts to resolve the Dispute in a manner satisfactory to both parties through consultation and negotiation with each other in good faith. If the Dispute cannot be resolved through direct negotiations within a period of sixty (60) days, the parties agree to attempt to settle the dispute in an amicable manner by arbitration. Any mediation or arbitration hereunder shall be conducted in accordance with the Commercial Mediation Rules or the Commercial Arbitration Rules, as appropriate, of the American Arbitration Association ("AAA"), as in effect at the time of the mediation or arbitration. In the event of arbitration, the final award of the Commercial Arbitration Tribunal shall be binding on the parties. Unless the parties agree otherwise, such mediation or arbitration shall also be conducted under the auspices of, and administered by, the AAA. 15. MISCELLANEOUS (a) No adequate remedy at law. The Bank and Executive recognize that each party shall have no adequate remedy at law for breach by the other of any of the agreements contained herein, and in the 3 4 event of any such breach, the Bank and Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus, injunction or other appropriate remedy to enforce performance of such agreements. (b) Non-assignability. No right, benefit or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. Any of the foregoing to the contrary notwithstanding, this provision shall not preclude Executive from designating one or more beneficiaries to receive any amount that may be payable after his or her death, and shall not preclude the legal representative of Executive's estate from assigning any right hereunder to the person or persons entitled thereto under his or her will or, in the case of intestacy, as applicable, to his or her estate. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but which together will constitute one and the same instrument. 17. NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by Registered or Certified Mail, or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by similar notice: to the Bank: Mechanics & Farmers Bank 116 West Parrish Street Durham, NC 27701-3321 Attn: Ms. Julia W. Taylor, Chairman, President and CEO to Executive: ------------------------ ------------------------ ------------------------ Executed and effective as of the date first above written. MECHANICS AND FARMERS BANK By: /s/ Julia W. Taylor ----------------------------------------------- Julia W. Taylor, Chairman, President & CEO By: /s/ Benjamin S. Ruffin ----------------------------------------------- Benjamin S. Ruffin, Compensation and Management Development Committee EXECUTIVE /s/ W. Donald Harrington --------------------------------------------------- W. Donald Harrington 4 EX-10.D 7 RETENTION BONUS AGREEMENT 1 Exhibit 10(d) RETENTION BONUS AGREEMENT This Agreement is made as of the 1st day of April, 1999 by and between Mechanics and Farmers Bank, a North Carolina banking corporation with its principal office in Durham, North Carolina (the "Bank"), and Fohliette W. Becote, a resident of Apex, North Carolina (the "Executive"). RECITALS A. The Bank and Executive acknowledge the ownership consolidation that is occurring in the financial institutions industry, particularly among community banks, and the Bank and Executive acknowledge that at some point it may be appropriate for the Bank to participate in this industry consolidation. B. The Bank recognizes the value of Executive's services to the Bank and desires to insure that Executive has adequate incentive to continue in the employment of the Bank. C. Given the current consolidation occurring within the financial institutions industry, Executive desires to continue in the employment of the Company with appropriate financial incentives. NOW, THEREFORE, in consideration of the foregoing Recitals and of the promises and mutual agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Bank and Executive agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meanings indicated: (a) "Cause" shall mean (A) the rendering of a final judgment against Executive by a court of competent jurisdiction, which is not subject to further appeal, for the willful and continued failure by Executive to substantially perform his or her duties to the Bank, the Bank's policies or federal and/or state law (other than any such failure resulting from his or her incapacity due to physical or mental illness); which breach of duty has materially and adversely affected the safety and soundness of the Bank; or (B) Executive's conviction of a felony which is not subject to further appeal. For purposes of this definition, no act, or failure to act on Executive's part, shall be considered "willful" unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission is in the best interest of the Bank. (b) "Change in Control" shall mean either: (A) the acquisition, directly or indirectly, by any person or group of persons of shares in the Bank other than by M&F Bancorp, Inc. in connection with the formation of the Bank's holding company or otherwise, which, when added to any other shares the beneficial ownership of which is held by such acquiror(s), shall result in ownership by any person(s) of greater than 50% of such stock or which would require prior notification under any federal or state banking law or regulation; or (B) the occurrence of any merger, consolidation, exchange or reorganization to which the Bank or, if formed, the Bank's holding company is a party and to which the Bank, or the Bank's holding company (or an entity controlled thereby) is not a surviving entity, or the sale of all or substantially all of the assets of the Bank or the Bank's holding company. For purposes of this definition, "person" shall be as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934. 2 (c) "Coincident With" shall mean any time within nine months prior to the occurrence of a Change in Control of the Bank. 2. CHANGE IN CONTROL AND RETENTION BONUS. If a Change in Control of the Bank is consummated and on the date of the consummation of the Change in Control, Executive is employed by Bank, Bank shall pay to Executive in a lump sum, in cash, within five days following the consummation date of the Change in Control, a Retention Bonus of twelve (12) months base salary. If the lump sum payment under this Section 2, either alone or together with other payments which Executive has the right to receive from the Company, would constitute a "parachute payment" [as defined in Section 280G of the Internal Revenue Code of 1986, as amended, (the "Code")], such lump sum payment shall be reduced to the largest amount as will result in no portion of the lump sum payment under this Section 2 being subject to the excise tax imposed by Section 4999 of the Code. The determination of any reduction in the lump sum payment under this Section 2, pursuant to the foregoing provision, shall be made by the Bank in good faith. 3. TERMINATION BY BANK NOT FOR CAUSE COINCIDENT WITH A CHANGE IN CONTROL. In the event Executive's employment is terminated by action of the Bank not for Cause Coincident With a Change in Control, the Bank shall pay Executive within five days following the consummation date of the Change in Control the same Retention Bonus in amount and manner described in Section 2 above. In the event of Executive's termination pursuant to this Section 3, Executive shall not be subject to any non-compete or similar restrictions that exist with regard to Executive, contractually or otherwise. 4. TERMINATION OF EMPLOYMENT BY EXECUTIVE/NON-COMPETITION AGREEMENT. In the event Executive voluntarily terminates his or her own employment at any time subsequent to receipt of the Retention Bonus provided for in paragraph 2 above, Executive agrees not to compete, directly or indirectly, with the Bank or any successor as an employee, officer, director, independent contractor, consultant, or shareholder of any financial services company or any other entity providing financial services, including but not limited to lending, securities, brokerage, trust or insurance products or services within a sixty (60) mile radius of the main office of the Bank, or such other office of the Bank at which such Employee was physically located during the majority of Employee's work tenure for the Company, for a period of 12 months following the date of such termination. 5. WITHHOLDING. All payments made by the Bank hereunder to Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation. 6. EMPLOYMENT AT WILL. Nothing in this Agreement should be construed to constitute an employment agreement for any length of time of Executive by the Bank. At all times, Executive shall remain an "At Will" employee of the Bank subject to the rights arising under this Agreement. 7. NON-DISCLOSURE. During the term of his or her employment hereunder, or at any time thereafter, Executive shall not disclose or use (except in the course of his or her employment hereunder) any confidential or proprietary information or data of the Bank or any of its subsidiaries or affiliates, including any such information with respect to a sale or merger of the Bank, regardless of whether such information or data is embodied in writing or other physical form. 8. POOLING OF INTERESTS TREATMENT. In the event anything in this Agreement will prevent, or have the effect of preventing the use of the pooling of interests accounting method by an acquiror in a Change in Control of Bank and the use of the pooling of interests accounting method is a condition precedent to the consummation of such Change in Control by the acquiror, then this Agreement shall be deemed valid only to the extent that 2 3 the pooling of interests accounting method can be used; provided however, that any determination that this Agreement would prevent, or have the effect of preventing, the use of the pooling of interests accounting method shall be supported by an opinion letter from the acquiror's independent accounting firm or from the Securities and Exchange Commission. 9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Bank and Executive and their respective successors, assigns, personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to him or her hereunder if she had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to his or her devisee, legatee or other designee, or if there be no such designee, to Executive's estate. 10. MODIFICATION, WAIVER OR DISCHARGE. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and authorized officers of the Bank. No waiver by any party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement; provided, however, that this Agreement shall not supersede or in any way limit the rights, duties, or obligations that Executive or the Bank may have under any other written agreement between such parties, under any employee pension benefit plan or Executive welfare benefit plan as defined in the Executive Retirement Income Security Act of 1974 as amended, and maintained by the Bank, or under any established personnel practice or policy applicable to Executive. 11. TERMINATION OF AGREEMENT. Notwithstanding any other provisions of this Agreement, the rights, duties and obligations of all parties to this Agreement shall cease, and this Agreement shall terminate, five (5) years from the date first listed above. 12. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina to the extent federal law does not apply. 13. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which latter provisions shall remain in full force and effect. 14. MEDIATION/ARBITRATION. In the event of any dispute, claim, question, or disagreement arising from or relating to this agreement or the breach thereof ("Dispute"), the parties hereto shall use their best efforts to resolve the Dispute in a manner satisfactory to both parties through consultation and negotiation with each other in good faith. If the Dispute cannot be resolved through direct negotiations within a period of sixty (60) days, the parties agree to attempt to settle the dispute in an amicable manner by arbitration. Any mediation or arbitration hereunder shall be conducted in accordance with the Commercial Mediation Rules or the Commercial Arbitration Rules, as appropriate, of the American Arbitration Association ("AAA"), as in effect at the time of the mediation or arbitration. In the event of arbitration, the final award of the Commercial Arbitration Tribunal shall be binding on the parties. Unless the parties agree otherwise, such mediation or arbitration shall also be conducted under the auspices of, and administered by, the AAA. 15. MISCELLANEOUS (a) No adequate remedy at law. The Bank and Executive recognize that each party shall have no adequate remedy at law for breach by the other of any of the agreements contained herein, and in the 3 4 event of any such breach, the Bank and Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus, injunction or other appropriate remedy to enforce performance of such agreements. (b) Non-assignability. No right, benefit or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. Any of the foregoing to the contrary notwithstanding, this provision shall not preclude Executive from designating one or more beneficiaries to receive any amount that may be payable after his or her death, and shall not preclude the legal representative of Executive's estate from assigning any right hereunder to the person or persons entitled thereto under his or her will or, in the case of intestacy, as applicable, to his or her estate. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but which together will constitute one and the same instrument. 17. NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by Registered or Certified Mail, or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by similar notice: to the Bank: Mechanics & Farmers Bank 116 West Parrish Street Durham, NC 27701-3321 Attn: Ms. Julia W. Taylor, Chairman, President and CEO to Executive: ------------------------ ------------------------ ------------------------ Executed and effective as of the date first above written. MECHANICS AND FARMERS BANK By: /s/ Julia W. Taylor ----------------------------------------------- Julia W. Taylor, Chairman, President & CEO By: /s/ Benjamin S. Ruffin ----------------------------------------------- Benjamin S. Ruffin, Compensation and Management Development Committee EXECUTIVE /s/ /s/ Fohliette W. Becote --------------------------------------------------- Fohliette W. Becote 4 EX-10.E 8 RETENTION BONUS AGREEMENT 1 Exhibit 10(e) RETENTION BONUS AGREEMENT This Agreement is made as of the 1st day of April, 1999 by and between Mechanics and Farmers Bank, a North Carolina banking corporation with its principal office in Durham, North Carolina (the "Bank"), and Harold Sellers, a resident of Durham, North Carolina (the "Executive"). RECITALS A. The Bank and Executive acknowledge the ownership consolidation that is occurring in the financial institutions industry, particularly among community banks, and the Bank and Executive acknowledge that at some point it may be appropriate for the Bank to participate in this industry consolidation. B. The Bank recognizes the value of Executive's services to the Bank and desires to insure that Executive has adequate incentive to continue in the employment of the Bank. C. Given the current consolidation occurring within the financial institutions industry, Executive desires to continue in the employment of the Company with appropriate financial incentives. NOW, THEREFORE, in consideration of the foregoing Recitals and of the promises and mutual agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Bank and Executive agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meanings indicated: (a) "Cause" shall mean (A) the rendering of a final judgment against Executive by a court of competent jurisdiction, which is not subject to further appeal, for the willful and continued failure by Executive to substantially perform his or her duties to the Bank, the Bank's policies or federal and/or state law (other than any such failure resulting from his or her incapacity due to physical or mental illness); which breach of duty has materially and adversely affected the safety and soundness of the Bank; or (B) Executive's conviction of a felony which is not subject to further appeal. For purposes of this definition, no act, or failure to act on Executive's part, shall be considered "willful" unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission is in the best interest of the Bank. (b) "Change in Control" shall mean either: (A) the acquisition, directly or indirectly, by any person or group of persons of shares in the Bank other than by M&F Bancorp, Inc. in connection with the formation of the Bank's holding company or otherwise, which, when added to any other shares the beneficial ownership of which is held by such acquiror(s), shall result in ownership by any person(s) of greater than 50% of such stock or which would require prior notification under any federal or state banking law or regulation; or (B) the occurrence of any merger, consolidation, exchange or reorganization to which the Bank or, if formed, the Bank's holding company is a party and to which the Bank, or the Bank's holding company (or an entity controlled thereby) is not a surviving entity, or the sale of all or substantially all of the assets of the Bank or the Bank's holding company. For purposes of this definition, "person" shall be as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934. 2 (c) "Coincident With" shall mean any time within nine months prior to the occurrence of a Change in Control of the Bank. 2. CHANGE IN CONTROL AND RETENTION BONUS. If a Change in Control of the Bank is consummated and on the date of the consummation of the Change in Control, Executive is employed by Bank, Bank shall pay to Executive in a lump sum, in cash, within five days following the consummation date of the Change in Control, a Retention Bonus of twelve (12) months base salary. If the lump sum payment under this Section 2, either alone or together with other payments which Executive has the right to receive from the Company, would constitute a "parachute payment" [as defined in Section 280G of the Internal Revenue Code of 1986, as amended, (the "Code")], such lump sum payment shall be reduced to the largest amount as will result in no portion of the lump sum payment under this Section 2 being subject to the excise tax imposed by Section 4999 of the Code. The determination of any reduction in the lump sum payment under this Section 2, pursuant to the foregoing provision, shall be made by the Bank in good faith. 3. TERMINATION BY BANK NOT FOR CAUSE COINCIDENT WITH A CHANGE IN CONTROL. In the event Executive's employment is terminated by action of the Bank not for Cause Coincident With a Change in Control, the Bank shall pay Executive within five days following the consummation date of the Change in Control the same Retention Bonus in amount and manner described in Section 2 above. In the event of Executive's termination pursuant to this Section 3, Executive shall not be subject to any non-compete or similar restrictions that exist with regard to Executive, contractually or otherwise. 4. TERMINATION OF EMPLOYMENT BY EXECUTIVE/NON-COMPETITION AGREEMENT. In the event Executive voluntarily terminates his or her own employment at any time subsequent to receipt of the Retention Bonus provided for in paragraph 2 above, Executive agrees not to compete, directly or indirectly, with the Bank or any successor as an employee, officer, director, independent contractor, consultant, or shareholder of any financial services company or any other entity providing financial services, including but not limited to lending, securities, brokerage, trust or insurance products or services within a sixty (60) mile radius of the main office of the Bank, or such other office of the Bank at which such Employee was physically located during the majority of Employee's work tenure for the Company, for a period of 12 months following the date of such termination. 5. WITHHOLDING. All payments made by the Bank hereunder to Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation. 6. EMPLOYMENT AT WILL. Nothing in this Agreement should be construed to constitute an employment agreement for any length of time of Executive by the Bank. At all times, Executive shall remain an "At Will" employee of the Bank subject to the rights arising under this Agreement. 7. NON-DISCLOSURE. During the term of his or her employment hereunder, or at any time thereafter, Executive shall not disclose or use (except in the course of his or her employment hereunder) any confidential or proprietary information or data of the Bank or any of its subsidiaries or affiliates, including any such information with respect to a sale or merger of the Bank, regardless of whether such information or data is embodied in writing or other physical form. 8. POOLING OF INTERESTS TREATMENT. In the event anything in this Agreement will prevent, or have the effect of preventing the use of the pooling of interests accounting method by an acquiror in a Change in Control of Bank and the use of the pooling of interests accounting method is a condition precedent to the consummation of such Change in Control by the acquiror, then this Agreement shall be deemed valid only to the extent that 2 3 the pooling of interests accounting method can be used; provided however, that any determination that this Agreement would prevent, or have the effect of preventing, the use of the pooling of interests accounting method shall be supported by an opinion letter from the acquiror's independent accounting firm or from the Securities and Exchange Commission. 9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Bank and Executive and their respective successors, assigns, personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to him or her hereunder if she had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to his or her devisee, legatee or other designee, or if there be no such designee, to Executive's estate. 10. MODIFICATION, WAIVER OR DISCHARGE. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and authorized officers of the Bank. No waiver by any party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement; provided, however, that this Agreement shall not supersede or in any way limit the rights, duties, or obligations that Executive or the Bank may have under any other written agreement between such parties, under any employee pension benefit plan or Executive welfare benefit plan as defined in the Executive Retirement Income Security Act of 1974 as amended, and maintained by the Bank, or under any established personnel practice or policy applicable to Executive. 11. TERMINATION OF AGREEMENT. Notwithstanding any other provisions of this Agreement, the rights, duties and obligations of all parties to this Agreement shall cease, and this Agreement shall terminate, five (5) years from the date first listed above. 12. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina to the extent federal law does not apply. 13. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which latter provisions shall remain in full force and effect. 14. MEDIATION/ARBITRATION. In the event of any dispute, claim, question, or disagreement arising from or relating to this agreement or the breach thereof ("Dispute"), the parties hereto shall use their best efforts to resolve the Dispute in a manner satisfactory to both parties through consultation and negotiation with each other in good faith. If the Dispute cannot be resolved through direct negotiations within a period of sixty (60) days, the parties agree to attempt to settle the dispute in an amicable manner by arbitration. Any mediation or arbitration hereunder shall be conducted in accordance with the Commercial Mediation Rules or the Commercial Arbitration Rules, as appropriate, of the American Arbitration Association ("AAA"), as in effect at the time of the mediation or arbitration. In the event of arbitration, the final award of the Commercial Arbitration Tribunal shall be binding on the parties. Unless the parties agree otherwise, such mediation or arbitration shall also be conducted under the auspices of, and administered by, the AAA. 15. MISCELLANEOUS (a) No adequate remedy at law. The Bank and Executive recognize that each party shall have no adequate remedy at law for breach by the other of any of the agreements contained herein, and in the 3 4 event of any such breach, the Bank and Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus, injunction or other appropriate remedy to enforce performance of such agreements. (b) Non-assignability. No right, benefit or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. Any of the foregoing to the contrary notwithstanding, this provision shall not preclude Executive from designating one or more beneficiaries to receive any amount that may be payable after his or her death, and shall not preclude the legal representative of Executive's estate from assigning any right hereunder to the person or persons entitled thereto under his or her will or, in the case of intestacy, as applicable, to his or her estate. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but which together will constitute one and the same instrument. 17. NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by Registered or Certified Mail, or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by similar notice: to the Bank: Mechanics & Farmers Bank 116 West Parrish Street Durham, NC 27701-3321 Attn: Ms. Julia W. Taylor, Chairman, President and CEO to Executive: Executed and effective as of the date first above written. MECHANICS AND FARMERS BANK By: /s/ Julia W. Taylor ----------------------------------------------- Julia W. Taylor, Chairman, President & CEO By: /s/ Benjamin S. Ruffin ----------------------------------------------- Benjamin S. Ruffin, Compensation and Management Development Committee EXECUTIVE /s/ Harold Sellers --------------------------------------------------- Harold Sellers 4 EX-10.F 9 RETENTION BONUS AGREEMENT 1 Exhibit 10(f) RETENTION BONUS AGREEMENT This Agreement is made as of the 1st day of April, 1999 by and between Mechanics and Farmers Bank, a North Carolina banking corporation with its principal office in Durham, North Carolina (the "Bank"), and E. Elaine Small, a resident of North Carolina (the "Executive"). RECITALS A. The Bank and Executive acknowledge the ownership consolidation that is occurring in the financial institutions industry, particularly among community banks, and the Bank and Executive acknowledge that at some point it may be appropriate for the Bank to participate in this industry consolidation. B. The Bank recognizes the value of Executive's services to the Bank and desires to insure that Executive has adequate incentive to continue in the employment of the Bank. C. Given the current consolidation occurring within the financial institutions industry, Executive desires to continue in the employment of the Company with appropriate financial incentives. NOW, THEREFORE, in consideration of the foregoing Recitals and of the promises and mutual agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Bank and Executive agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meanings indicated: (a) "Cause" shall mean (A) the rendering of a final judgment against Executive by a court of competent jurisdiction, which is not subject to further appeal, for the willful and continued failure by Executive to substantially perform his or her duties to the Bank, the Bank's policies or federal and/or state law (other than any such failure resulting from his or her incapacity due to physical or mental illness); which breach of duty has materially and adversely affected the safety and soundness of the Bank; or (B) Executive's conviction of a felony which is not subject to further appeal. For purposes of this definition, no act, or failure to act on Executive's part, shall be considered "willful" unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission is in the best interest of the Bank. (b) "Change in Control" shall mean either: (A) the acquisition, directly or indirectly, by any person or group of persons of shares in the Bank other than by M&F Bancorp, Inc. in connection with the formation of the Bank's holding company or otherwise, which, when added to any other shares the beneficial ownership of which is held by such acquiror(s), shall result in ownership by any person(s) of greater than 50% of such stock or which would require prior notification under any federal or state banking law or regulation; or (B) the occurrence of any merger, consolidation, exchange or reorganization to which the Bank or, if formed, the Bank's holding company is a party and to which the Bank, or the Bank's holding company (or an entity controlled thereby) is not a surviving entity, or the sale of all or substantially all of the assets of the Bank or the Bank's holding company. For purposes of this definition, "person" shall be as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934. 2 (c) "Coincident With" shall mean any time within nine months prior to the occurrence of a Change in Control of the Bank. 2. CHANGE IN CONTROL AND RETENTION BONUS. If a Change in Control of the Bank is consummated and on the date of the consummation of the Change in Control, Executive is employed by Bank, Bank shall pay to Executive in a lump sum, in cash, within five days following the consummation date of the Change in Control, a Retention Bonus of twelve (12) months base salary. If the lump sum payment under this Section 2, either alone or together with other payments which Executive has the right to receive from the Company, would constitute a "parachute payment" [as defined in Section 280G of the Internal Revenue Code of 1986, as amended, (the "Code")], such lump sum payment shall be reduced to the largest amount as will result in no portion of the lump sum payment under this Section 2 being subject to the excise tax imposed by Section 4999 of the Code. The determination of any reduction in the lump sum payment under this Section 2, pursuant to the foregoing provision, shall be made by the Bank in good faith. 3. TERMINATION BY BANK NOT FOR CAUSE COINCIDENT WITH A CHANGE IN CONTROL. In the event Executive's employment is terminated by action of the Bank not for Cause Coincident With a Change in Control, the Bank shall pay Executive within five days following the consummation date of the Change in Control the same Retention Bonus in amount and manner described in Section 2 above. In the event of Executive's termination pursuant to this Section 3, Executive shall not be subject to any non-compete or similar restrictions that exist with regard to Executive, contractually or otherwise. 4. TERMINATION OF EMPLOYMENT BY EXECUTIVE/NON-COMPETITION AGREEMENT. In the event Executive voluntarily terminates his or her own employment at any time subsequent to receipt of the Retention Bonus provided for in paragraph 2 above, Executive agrees not to compete, directly or indirectly, with the Bank or any successor as an employee, officer, director, independent contractor, consultant, or shareholder of any financial services company or any other entity providing financial services, including but not limited to lending, securities, brokerage, trust or insurance products or services within a sixty (60) mile radius of the main office of the Bank, or such other office of the Bank at which such Employee was physically located during the majority of Employee's work tenure for the Company, for a period of 12 months following the date of such termination. 5. WITHHOLDING. All payments made by the Bank hereunder to Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation. 6. EMPLOYMENT AT WILL. Nothing in this Agreement should be construed to constitute an employment agreement for any length of time of Executive by the Bank. At all times, Executive shall remain an "At Will" employee of the Bank subject to the rights arising under this Agreement. 7. NON-DISCLOSURE. During the term of his or her employment hereunder, or at any time thereafter, Executive shall not disclose or use (except in the course of his or her employment hereunder) any confidential or proprietary information or data of the Bank or any of its subsidiaries or affiliates, including any such information with respect to a sale or merger of the Bank, regardless of whether such information or data is embodied in writing or other physical form. 8. POOLING OF INTERESTS TREATMENT. In the event anything in this Agreement will prevent, or have the effect of preventing the use of the pooling of interests accounting method by an acquiror in a Change in Control of Bank and the use of the pooling of interests accounting method is a condition precedent to the consummation of such Change in Control by the acquiror, then this Agreement shall be deemed valid only to the extent that the pooling of interests accounting method can be used; provided however, that any determination that this Agreement would prevent, or have the effect of preventing, the use of the pooling of interests accounting 2 3 method shall be supported by an opinion letter from the acquiror's independent accounting firm or from the Securities and Exchange Commission. 9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Bank and Executive and their respective successors, assigns, personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to him or her hereunder if she had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to his or her devisee, legatee or other designee, or if there be no such designee, to Executive's estate. 10. MODIFICATION, WAIVER OR DISCHARGE. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and authorized officers of the Bank. No waiver by any party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement; provided, however, that this Agreement shall not supersede or in any way limit the rights, duties, or obligations that Executive or the Bank may have under any other written agreement between such parties, under any employee pension benefit plan or Executive welfare benefit plan as defined in the Executive Retirement Income Security Act of 1974 as amended, and maintained by the Bank, or under any established personnel practice or policy applicable to Executive. 11. TERMINATION OF AGREEMENT. Notwithstanding any other provisions of this Agreement, the rights, duties and obligations of all parties to this Agreement shall cease, and this Agreement shall terminate, five (5) years from the date first listed above. 12. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina to the extent federal law does not apply. 13. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which latter provisions shall remain in full force and effect. 14. MEDIATION/ARBITRATION. In the event of any dispute, claim, question, or disagreement arising from or relating to this agreement or the breach thereof ("Dispute"), the parties hereto shall use their best efforts to resolve the Dispute in a manner satisfactory to both parties through consultation and negotiation with each other in good faith. If the Dispute cannot be resolved through direct negotiations within a period of sixty (60) days, the parties agree to attempt to settle the dispute in an amicable manner by arbitration. Any mediation or arbitration hereunder shall be conducted in accordance with the Commercial Mediation Rules or the Commercial Arbitration Rules, as appropriate, of the American Arbitration Association ("AAA"), as in effect at the time of the mediation or arbitration. In the event of arbitration, the final award of the Commercial Arbitration Tribunal shall be binding on the parties. Unless the parties agree otherwise, such mediation or arbitration shall also be conducted under the auspices of, and administered by, the AAA. 15. MISCELLANEOUS (a) No adequate remedy at law. The Bank and Executive recognize that each party shall have no adequate remedy at law for breach by the other of any of the agreements contained herein, and in the event of any such breach, the Bank and Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus, injunction or other appropriate remedy to enforce performance of such agreements. 3 4 (b) Non-assignability. No right, benefit or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. Any of the foregoing to the contrary notwithstanding, this provision shall not preclude Executive from designating one or more beneficiaries to receive any amount that may be payable after his or her death, and shall not preclude the legal representative of Executive's estate from assigning any right hereunder to the person or persons entitled thereto under his or her will or, in the case of intestacy, as applicable, to his or her estate. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but which together will constitute one and the same instrument. 17. NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by Registered or Certified Mail, or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by similar notice: to the Bank: Mechanics & Farmers Bank 116 West Parrish Street Durham, NC 27701-3321 Attn: Ms. Julia W. Taylor, Chairman, President and CEO to Executive: ________________________ ________________________ ________________________ Executed and effective as of the date first above written. MECHANICS AND FARMERS BANK By: /s/ Julia W. Taylor --------------------------------------------------- Julia W. Taylor, Chairman, President & CEO By: /s/ Benjamin S. Ruffin --------------------------------------------------- Benjamin S. Ruffin, Compensation and Management Development Committee EXECUTIVE /s/ E. Elaine Small --------------------------------------------------------- E. Elaine Small 4 EX-27 10 FINANCIAL DATA SCHEDULE 9/30/99
9 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 6,715 2,025 2,590 0 34,313 1,412 0 101,495 1,277 154,565 126,286 0 2,070 10,000 0 0 2,846 13,363 154,565 6,416 1,589 55 8,080 2,323 2,683 5,400 208 3 5,053 1,240 1,240 0 0 890 1.56 1.56 5.68 544 136 0 861 1,150 136 55 1,277 1,277 0 0
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